Singapore moves securities and futures amendment bill for first reading – ftse global markets

The MAS is introducing legislative amendments to the Securities and Futures Act (Cap. The definition of trade off 289) (SFA) to implement policy proposals aimed at ensuring that the capital markets regulatory framework in Singapore keeps pace with market developments and is aligned to international standards and best practices.

MAS is also introducing amendments aimed at enhancing regulatory safeguards for retail investors, enhancing the credibility and transparency of the capital markets, and strengthening MAS’ ability to take enforcement action against market misconduct. Definition of foreign trade policy MAS conducted public consultations on significant policy changes and the proposed SFA amendments between 2012 and 2015.

The bill will extend the scope of the SFA to OTC derivatives by empowering MAS to regulate market operators and capital markets intermediaries in respect of their OTC derivatives activities. Triangular trade system definition Regulatory oversight of commodity derivatives, currently under the Commodity Trading Act (Cap. Foreign trade policy definition 48A) administered by IE Singapore, will consequently be transferred to the SFA.

MAS will also be empowered to require derivatives contracts that meet prescribed criteria to be traded on organised trading facilities or exchanges, instead of over-the-counter (“trading mandate”). International trade organizations definition This complements MAS’ existing powers to require reporting of trade information and central clearing of certain OTC derivatives contracts, and is the last key component of OTC derivatives reforms recommended by the FSB and G20 to improve transparency in the derivatives market. On trade definition The regulator will consider liquidity conditions in Singapore and international developments in determining whether any derivatives contracts should be subject to the trading mandate.

The bill introduces new terms such as exchange-traded derivatives contract, with consequential rationalisation in the definition of existing terms such as securities, futures contract, debenture and derivatives contract. Definition of a trademark Various SFA provisions will be consequentially amended or repealed based on the new and re-defined terms.

The bill also extends the scope of the SFA to non-conventional investment products, so that investors in such products are accorded the same regulatory safeguards as investors in capital markets products. To this end, the Bill will allow MAS to subject precious metals buy-back arrangements, which are in substance equivalent to collateralised borrowing, to the regulatory framework for debentures; and amend the definition for a collective investment scheme (“CIS”) such that there need not be pooling of investors’ contributions and scheme profits for an arrangement to be regarded as a CIS, so long as the scheme property is collectively-managed. Trade show marketing definition Exclusions will be provided to ensure that schemes which are predominantly for the consumption of property as opposed to investment purposes, are not brought within MAS’ regulatory ambit.

It also redefines definitions of accredited investors (AIs) and institutional investors (IIs) to, says MAS, better reflect categories of non-retail investors identified based on their wealth or income and financial knowledge respectively. Trade fair definition Under the current capital markets regulatory framework, the full suite of regulatory safeguards is aimed primarily at retail investors. Processing trade definition Intermediaries are exempted from certain requirements when dealing with non-retail investors who are generally considered better able to look after their own interests.

The wealth criteria for an individual to qualify as an AI will be tightened such that the net equity of the individual’s primary residence can only contribute up to SGD1m of the current SGD2m net personal assets threshold. Definition of barter trade system Alternatively, individuals will be able to qualify as an AI if they have SGD1m of financial assets (net of any related liabilities). Definition of carry trade Individuals whose wealth is concentrated in their primary residence and have little liquid assets otherwise will no longer qualify as AIs. Trade papers definition An opt-in regime will also be introduced to give investors who meet the prescribed AI wealth or income thresholds the choice of benefiting from the regulatory safeguards afforded to retail investors.5

The II definition will be widened to include persons professionally active in the capital markets such as financial institutions regulated by foreign regulators, foreign central governments and sovereign wealth funds. Trade in definition However, statutory bodies, other than prescribed statutory boards, will no longer be deemed as IIs.6

The bill will introduce requirements to enhance transparency on the level of short-selling in securities listed on Singapore’s approved exchanges. Retail trade area definition Market participants will be required to specifically indicate short-sell orders to the relevant exchange. They will also be required to report short positions above a prescribed threshold amount to MAS. Trade finance definition banking Aggregate information on the level of short-sell orders and short positions will be published. Intra industry trade definition The requirements are in line with the principles on regulation of short-selling set by IOSCO, the international standard setting body for the securities market.

A new regulatory framework for financial benchmarks will also be introduced and MAS will be able to designate key financial benchmarks and to regulate administrators of, and submitters who contribute information required to compute benchmarks. Trade weighted exchange rate definition The MAS will also have powers to direct specified persons, such as banks, to submit information required to compute the designated benchmark to the administrator of such benchmark. Local trade definition This is to ensure that there is a sufficient pool of submitters to provide information to the administrator of a systemically-important designated benchmark, to enable an accurate and representative computation of the benchmark. Trade union economics definition The Bill further introduces criminal sanctions and civil penalties to deter manipulation of financial benchmarks.

The bill clarifies that the SFA prohibits disclosures where a material aspect of the statement is false or misleading and is likely to influence the market price of the securities, securities-based derivatives contract or CIS unit, regardless of the significance of the price effect. Trade repository definition Disclosures where a material aspect of the statement is false or misleading may not necessarily result in significant price movements because of other contemporaneous and irrelevant market factors such as general market sentiment or market liquidity, and yet may wrongly influence investors to trade in the market. Definition of international trade in economics The word “material” in section 199 is meant to only describe the nature of the false or misleading in the sense that what is false or misleading must not be minor or unimportant. Fair trade definition deutsch The word does not describe the extent of the market effect that the statement has on the price of securities, securities-based derivatives contract or CIS unit.

A statutory definition of “persons who commonly invest” to better reflect market participants who are accustomed to or likely to invest in the product in question is also introduced.

In determining liability for insider trading, the term acts as a reference point for assessing whether information is generally available and whether it is likely to have a material price impact by influencing the behaviour of common investors. Definition of international trade theory This statutory definition will strengthen MAS’ ability to pursue insider trading cases without having to meet an unrealistically high standard for “persons who commonly invest”. Definition of trade payable The definition would also allow the Court to consider the reality that there can be different classes of “persons who commonly invest”, each with a different level of knowledge and expertise. Trade sample definition A set of guidelines would be issued to elaborate on MAS’ policy stance behind the statutory definition and to provide guidance on its interpretation.

The bill will confer priority on MAS’ civil penalty claims over private unsecured claims that accrue after any contravention of the SFA, in alignment with the priority that is accorded to government claims under section 10(1) of the Government Proceedings Act (Cap. Trade in economics definition 121). Definition of global trade Such priority will strengthen MAS’s ability to resist attempts to divert funds frozen by MAS for satisfaction of civil penalties imposed under the SFA towards satisfaction of the contravening person’s private debts.

It will also standardise the maximum penalty that can be awarded to the greater of SGD2m, or three the amount of benefits gained or losses avoided for all civil penalty cases.

Several technical amendments aimed at effecting revisions relating to operational matters have also been included, such as streamlining the process by which investors can pledge their securities as collateral with intermediaries, to support a requirement for investors to cover at least 5% of their net open positions by the end of each trading day; enabling MAS to take into account a wider range of factors beyond the laws and practices of a foreign jurisdiction when deciding whether to recognise a CIS constituted in that foreign jurisdiction for offer to retail investors in Singapore; enhancing the regulatory regime governing real estate investment trusts (“REIT”) and their managers to reduce potential conflicts of interest with REIT unitholders; and clarifying that court orders sought under section 324 of the SFA are available to support any investigation conducted by MAS, regardless of whether the investigation is carried out under the SFA or the Criminal Procedure Code.

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