On 11 February 2015, the Monetary Authority of Singapore (the “MAS”) issued a Consultation Paper containing draft amendments to the Securities and Futures Act (the “SFA”) to implement the key initiatives set out below. The consultation exercise closed on 24 March 2015.
- OTC derivative reforms
In November 2012, the requirements for reporting and clearing of over-the-counter (“OTC”) derivative transactions and the regulatory regime of OTC derivatives trade repositories (“TRs”) and clearing facilities were put in place. Some changes are proposed in the Consultation Paper to finetune the current mandatory reporting requirements for OTC derivatives, including providingexpressly in the SFA that a financial institution that is subject to the banking secrecy or confidentiality laws will not be regarded as breaching the confidentiality laws when it discloses a customer’s information for the purpose of complying with the reporting requirements for OTC derivatives in the SFA or foreign reporting obligations of the jurisdictions prescribed by the MAS.
The Consultation Paper also proposes to amend the SFA to implement the regulatory regime for derivative market operators and market intermediaries for OTC derivatives.
In addition, the MAS announced that it will not be mandating a trading regime for OTC derivatives for now.
- Transfer of regulation of commodity derivatives from the CTA to the SFA
Currently, the MAS regulates commodity futures under the SFA while the International Enterprise Singapore Board (the “IE”) regulates commodity derivatives and spot commodity under the Commodity Trading Act (the “CTA”). The regulatory oversight of commodity derivatives will be transferred from the IE under the CTA to the MAS under the SFA. Spot commodity trading will continue to be administered by the IE.
- New regulatory framework for marking of short-sell orders and short position reporting
Brokers who are Trading Members of the Singapore Exchange Securities Trading Limited (the “SGX-ST”) are required to mark short-sell orders before they may be placed in the trading system. A short-sell order is any sell order where the seller does not own in full the quantity of the security to be sold at the time of placing the order. The requirements for marking of short-sell orders are currently set out in the SGX-ST Trading Rules.
The Consultation Paper contains the legislative changes in the SFA to implement a new regime under the SFA to formalise the requirements for marking of short-sell orders as well as to require the reporting of net short positions for all securities listed on the SGX-ST Mainboard and Catalist which require delivery of underlying securities. These positions will be aggregated and published.
- Fine-tuning changes to market misconduct provisions
The MAS proposes to make the following changes to the market misconduct provisions in the SFA to strengthen the effectiveness of the enforcement regime in deterring market misconduct:
- Clarifying the meaning of “material” in section 199 of the SFA which prohibits a person from making a statement or disseminating information that is false or misleading in a “material particular” and is likely to affect the market price of securities or induce the dealing of securities by any other person;
- Introducing a new definition of “persons who commonly invest in securities” for the purpose of determining what is price-sensitive information that is not generally available under the insider trading offence;
- Revising the ceiling for the civil penalty quantum which may be sought by the MAS from a person who has contravened a market misconduct provision in the SFA;
- Providing expressly that the civil penalty claims by the MAS against a person who is being investigated for possible contraventions of the market misconduct provisions will have priority over any private debt owed by the suspect which accrues after a freezing order has been made against his assets.
- Amending the criteria for recognising foreign CIS
Currently, the MAS is allowed under the SFA to recognise foreign collective investment schemes (CIS”) for offers to retail investors in Singapore only if the laws and practices of the jurisdiction that the CIS is constituted and regulated under afford retail investors protection that is equivalent to that afforded to investors of Singapore-constituted CIS that are authorised under the SFA. The MAS is proposing to provide flexibility to take into account factors other than the laws and practices under which a foreign CIS is governed when considering whether to recognise a foreign CIS.