Media Releases
Published Date: 11 September 2002

Media Release For The Implementation Of The:(I) Final Phase Of The Securities And Futures Act/Regulations:(II) The Financial Advisers Act/Regulations(III) Section 20 Of The Insurance (Amendment) Act 2001, Insurance(Amendment No 2) Regulations, Insurance (Accounts And Statements)(Amendment No 2) Regulations And Insurance (Protection And Indemnity Clubs) Regulations The Securities And Futures Act,  The Financial Advisers Act And Section 20 Of The Insurance (Amendment) Act To Take Full Effect On 1 October 2002



Singapore 11 September 2002... MAS today announced the implementation of the final phase of the Securities and Futures Act (SFA) and the Financial Advisers Act (FAA), and issued subsidiary regulations to fully implement the 2 pieces of legislation.  This new regulatory regime governing Singapore?s capital markets will take effect on 1 October 2002.

2   The Securities Industry Act and the Futures Trading Act will consequently be repealed  . With the passage of the FAA, the Insurance Intermediaries Act 1999 and the Insurance Intermediaries Regulations will be repealed.

3   The SFA and FAA were passed by Parliament in October 2001.  The new legislative regime updates the regulatory framework relating to the capital markets to take into account many developments that have taken place arising from globalization, technology and innovation.  The new legal framework provides a sound and transparent set of rules for  market participants, and at the same time the flexibility to accommodate market innovation.

4   MAS has implemented  the SFA in several phases. The first phase was implemented in January 2002 - that put in place provisions relating to takeovers, supervisory and investigative powers of MAS and cooperation with foreign regulators.  The 2nd phase, in May 2002, implemented the provisions relating to offers of shares, debentures and collective investment schemes, as well as appeal processes.

5   The final phase operationalises the following parts of the SFA:

  • Markets (Part 2)
  • Clearing Facilities (Part 3)
  • Capital Markets Services Licence and Representative?s Licence (Part 4)
  • Accounts, Customer Assets and Audit (Part 5)
  • Conduct of Business (Part 6)
  • Disclosure of Interest (Part 7)
  • Market Conduct (Part 12)

Regulations

6   MAS today issued the following regulations which will give full effect to the SFA and the FAA.

  • Securities and Futures (Markets) Regulations 2002;
  • Securities and Futures (Clearing Facilities) Regulations 2002;
  • Securities and Futures (Licensing and Conduct of Business) Regulations 2002;
  • Securities and Futures (Exemption from Requirement to hold Capital Market Services Licence) Regulations 2002;
  • Securities and Futures (Market Conduct)(Exemptions) Regulations 2002; 
  • Financial Advisers Regulations 2002;
  • Financial Advisers (Insurance Broking Premium  Accounts) (Transitional and Savings Provisions) Regulations 2002; and
  • Financial Advisers (Appeals) Regulations 2002.

7   These regulations were drafted after going through detailed industry consultation  and comment.

Securities and Futures (Markets) Regulations 2002

8   Part 2 of the SFA updates and fine-tunes the regulatory regime for securities and futures markets.  Part 2 enables the MAS to adopt a calibrated approach in regulating a host of markets, particularly those in the form of electronic trading systems.  The SFA introduces a new authorisation regime called "Recognised Trading System Providers".  The regime allows MAS to specify different regulatory requirements depending on the risks posed by different business models.

Securities and Futures (Clearing Facilities) Regulations 2002

9   Part 3 of the SFA seeks to enhance the regulatory framework for clearing and settlement activities, and to provide an exception to laws of insolvency for clearing and settlement activities to minimise any systemic risk to our clearing and settlement system.  The Securities and Futures (Clearing Facilities) Regulations sets out the governance, reporting and operational requirements for clearing houses, and also include provisions that relate to customers' money and assets held by clearing houses. 

Securities and Futures (Licensing and Conduct of Business) Regulations 2002

10   Part 4 of the SFA and the relevant regulations introduces a single, modular licensing framework that allows intermediaries the flexibility to tailor their business models to meet market demands.  This would facilitate innovation, competition and efficiency. The new licensing framework also reduces both capital and compliance cost for the intermediaries.

Securities and Futures (Market Conduct) (Exemptions)  Regulations

11   Under the Securities and Futures (Market Conduct)(Exemptions) Regulations, various classes of transactions, including stabilising action during initial public offer and bond dealings, will be exempted from the operation of specific market conduct provisions under Part XII of the Securities and Futures Act 2001.

FAA/Financial Advisers Regulations

12   The FAA consolidates and streamlines the different regulatory regimes governing the provision of financial advisory services for investment products, including the sale of unit trusts and life insurance, into a single piece of legislation.  With the FAA, the aim is the consumers and investors would be able to benefit from higher standards of service and better quality of advice on investment products from professional, competent advisers. 

13   As a single rulebook, the FAA provides an integrated regulatory framework for financial advisory activities and ensures consistency in requirements and uniform standards across institutions providing financial advice.  The single licencing framework for advisory services on an array of products reduces administrative and compliance costs for industry participants.  Following industry consultation on the Notices and Guidelines to be issued under the FAA, MAS is finalising the documents taking into account the comments received by the industry and will be issuing the Notices and Guidelines in October.

New Examination Requirements under the SFA/FAA

14   In line with the introduction of a new licensing framework under the SFA and FAA, MAS will be implementing an equivalent modular examination series for life insurance and capital market intermediaries.  The new examination structure will take effect on 1 Dec 2002.

Securities and Futures (Financial and Margin Requirements for Holders of Capital Markets Services Licences) Regulations

15   The Securities and Futures (Financial and Margin Requirements for Holders of Capital Markets Services Licences) Regulations 2002 will be gazetted at a later date.  The Regulations set the financial requirements for the grant or renewal of a Capital Markets Services Licence to any corporation under Part 4 of the SFA.  This will introduce a risk-based capital regime for holders to deal in securities or trade in futures contracts as a member of a securities exchange, futures exchange or clearing house, streamlined capital requirements for other classes of holders, as well as margin requirements for holders providing securities financing.

Section 20 of the Insurance (Amendment) Act 2001, Insurance (Amendment No 2) Regulations 2002, Insurance (Accounts and Statements)(Amendment No 2) Regulations 2002 and Insurance (Protection and Indemnity Clubs) Regulations 2002

16   With the implementation of the FAA and the Financial Advisers Regulations, the Insurance Intermediaries Act 1999 and the Insurance Intermediaries Regulations will consequently be repealed.  Section 20 of the Insurance (Amendment) Act 2001, which deals with insurance intermediaries, will take effect on 1 October 2002.  To give full effect to section 20, MAS today issued the Insurance (Amendment No 2) Regulations 2002 and Insurance (Accounts and Statements)(Amendment No 2) Regulations 2002.

17   The regulations dealing with insurance intermediaries remain substantively unchanged.  The modifications in the Insurance (Amendment No 2) Regulations and Insurance (Accounts and Statements)(Amendment No 2) Regulations pertain mainly to the treatment of interest income earned from insurance broking premium accounts maintained by insurance brokers, the need for exempt insurance brokers to comply with financial and reporting requirements as well as the requirement for registered and exempt insurance brokers to maintain a register of all their broking staff.

18   MAS also issued the Insurance (Protection and Indemnity Clubs) Regulations 2002, which will take effect from 1 October 2002.  The regulation formalizes the regulatory framework for protection and indemnity clubs, which are marine insurance specialists, whose operations are expected to contribute to Singapore's development as a regional marine insurance centre.

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Annex

Particulars Of Regulations:

Securities and Futures (Markets) Regulations 2002

19   Part 2 of the SFA updates and fine-tunes the regulatory regime for securities and futures markets, to keep pace with many changes in the industry arising from technological advances, innovation and globalisation.  Part 2 enables the MAS to adopt a calibrated approach in regulating a range of markets.  The current practice of granting "exempt market" status to overseas exchanges having access to Singapore and electronic trading systems will be replaced.  Instead, such entities may be authorised under a new regime, as "Recognised Trading System Providers".  This will allow MAS to have more direct regulatory reach over these markets and to calibrate specific regulatory requirements to address the risks posed by different forms of markets. 

20   The Securities and Futures (Markets) Regulations stipulates the governance and reporting requirements for securities and futures markets under the SFA markets regime, and the migration procedures for existing markets to this regime.  MAS is issuing the Guidelines on the Regulation of Markets to help the industry better understand how MAS will administer the SFA markets regime.

Securities and Futures (Clearing Facilities) Regulations 2002

21   The Securities and Futures (Clearing Facilities) Regulations sets out the governance, reporting and operational requirements for clearing houses, and also include provisions that relate to customers' money and assets held by clearing houses.

Securities and Futures (Licensing and Conduct of Business) Regulations 2002

22   Part 4 of the SFA and the relevant regulations introduces a single, modular licensing framework that allows intermediaries the flexibility to tailor their business models to meet customer demands. A single licence is required to conduct one or more regulated activities in the securities and futures market. These regulated activities include dealing in securities, trading in futures contracts, leveraged foreign exchange trading, fund management, advising on corporate finance, securities financing and providing custodial services for securities. The licensing framework will better accommodate changes in the business models of market intermediaries, and make it more convenient for market intermediaries to conduct business. It will also reduce both capital and compliance cost for the intermediaries.

23   The Act and regulations also set out the provisions governing the operations of licensed intermediaries, and dealing with other licensing and administrative matters. These include licence application and fees, the record keeping requirements, issue of contract notes, business conduct rules, trust account requirements, and the notifications to be lodged by the licensed intermediaries and their representatives. The new rules sought to update, clarify, fine-tune and streamline current provisions so as to remain relevant and conducive to the markets.

24   Banks, merchant banks, finance companies and insurance companies which conduct any regulated activity are exempted from licensing under the SFA. However, in respect of the regulated activity which they conduct, they will be subject to the same business conduct rules, including the trust account requirements, that apply to the licensed intermediaries. This will ensure consistent regulations and level the playing field for all intermediaries participating in the securities and futures market.

Securities and Futures (Market Conduct) (Exemptions)  Regulations

25   Under the Securities and Futures (Market Conduct)(Exemptions) Regulations, various classes of transactions, including stabilising action during initial public offer and bond dealings, will be exempted from the operation of specific market conduct provisions under Part XII of the Securities and Futures Act 2001.  Industry consultations are still ongoing in relation to the operation of the insider trading provisions to other classes of transactions that are currently not exempted.  MAS expects to issue further guidance in relation to these other transactions when the consultation process is completed.

FAA/Financial Advisers Regulations

26   The FAA consolidates and streamlines the different regulatory regimes governing the provision of financial advisory services for investment products, including the sale of unit trusts and life insurance, into a single piece of legislation.  With the FAA, the aim is that consumers and investors would be able to benefit from higher standards of service and better quality of advice on investment products from professional, competent advisers. 

27   For industry participants, the FAA provides a flexible basis for the further development of a competitive and innovative financial advisory sector in Singapore based on consistent, sound professional standards. The ability to hold a single licence to advise on a wider array of products will also reduce administrative and compliance costs for industry participants.

28   Some of the key provisions and requirements in the Financial Advisers Regulations include:

  • Licence application procedures;
  • Financial requirements for licensed financial advisers;
  • Criteria for approval of CEO and duties of CEO;
  • Restriction on the use of the term ?independent?; and
  • Exemption from licensing and business conduct requirements for certain types of persons and activities.

29   Following the industry consultation on the following Notices and Guidelines, MAS is finalising the documents taking into account the comments received by the industry and will be issuing the Notices and Guidelines in October:

  • Notice on Recommendations on Investment Products;
  • Notice on Product Disclosure and Information to Clients;
  • Guidelines on Standards of Conduct for Financial Advisers; and
  • Guidelines on the Use of the Term ?Independent? by Financial Advisers

New Examination Requirements under the SFA/FAA

30   The new examination structure will comprise nine modules that are linked closely to the regulated activities under the SFA and FAA.   Unless exempted, all applicants for representative?s licences under the SFA and FAA will be required to pass the module(s) pertaining to the regulated activities they intend to conduct.   Details of these nine modules and their application to each regulated activity are attached in the Appendix.

31   The new examination series will apply equally to the representatives of banks, merchant banks and other exempt financial institutions who conduct regulated activities under the SFA and FAA.  These representatives will be required to pass the modules pertaining to the regulated activities they intend to conduct.    This will ensure a common standard and enhance the competency level of all market participants across the various financial sectors.

32   As with current practice, exemption from the examination requirements will be accorded to persons who possess the relevant qualifications and market experience, or who deal with only certain sophisticated segments of the market. 

33   The new examination will take effect on 1 Dec 2002.   Details of the examination requirements including the exemptions to be given and transitional arrangements to cater for persons joining the industry during the period from 1 Oct 2002 and 1 Dec 2002 will be set out in a notice under the SFA and FAA.  This notice will be issued before 1 Oct 2002.

Appendix

Contents Of The Examination

Module

Examination

Rules & Regulations

1

Rules and Regulations for Dealing in Securities

2

Rules and Regulations for Trading in Futures Contracts

3

Rules and Regulations for Fund Management

4A

Rules and Regulations for Advising on Corporate Finance

4B

Rules and Regulations for Advising on Corporate Finance (solely debt securities)

5

Rules and Regulations for Financial Advisory Services

Product Knowledge & Analysis

6

Securities Products and Analysis

7

Futures Products and Analysis

8

Collective Investment Schemes

9

Life Insurance and Investment-Linked Policies

Application Of The Examination To Each Regulated Activities Under The SFA And FAA

TYPE OF ACTIVITIES

MODULE

 

Rules & Regulations

Product Knowledge & Analysis

 

1

2

3

4A

4B

5

6

7

8

9

Regulated Activities Under SFA

Dealing in Securities

X

     

X

   

Trading in Futures Contracts - full trading

 

X

     

X

  

Trading in Futures Contracts - Floor trading

X

        

Trading in Futures Contracts - non-floor trading

 

X

     

X

  

Fund Management - solely securities funds

  

X

   

X

   

Fund Management - solely futures funds

  

X

    

X

  

Fund Management - both securities and futures funds

  

X

   

X

   

Advising on Corporate Finance

   

X

      

Advising on Corporate Finance (Solely Debt Securities)

    

X

     

Regulated Activities Under FAA

Advising others concerning securities (excluding collective investment schemes)

     

X

X

   

Advising others concerning futures

     

X

 

X

  

Advising on and/or arranging life insurance policies (whether or not include Investment-linked policies)

     

X

   

X

Advising on and/or marketing of collective investment schemes

     

X

  

X

 

Advising on and/or marketing collective investment schemes as well as arranging life insurance policies (whether or not include ILPs)

     

X

  

X

X