30 August 2018
The Monetary Authority of Singapore (“MAS”) has published its Response to Parts 3 and 4 of the Consultation Paper on “Proposed Amendments to the Securities and Futures Act, Financial Advisers Act and Trust Companies Act”.
Issued on 18 September 2015, the Consultation Paper proposed changes to enhance MAS’ supervisory powers (Part 3 of the Consultation Paper) and strengthen business conduct requirements (Part 4 of the Consultation Paper) for financial institutions (“FIs”) regulated under the Securities and Futures Act (“SFA”), Financial Advisers Act (“FAA”) and Trust Companies Act (“TCA”). The Consultation Paper also proposed to allow the pledging of securities held in The Central Depository (Pte) Limited (“CDP”) direct accounts for collateralised trading (Part 5 of the Consultation Paper).
MAS had, on 7 November 2016, published its response to feedback received on the proposals to allow the pledging of securities held in CDP direct accounts for collateralised trading, and the proposal to extend sections 150B and 150C of the SFA in relation to inspections by foreign regulators to market infrastructure operators and approved trustees.
The current Response sets out MAS’ response to the feedback received on the remaining proposals in the Consultation Paper. These proposals will be progressively effected when the relevant legislative amendments are made.
The following are some of the key points conveyed in the Response:
- Prior MAS approval for appointment of CEOs and directors: MAS will proceed with the proposal to require all Singapore incorporated recognised market operators (“RMOs”), Singapore incorporated recognised clearing houses (“RCHs”) and approved trustees for collective investment schemes (“ATs”) to seek MAS’ approval prior to appointing their chief executive officers (“CEOs”) and directors.
- Grounds for removal of officers: MAS will proceed with the proposal to align the grounds for removal of CEOs (or Resident Managers in the cases of licensed trust companies) and directors of FIs regulated under the SFA, FAA and TCA to a single criterion of not being “fit and proper” (as set out in the Guidelines on Fit and Proper Criteria (Guidelines No. FSG-G01)).
- Effective control of Singapore incorporated RMO, Singapore incorporated RCH and AT: MAS will proceed to implement the proposal to extend the requirement for a person to seek MAS’ approval prior to taking effective control for takeover of a Singapore incorporated RMO, Singapore incorporated RCH or AT.
- Refining effective control provisions under SFA and FAA: Under section 97A of the SFA and section 57A of the FAA, a person must seek MAS’ approval prior to entering into an “arrangement” which would result in the person obtaining effective control of a capital markets services licensee or licensed financial adviser (together, “Licensee”). MAS clarified that it will only require a potential acquirer to obtain MAS’ approval before he takes effective control of a Licensee. Hence, a potential acquirer may enter into a conditional sale and purchase agreement without having to obtain MAS’ prior approval, provided the completion of the acquisition is subject to MAS’ approval being obtained.
- Notification requirements concerning adverse information on FIs: MAS had proposed requiring FIs regulated under the SFA, FAA and TCA to notify MAS as soon as they become aware of (i) any adverse development that materially affects the FI or the FI’s group entities to the extent that the development materially and adversely affects the FI, and (ii) matters affecting the fitness and propriety of the FI’s substantial shareholders, controllers or key officers. In its Response, MAS stated that it recognises that FIs may be prevented by regulatory obligations imposed by their home regulators from making the required disclosure. MAS will take this into account in assessing whether to take regulatory action against FIs for breaching the notification requirement.
- Failure to exercise reasonable care in submission of information: MAS will proceed with its proposal to amend the SFA, FAA and TCA to provide powers to make it an offence if an FI fails to take reasonable care to ensure the accuracy of information submitted to MAS, even if the information is not material.
- Inspection by appointed agent of foreign regulator: MAS proposed to amend the SFA to empower MAS to grant approval to foreign regulatory authorities to appoint an agent to inspect FIs regulated under the SFA. MAS explained that only a foreign regulator exercising a function that corresponds to a regulatory function of MAS would be allowed to conduct inspection of MAS-regulated FIs. MAS would only allow foreign regulatory authorities to inspect (i) MAS-regulated FIs that foreign regulatory authorities have regulatory oversight of, such as MAS-regulated FIs which are branches and subsidiaries of FIs regulated by the foreign regulatory authorities, and (ii) MAS-regulated FIs which are service providers to their related overseas FIs under outsourcing agreements.