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Implementation of Securities and Futures (Amendment) Act 2005 and Financial Advisers (Amendment) Act 2005

Singapore, 14 June 2005...The Monetary Authority of Singapore (MAS) announced today that the Securities and Futures (Amendment) Act 2005 (SF(A)A) and the Financial Advisers (Amendment) Act 2005 (FA(A)A) will take effect on 1 July 2005.The amendments relating to Part XIII of the Securities and Futures Act (SFA) on Offers of Investments will be implemented later in the third quarter of 2005.

2 Parliament passed the SF(A)A and the FA(A)A on 25 January 2005. The SF(A)A introduces amendments to rules on capital raising, the provision of markets and clearing facilities and the conduct of intermediaries. The FA(A)A seeks to maintain high standards that promote fair dealing by financial advisers with customers.

3 To implement the amendments in the SF(A)A and the FA(A)A, MAS issued Subsidiary Legislation and Guidelines. These will also take effect on 1 July 2005. The Subsidiary Legislation and Guidelines issued and their key aspects are set out in the Appendix.

4 MAS has consulted the industry on these Regulations and Guidelines. We have incorporated the comments received, where appropriate, and have published our response to the consultation on the website. (Click here to view)

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Appendix

The SF(A)A (except for the amendments relating to Part XIII of the SFA) and the FA(A)A will take effect on 1 July 2005.
Securities and Futures (Amendment) Act (Commencement) Notification 2005 (PDF, 6.48KB)
Financial Advisers (Amendment) Act (Commencement) Notification 2005 (PDF, 6.42KB)

2. The following Subsidiary Legislation and Guidelines are issued to implement the amendments in the SF(A)A and the FA(A)A:-

- Guidelines on the Regulation of Markets (PDF, 110KB)
- Guidelines on the Regulation of Clearing Facilities (PDF, 119KB)

Pursuant to the Financial Advisers Act ("FAA")
- Financial Advisers (Amendment) Regulations 2005 (PDF, 36.0KB)

3. The key aspects of the Regulations and Guidelines are described below.

Regulations and Guidelines for Markets, Clearing Facilities And Approved Holding Companies

(i) The Securities and Futures (Markets) Regulations 2005 set out, amongst other things, the criteria to be applied by MAS when assessing the systemic importance of market operators wishing to establish markets in Singapore. The Securities and Futures (Clearing Facilities) Regulations 2005 provide MAS the power to approve new clearing fees imposed by a designated clearing house specified by MAS on its participants, or changes to the existing clearing fee in respect of services provided by the specified designated clearing house. Both sets of Regulations also regulate the process by which approved exchanges and designated clearing houses amend their business or listing rules. The Securities and Futures (Approved Holding Companies) Regulations 2005 operationalise the new Part IIIA of the SFA, which
provides for the regulation of holding companies of approved exchanges and designated clearing houses.

(ii) The Guidelines on the Regulation of Markets and the Guidelines on the Regulation of Clearing Facilities provide market participants with a better understanding of how MAS will administer the legislative provisions relating to markets and clearing facilities.

Regulations for Capital Market Intermediaries

(iii)The Securities and Futures (Licensing and Conduct of Business) (Amendment) Regulations introduce several amendments to clarify MAS' policy intent to aid industry players in their compliance with our laws and regulations. The limits for unsecured credit facilities for staff trading are clarified following the repeal of section 119 of the SFA. The range of instruments accepted as collateral for securities borrowing and lending has also been spelt out more clearly. In addition, an exemption from the requirement to give priority to customers orders under section 122 of the SFA is provided in instances where the transaction was entered into in accordance with the rules of the exchange.

(iv) The Regulations require financial institutions who are exempted from holding a capital markets services licence under section 99(1)(a) to (d) of the SFA to provide information to MAS on its capital markets activities. The Regulations also require certain persons who are exempted from holding a capital markets services licence¹, their representatives and directors to be fit and proper persons.

(v) The Securities and Futures (Financial and Margin Requirements for Holders of Capital Markets Services Licences) (Amendment) Regulations 2005 set out the changes to the business limits and risk requirements for securities financing. The Regulations also provide clarifications on the definitions of aggregate indebtedness and base capital. In addition, going forward, lodgement of financial statements and accounts through electronic means will be a regulatory requirement. This is to automate the submission process using the MAS Network (MASNET).

Other Regulations pursuant to the SFA

(vi) The Securities and Futures (Prescribed Specific Classes of Investors) Regulations 2005 prescribes additional classes of investors as accredited investors and institutional investors under the SFA. The Securities and Futures (Prescribed Futures Contracts) Regulations 2005 prescribes additional classes of commodity futures contracts as futures contracts under the SFA.

Regulations pursuant to the FAA

(vii) The Financial Advisers (Amendment) Regulations 2005 exempt licensed and exempt Financial Advisers (collectively referred to as "FAs") and their representatives from most of the business conduct requirements in the FAA when they provide financial advisory services to institutional investors, related corporations or connected persons.The Regulations also exempt FAs and their representatives from certain business conduct requirements of the FAA when providing financial advisory services to overseas investors.

(viii) FAs and their representatives are currently granted exemptions from particular business conduct requirements in the FAA in respect of financial advisory services provided to accredited and expert investors. The Regulations impose a requirement on FAs and their representatives to disclose to the accredited or expert investor any exemptions that apply.

(ix) Section 27 of the FAA requires FAs to have a reasonable basis when making recommendations. The Regulations disapply this requirement in situations where a FA provides generally-circulated advice that is not intended to be targeted at specific persons, and sets out the criteria for what constitutes generally-circulated advice.

(x) The Regulations also require exempt financial advisers, their representatives and directors to be fit and proper persons. In addition, going forward, licensed FAs are required to lodge financial statements through electronic means. This is to automate the submission process using the MASNET.

Forms and Other Notices and Guidelines

(xi) Under the Regulations issued, the various forms for the regulatory framework under the SFA and FAA (which are currently part of the Subsidiary Legislation) will be made available on the MAS website. The links to the forms are below:-

- Forms for Markets, Clearing Facilities and Approved Holding Companies
- Forms for Capital Market Intermediaries
- Forms for Financial Advisers

(xii) Consequential amendments will also be made to the Notices and Guidelines listed below. The revised Notices and Guidelines will be published on 1 Jul 2005.

Pursuant to the SFA
- Guidelines on Applications for Approval of Arrangements under Paragraph 9 of the Third Schedule to the SFA
- Guidelines on Licence Application and Payment of Fees
- Guidelines on Criteria for the Grant of a Temporary Representative's Licence
- Guidelines on the Application of Section 339 (Extra-Territoriality) of the Securities and Futures Act
- Guidelines on Outsourcing

Pursuant to the FAA
- Notice on Recommendations on Investment Products
- Notice on Appointment and Use of Introducers by Financial Advisers
- Notice on Information to Clients and Product Information Disclosure
- Notice on Prevention of Money Laundering
- Notice on Minimum Entry and Examination Requirements for Representatives of Licensed Financial Advisers and Exempt Financial Advisers

- Guidelines on Criteria for the Grant of a Financial Adviser's Licence and a Representative's Licence
- Guidelines on Licence Applications and Payment of Fees
- Guidelines on Standards of Conduct for Financial Advisers
- Guidelines on the Use of the Term "Independent" by Financial Advisers
- Guidelines on Applications for Approval of Arrangements under Paragraph 11 of the First Schedule to the Financial Advisers Act
- Guidelines on Exemption for Specialised Units Serving High Net Worth Individuals under Section 100(2) of the Financial Advisers Act
- Guidelines on Conduct of Business for Execution-Related Advice
- Guidelines on Structured Deposits
- Guidelines on Switching of Designated Investment Products

(xiii) MAS will soon be issuing Guidelines on Fit and Proper Criteria for persons regulated under the SFA, FAA and the Insurance Act (with respect to insurance brokers).

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¹ These persons are financial institutions exempted from holding a capital markets services licence under section 99(1)(a), (b), (c), (d), (f) & (g) of the SFA, and exempt fund managers, exempt corporate finance advisers and exempt leveraged foreign exchange traders under paragraphs 4(1)(c), 5(1)(d) and 7(1)(b) of the Second Schedule to the Securities and Futures (Licensing and Conduct of Business) Regulations.

Last modified on 21/02/2011