Singapore – MAS Proposes Amendments To The Securities And Futures Act, Financial Advisers Act And Trust Companies Act.

SUMMARY OF PROPOSED AMENDMENTS

Approval and removal of officers based on “fit and proper” criterion 

The MAS has proposed to amend the SFA to require locally incorporated RMOs, RCHs and ATs to seek MAS’ approval prior to appointing their Chief Executive Officers (“CEOs”) and/or directors. This will create a single uniform regime for all Regulated FIs.

Similarly, MAS has also proposed to amend the statutory grounds for the removal of CEOs and/or directors of all Regulated FIs to a single criterion of not being “fit and proper.” However, this requirement is not intended to extend to overseas incorporated market operators or clearing houses for which MAS is not the primary regulator.

Effective control provisions under the SFA and FAA 

MAS has proposed to amend sections 97A of the SFA and 57A of the FAA to state that a potential controller is only required to seek MAS’ approval prior to taking effective control of a CMSL or LFA. This will better reflect MAS’ policy intent and clarify that prior approval is not required for the negotiation stage.

MAS also proposed to extend such similar effective control provisions to locally incorporated RMOs, RCHs and ATs given its status as the primary regulator for locally incorporated RMOs and RCHs, and that ATs act as independent oversight entities for retail funds.

Notification requirements concerning adverse information on FIs 

In order to ensure that MAS stays informed, MAS has proposed to amend the provisions in the Acts to require all Regulated FIs to notify MAS as soon as it becomes aware of:

1. any adverse development that materially affects or is likely to materially affect it or its group entities to the extent that such development materially and adversely affects it; and
2. matters affecting the fitness and propriety of its substantial shareholders or controllers and key officers.

Such adverse developments would include developments that may have an adverse impact on the entity’s (i) financial soundness or reputation or (ii) ability to serve its customers on a business-as-usual basis.

Foreign regulators’ inspection of market infrastructure operators and Approved Trustees 

MAS intends to extend the provisions under section 150B of the SFA, which requires foreign regulators to obtain written approval from the MAS prior to inspection to cover locally incorporated RCOs, RCHs, ACHs, LTRs, AHCs and ATs. Such foreign regulators will also have to treat any report produced through such inspections as confidential. 

Inspection by an appointed agent of the foreign regulator

Under the proposals, all foreign regulatory authorities who wish to appoint an agent to inspect any Regulated FI are required to seek MAS approval.

Appointment of external auditors of market infrastructure operators

MAS intends to introduce a requirement for AEs, ACHs, LTRs and AHCs to obtain MAS’ approval for the appointment of their auditors on an annual basis. MAS would also have the power to require these entities to remove their auditors where the auditors are unable to discharge their duties satisfactorily. 

Failure to exercise reasonable care in submission of information

MAS has proposed to make the failure of Regulated FIs to take reasonable care to ensure the accuracy of information submitted to MAS (even if the information is not material) an offence within the Acts. 

The maximum penalty for the offence shall be set at S$25,000 under the SFA and S$12,000 under the FAA and TCA. 

Service of notice, order or documents by MAS 

MAS has proposed that the SFA and TCA are amended to provide that any notice, order or document sent by registered post to any person at his last known place of residence, registered office or principal place of business shall be deemed to have been duly served on him. 

The SFA, FAA and TCA will also be amended such that where any person has given consent for electronic service of documents, MAS may serve any such document on the person through electronic service. 

Pledging securities held in CDP direct accounts for collateralised trading 

Pursuant to an earlier review on securities market structure and practices in Singapore, MAS intends to effect a new collateralised trading regime, where brokers will collect collateral of at least 5 percent of a customer’s net open positions directly from such customer by end of trading day. Investors would be allowed to use securities held in their respective CDP direct accounts to meet such collateral requirements.

In order to make the pledging process more convenient under the new regime, MAS proposed an additional option where an investor will be able to create a statutory charge over a pool of securities in a segregated sub-balance of his CDP direct accounts.