Media Releases
Published Date: 19 October 2004

Explanatory Brief: Securities and Futures (Amendment No.2) Bill 2004 and Financial Advisers (Amendment) Bill 2004

1   The Minister for Education and Deputy Chairman of the Monetary Authority of Singapore (MAS) today moved two Bills for first reading in Parliament, namely:

  • The Securities and Futures (Amendment No.2) 1 Bill 2004

    [SF(A) Bill]

    ; and

  • The Financial Advisers (Amendment) Bill 2004 [FA(A) Bill].

2   The Amendment Bills represent the final step of a two-phase review of the Securities and Futures Act (SFA) and Financial Advisers Act (FAA).  The first phase of amendments came into effect on 1 December 2003.   

3   MAS conducted public consultations on the policy reforms for this phase and the draft Amendment Bills.  Comments received have been incorporated, where appropriate, into the Amendment Bills.  MAS' response to the public consultations are published on its website at


4   The SF(A) Bill implements the following key changes:

(a)  Requiring Prospectuses for All Offers and Introducing New "Safe Harbours" (Part XIII) - Currently, offers of investments (such as shares, debentures and collective investment schemes) to the public need to be accompanied by prospectuses.  However, the term "offer to the public" is not defined, posing practical difficulties for issuers.  To provide legal certainty, the "public offer" concept will be abolished and prospectuses will be required for all offers of investments unless exempted.  New "safe harbours" or exemptions2  will be introduced, such as private placements that are made to not more than 50 investors within a 12 month period, small offerings3 of up to $5 million during a 12 month period and offers for no consideration (e.g. bonus shares or gifts involving a transfer of shares).

(b)  Extending Prospectus Liability to Issue Managers (Sections 253 and 254) - Issue managers are currently not liable for any false or misleading statement in or omission of information from a prospectus (i.e. material deficiency), unless they are also the underwriter of the offer or if they are responsible for the material deficiency.  As issue managers generally play the most extensive role among the intermediaries involved in an offer, they will also be liable for any material deficiency in a prospectus.  This is the same treatment as for underwriters.

(c)  Modifying the Criminal Liability Provision for Prospectus Disclosures (Section 253) - Under the SFA, certain persons involved in an offer, e.g. the offeror and its directors, the underwriter and other professionals, are criminally liable for material deficiencies in a prospectus unless they exercised due care and diligence. The offeror and its directors will continue to be criminally liable unless they can demonstrate that they have undertaken proper due diligence.  However, the SFA will be amended such that other persons (e.g. underwriter, issue managers and experts) will be criminally liable only if they have acted intentionally or recklessly.  This change reflects the higher duty of care placed on the offeror and its directors vis-୶is other persons involved in an offer, given that the offeror and its directors have full access to information and can control the flow of information to potential investors.

(d)  Refining the Provisions on Publicity for Offers (Sections 251, 282L and 300) - The following refinements to the publicity provisions for offers of investments are made:

(i)  The distribution of pre-deal research reports4 is currently prohibited. This has disadvantaged Singapore investors vis a-vis foreign investors who may have access to such reports in other markets.MAS will allow pre-deal research reports to be distributed to institutional investors for offers that are made concurrently in Singapore and one or more jurisdictions where pre-deal research reports are permitted, subject to certain safeguards. This will help prevent retail investors from relying on pre deal research reports instead of registered prospectuses when making investment decisions.

(ii)  For offers of shares and debentures, a person may, prior to registration of a prospectus, publish only "tombstone" advertisements. These advertisements merely identify the issuer and the securities to be offered. They also state how a copy of the prospectus may be obtained.  This restriction on "tombstone" advertisements is to protect the investing public from being induced to purchase securities without the full disclosure of information found in a prospectus. Similar advertising restrictions will be applied to offers of collective investment schemes.

(iii)  Advertisements made after the registration of a prospectus can include only information contained in the registered prospectus.  This will prevent misleading advertisements that may contain information not found in the registered prospectus.

(e)  Refining the Regulatory Framework for Markets (Part II) - The regulatory framework for markets will be refined to apply the appropriate level of regulation to markets based on their systemic importance.  Any person who wishes to establish a market will require approval as an approved exchange or recognition as a recognised market operator. Approved exchanges, given its systemic importance, will be subject to a higher degree of regulatory oversight by MAS than recognised market operators. For less systemically important markets, i.e. those operated by recognised market operators, the new framework will be more flexible to accommodate new business models for markets.

(f)  Introducing a Designation Approach for Regulating Clearing Facilities (Part III) - Currently, all clearing facilities must be approved and regulated by MAS. The proposed amendments will introduce a new risk-focused approach for regulating clearing facilities. Persons wishing to operate a clearing facility will be required to notify MAS at least 60 days prior to commencement of operations.  Upon notification, MAS will assess whether the clearing facility is considered to be systemically important, and if so, to designate it as a clearing house and subject it to regulation.

(g)  Easing the Restriction on Granting Unsecured Credit (Section 119) - The current prohibition against holders of capital markets services licences granting unsecured credit facilities to their directors, officers, employees or representatives for trading purposes will be removed.  This prohibition has posed practical difficulties to stockbrokers, as their staff who trade through them need to settle their securities transactions upfront, rather than in accordance with market rules.  The risk arising from allowing unsecured credit facilities will be minimal as there are existing safeguards on loans to directors, officers and employees5.

(h)  Expanding the Grounds for Refusing an Application for Grant or Renewal of Licence or Revocation of Licence (Part IV) - The grounds under which MAS may refuse an application for the grant or renewal of a licence, or revoke a licence, will be expanded to include cases where any information or document furnished by the applicant or licensee is false or misleading.

(i)  Applying the Market Misconduct Provisions to Business Trusts (Part XII) - Business trusts are business enterprises structured as trusts.  The governance framework for business trusts are set out in the Business Trusts Act 2004 (Act 30 of 2004).  Trading of units of business trusts will be subject to the market misconduct provisions6 of the SFA, similar to those for trading in securities of corporations.  


5   The FA(A) Bill implements the following key changes:

(a)  Excluding Generally Circulated Advice from Reasonable Basis Requirement (Section 27) - Financial advisers are required to have a reasonable basis for their recommendations, taking into account the investment objectives, financial situation and particular needs of the recipients ("reasonable basis requirement").   The proposed amendment will allow MAS to exclude generally circulated advice that is not targeted at any specific person (e.g. marketing brochures, advice given at seminars and workshops, etc.) from the reasonable basis requirement. The criteria for what constitutes "generally circulated advice" will be set out in Regulations.

(b)  Clarifying Aggrieved Parties' Right to Appeal (Section 20) - There is ambiguity as to whether third parties may appeal to the Minister against MAS' decision to refuse the grant, renewal or variation of a licence, or to revoke or suspend a licence. The proposed amendment will clarify that only the applicant for the grant, renewal or variation of a licence or a person whose licence is revoked or suspended may appeal to the Minister.

(c)  Extending the Scope of MAS' Inspection to Exempt Entities (Section 23) - Currently, MAS may prescribe any person or class of persons as exempt from licensing requirements. Exemptions could be given to financial institutions that pose minimal risks to our regulatory objectives7 or could contribute to the development of the financial sector.  There are no explicit powers for MAS to inspect such exempt entities.  To ensure effective supervision and consistency with the SFA, MAS will be empowered to inspect these exempt entities.

(d)  Expansion of MAS' Powers to Issue Prohibition Orders (Section 59) - MAS may issue a Prohibition Order against undesirable persons to bar them from providing financial advisory services in Singapore.  MAS will be given the power to issue a Prohibition Order against persons who have been convicted of an offence in respect of financial advisory services in a foreign country. This will make known MAS' stance that such persons are undesirable to operate in Singapore.

6   The FA(A) Bill also introduces amendments relating to the grant of unsecured credit, and the grounds for refusing to grant or renew a licence or to revoke a licence.  These amendments are similar to those in the SF(A) Bill which are outlined in paragraphs 4(g) and (h) above.


1  An earlier Bill to amend the Securities and Futures Act pursuant to the Business Trusts Bill 2004 was passed in Parliament on 1 September 2004.  It introduced offer provisions for units in business trusts.

They will supplement existing exemptions, which include offers to institutional and sophisticated investors, offers made in compliance with the Takeover Code, offers to employees in connection with an investment scheme and offers of covered warrants where the underlying securities are already issued and listed.

3  The potential investors must be connected to the offeror or have indicated interest in acquiring the securities being offered.

4  Pre-deal research reports profile an issuer or a collective investment scheme shortly before an offer is made, and even before a prospectus is lodged.

5  Holders of capital markets services licences are prohibited from granting unsecured credit facilities to any of its directors other than a director who is an employee.  In addition, they may not grant credit facilities to any of its employees or officers exceeding one year's emolument of such employee or officer.

6  Examples of market misconduct include false trading, market rigging, employment of manipulative and deceptive devices, market manipulation and insider trading.

7  For example, exemptions may be given to entities that only provide advice to a limited number of accredited investors.