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13 May, 2017

 

On 28 April 2017, the Monetary Authority of Singapore ("MAS") issued the first of two consultation papers on draft regulation to support the implementation of legislative amendments to the Securities and Futures Act ("SFA"), referred to as Consultation Paper I on Draft Regulations Pursuant to the SFA ("Consultation Paper"). This comes shortly after the amendments to the SFA were passed in Parliament on 9 January 2017 (please click here to see our earlier alert on this). Although these amendments are not yet in force, the MAS has indicated the intention for these amendments to be operationalized by 2018. Meanwhile, we can expect the second consultation paper on remaining draft regulations to be issued in May 2017.

 

The Consultation Paper proposes regulations on:

(i) New Securities and Futures (Markets) Regulations ("SF(M)R");
(ii) New Securities and Futures (Financial Benchmark) Regulations ("SF(FB)R");

(iii) Amendments to the Securities and Futures (Offer of Investments)(Collective Investment Schemes) Regulations 2005 ("SF(OI)(CIS)R") to implement changes under Part XIII of the FA on funds, including real estate investment trusts ("REITs").

 

The Consultation Paper can be found here. If you have any comments, further questions or feedback on this, please contact us.

 

Some key proposals are: 

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Topic

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Key Proposals

Markets Regulations (SF(M)R)

  •   Minimum admission requirements for corporations operating organised markets (including derivatives markets) as approved exchanges ("AE") or recognised market operators ("RMO") will be set out in the SF(M)R instead of licence conditions/ approvals

  •   Defined key criteria for assessing potential AE/RMO applications will be set out in the SF(M)R, including requirements for established track record for the past 5 years, key officers / directors with sufficient experience and a statement on how the corporation complies with statutory obligations, e.g. risk management, sufficient financial / human resources
 

  •   Additional requirements on market operators to have measures to:

    •   ensure the handling and execution of bids and offers on a fair and objective basis and to take into account the interests of market participants;

    •   facilitate execution of customer orders in the customer's interest

  •   Exemption from regulation as an AE or RMO for facilities which engage with customers to broke "block futures" or negotiated large trades" for the purposes of registering such trades on an established organised market operated by an AE or RMO, where regulated as brokers (or CMS licence holders)

  •   Transitional arrangements for entities in operation at the commencement of the SFA ("T")

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Transitional Period

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Timeline

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3 months to assess whether it operates an organised market and if so, to notify MAS whether it intends to apply for AE or RMO

(T+3 months)

9 months to submit an application to the MAS

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(T+12 months)

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Entities may continue to operate business as usual until MAS approves or rejects their applications

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Financial Benchmarks SF(FB)R

  •   The MAS intends to designate SIBOR and SOR as designated benchmarks and the new proposed draft regulations will set out the admission, ongoing and other requirements which administrators and submitters to designated benchmarks will be subject to

  •   Every benchmark administrator will need to establish an Oversight Committee to maintain and govern the designated benchmark

  •   Prior approval from the MAS is required to appoint a person to the Oversight Committee

  •   At least one third of the Oversight Committee must be comprised of persons who are not directors, key management officers or substantial shareholders of the benchmark administrator or benchmark submitters

  •   Independent external audit of benchmark administrators and benchmark submitters required

  •   Transitional arrangements for existing benchmark administrators and benchmark submitters in relation to SIBOR and SOR benchmarks:

 

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Transitional Period

Timeline

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6 months to submit an application to the MAS for existing benchmark administrators and submitters

(T+6 months)

6 months to notify the MAS for exempt benchmark submitters (eg licensed banks)

(T+6 months)

CIS Regulations SF(OI)(CIS)R

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  •   In addition to the laws and practices under which a foreign fund is governed, MAS has proposed that the following additional factors be taken into account when recognising a foreign fund for offer to retail investors : (a) investment policy of the fund, (b) fund's constituent documents; (c) oversight by trustee or an equivalent body; and (d) whether the factors in (a) to (c) would accord investors protection at least equivalent to that provided under authorised schemes for Singapore constituted funds offered to retail investors)

  •   Managers of physical assets funds that are offered only to accredited investors or institutional investors may be exempted from fund authorisation and prospectus registration requirements subject to certain conditions, e.g. lodgement of information memorandum which complies with disclosure requirements similar to those applicable to registered restricted funds and lodging an annual declaration with the MAS;

  •   Clarification that restriction on disclosure of past performance based on simulated results of a hypothetical fund does not extend to disclosure of pro forma financial information by a REIT.

 

Baker McKenzie

 

For further information, please contact:

 

Stephanie Magnus, Principal, Baker McKenzie.Wong & Leow

stephanie.magnus@bakermckenzie.com 

 

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