Articles and Events Summary

Corporate Governance Requirements in Singapore

Corporate Governance is a general term encompassing all the directives, processes and rules which characterized “the system by which companies are directed and controlled” (Cadbury Committee, 1992). It also defines the responsibilities of all the stakeholders within the organisation, including the procedures for taking decisions in corporate matters, mainly to prevent any conflicts of interests.

In Singapore, the principles defining Corporate Governance are set out by the Code of Corporate Governance, the latest version of which was issued in August 2018, accompanied by a Practice Guidance. This reviewed version applies to Annual Reports covering financial years commencing from 1 January 2019.

The Accounting and Corporate Regulatory Authority (ACRA) provides the regulatory environment and the corporate governance practices for businesses, public accountants and corporate service providers in Singapore. ACRA’s role is to achieve synergies between the monitoring of corporate compliance with disclosure requirements and regulation of public accountants performing statutory audit.

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Regulatory compliance in Singapore: Legal Entity Identifier

A Legal Entity Identifier (LEI) is a number given to a legal entity to identify without ambiguity all the parties in a financial transaction across the globe. It is a unique 20 digits alpha-numeric code, assigned to the entity for the duration of its life by Local Operational Units (LOU) part of the Global Legal Entity Identifier System.

As defined in ISO standard 17442, “any legal entity that enters into a financial transaction is eligible for an LEI”. However, “any legal requirement to have an LEI will come from national financial regulators. In Singapore, any organisation subjected to the MAS Securities and Futures (Reporting of Derivatives Contracts Regulations 2013 are required to have one.

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Industry News

Variable Capital Company (VCC) Consultation Paper

The Variable Capital Companies Act (“VCC Act”) was passed in Parliament on 1October 2018. It provides the legislative framework for the incorporation, operation, and regulation of a new corporate structure that is tailored for collective schemes, known as the variable capital company (“VCC”).

The Monetary Authority of Singapore (“MAS”) has been consulting on (i) the proposed new regulations for the VCC framework; and (ii) other amendments to existing rules and regulations, such as the SFR(CIS), CIS Code and AML/CFT notice for VCCs, to provide the operational framework to facilitate the implementation of this new regime. The proposed regulations are adapted from existing regulations under the Companies Act (Cap. 50) (“CA”). Among other things, these proposed regulations set out details in relation to the operation of the VCC framework, including the incorporation of a VCC, the registration of sub-funds and the re-domiciliation to Singapore of foreign corporate entities as VCCs.

Interested parties are to provide their comments and feedback on these proposed regulations by 30 May 2019 via email to vcc@mas.gov.sg.

For more information, clickhere.

Crypto regulation: FinCEN Fines Virtual Currency Exchanger

The Financial Crimes Enforcement Network (FinCEN) fined in April Eric Powers, the operator of a peer-to-peer exchanger of convertible virtual currency, for willfully violating the Bank Secrecy Act’s (BSA) registration, program and reporting requirements and therefore failing to comply with crypto regulation.

This is the first time FinCEN takes an enforcement action against a P2P virtual currency exchange, and the first instance where the bureau has penalized an exchanger of virtual currency for its failure to file Currency Transaction Reports (CTRs).

FinCEN Director Kenneth A. Blanco commented: “Obligations under the BSA apply to money transmitters regardless of their size. Exchangers of convertible virtual currency, such as Mr. Powers, are money transmitters and must register as MSBs.”

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Standard Chartered fined $1.1bn for money-laundering and sanctions breaches

The British bank has agreed to pay $947m to American authorities over allegations that it violated sanctions imposed against Burma, Zimbabwe, Cuba, Soudan, Syria and Iran.

Separately, it was fined £102m by UK’s Financial Conduct Authority (FCA) for anti-money-laundering breaches that included “shortcomings” in its counter-terrorism finance controls in the Middle East. It is the second-largest fine ever imposed by the FCA for anti-money-laundering failures.

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MAS Releases Consultation Paper on Proposed Payment Services Regulations

The Monetary Authority of Singapore (MAS) released a consultation paper on payment services regulations, calling for comments from any interested parties. To effect the objectives of the PS Act, MAS intends to prescribe the following three sets of regulations and one order:

  • Payment Services Regulations
  • Payment Services (Exemptions for a limited period of time) Regulations
  • Payment Services (Singapore Dollar Cheque Clearing System and Inter-Bank GIRO System) Regulations
  • Payment Services (Designated Payment Systems) Order.

For more information, click here.

MAS issues Prohibition Orders against three people for fraud

The Monetary Authority of Singapore has issued Prohibition Orders against three individuals for their fraudulent and dishonest conduct while carrying out their duties. Two former bank employees and a former insurance agent are concerned and their cases are not related.

Mr Lee Boon Ngiap, Assistant Managing Director (Capital Markets), MAS, said: “MAS imposed Prohibition Orders of considerable duration against these individuals as they had abused their position of trust by engaging in criminal conduct at the expense of their customers.”

Their Prohibition Orders are effective from April 5th 2019.

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Deutsche Bank’s US Unit involved in money-laundering case

The U.S. unit of Deutsche Bank largely resisted strict money-laundering compliance for years, as shown by a condemning number of proofs. Danish regulators say Estonian employees covered up money-laundering violations for years. From 2007 to 2015, the bank has admitted that roughly $230 billion that passed through that subsidiary was suspicious. In its annual report in March, the bank urgently highlighted the importance of the fight against money-laundering to investors.

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NZ Financial Markets Authority issues AML/CFT monitoring report

New Zealand’s Financial Market Authority (FMA) has published an AML/CFT monitoring report setting out the areas requiring further attention by the management and boards of reporting entities. From 1 July 2016 to 30 June 2018, the FMA issued 18 formal warnings including one public warning. 89 issues requiring remedial action were identified in the one year ending June 2017, up to 175 for the same period in 2018.

For more information, click here.

Regulatory Updates

26April 2019– FAQs on Minimum Entry and Examination Requirements

MAS has issued revised FAQs on the Minimum Entry and Examination Requirements for Representatives of Holders of Capital Markets Services License and Exempt Financial Institutions. As per the revised FAQs, representatives of fund management companies who market funds to distributors (who are institutional investors) are exempted from the CMFAS Exam and CPD requirements.

Click hereto read the regulatory update.

23 April 2019– Exemptions issued Pursuant to Section 337(2) of The Securities and FuturesAct

An exemption has been granted on 19th February 2019 under Section 99(1) (h) of the Securities and Futures Act (“SFA”), read with section 337(2) of the SFA, from the requirement to hold a Capital Markets Services (“CMS”) licence for fund management to 9 single family offices (“SFOs”) that provided fund management services to their respective sponsors. Due to their ownership structures, these SFOs were not able to rely on the existing exemption from licensing under the Second Schedule to the Securities and Futures (Licensing and Conduct of Business) Regulations for carrying on business in fund management for or on behalf of any of its related corporations. Under the conditions of the exemption, these SFOs shall only carry out the regulated activity of fund management for members or entities wholly owned or controlled by the respective families or shareholders, and do not manage any monies belonging to nonrelated parties.

Click here to read the regulatory update.

23 April 2019– FAQs on Classification of Capital Market Products

MAS has issued revised FAQs on Classification of Capital Market Products. Some of the new matters raised would be relating to issuers who intend to make an offer of any capital markets products either personally or through an agent, to any person in Singapore, or invite any person in Singapore to make an offer, need to determine the classification of the capital markets product as either prescribed capital markets products or capital markets products other than prescribed capital markets products andnotify relevant persons in writing of the classification,if the capital markets product are or will be offered through these relevant persons. The issuers must also notify the approved exchange in writing of the classification, if the capital markets products are or will be listed on the market operated by the approved exchange. There is no prescribed form regarding how this notification must be made.

Click hereto read the regulatory update.

12 April 2019– Clarification on MAS Notice 113 –Notice On Securities Borrowing and Lending Activity

MAS has issued a Circular for providing clarification on MAS Notice 113. The Notice governs securities borrowing and lending transactions. It is not intended to apply to a transaction where its objective is to borrow or lend cash or cash-equivalent assets. The objective of a transaction (e.g. whether it is driven by the need for securities or cash) should be evident from the terms of the agreement governing the transaction. Relevant factors in determining the objective of a transaction include, but are not limited to, the asset on which margining is based, and the mark-to-market requirements imposed on the collateral leg of the transaction.

Click hereto read the regulatory update.

8 April 2019– Notice on Criteria of Rules of a Designated System (FNA N01)

The MAS has issued a Notice that sets out the criteria that will apply when considering an application to approve the Rules of a Designated System in relation to the operator, settlement institution or collateral holder of the designated system. The operator, settlement institution and the collateral holder shall clearly defineterms in the Rules where applicable, taking into account the definitions of the terms in section 2(1) of the Payment and Settlement Systems (Finality and Netting) Act (“FNA”).The Rules shall clearly set out the points at which transfers, netting or settlement are final and irrevocable. The Rulesshall clearly set out the steps for transfers, netting or settlement to takeprecedence over the law of insolvencyand the steps for transfer orders entered into and netting in a designated system.

Click here to read the notice.

5 April 2019– A Guide to Digital Token Offerings

The MAS has issued updatedthe general guidance paper on the application of relevant laws administered by MAS in relation to offers or issues of digital tokens in Singapore. Offers or issues of digital tokens may be regulated by MAS if the digital tokens are capital markets products under the SFA. Applications can be made to MAS to know whether the digital token offerings are subject to MAS’ regulations.All the information stated in the checklist in Appendix 2 of the guidance paper regarding the token name, offering details etc. must be enclosed with the application.

Click here to read the guide.

4 April 2019– Securities and Futures (Trading Venues for Derivatives Contracts in the European Union) Regulations 2019

The Securities and Futures (Trading Venues for Derivatives Contracts in the European Union) Regulations   came into operation on 2 April 2019. The purpose of these Regulations is to give effect to an arrangement between MAS and the European Commission, under which the European Commission and MAS recognises that the requirements imposed by or under the Securities and Futures Act (“SFA”) on persons who operate organised markets in Singapore are comparable to the requirements imposed on persons who operate trading venues for derivatives contracts in the European Union under EU Rules and to exempt such persons from the requirement under section 7(1) of the SFA to be an approved exchange or a recognised market operator before establishing or operating an organised market, or holding itself out as operating an organised market. The Rules also prescribe trading venues for derivatives contracts in the European Union that are regulated under and in accordance with the EU Rules as facilities on or through which a specified person may execute a specified derivatives contract.

Click here to read the regulatory update.

4 April 2019– Practice Note on Sale of Investment Products

MAS has issued an updated Practice Note on the Sale of Investment Products to provide guidance to licensed persons or exempt financial institutions, as well as their representatives, who carry on the regulated activity of dealing in securities, trading in futures contracts, leveraged foreign exchange trading, or any combination of these regulated activities in respect of dealing in Specified Investment Products,for a customer who is an individual and who is not an accredited investor, institutional investor or expert investor. The notice sets out the matters that need to be considered during a customer account review and the additional safeguards to be taken to ensure that the customer understands the features and risks of the Listed Specified Investment Product that he intends to transact in.

Click here to read the regulatory update.

3 April 2019– FAQs on Licensing and Business Conduct (Other than for Fund Management Companies)

MAS has reissued the FAQs on Licensing and Business Conduct (Other than for Fund Management Companies. As per the FAQs,the Regulation 45 of the Securities and Futures (Licensing and Conduct of Business) Regulations governs securities borrowing and lending transactions, where the objective of such transactions is to borrow or lend securities. It is not intended to apply to a transaction where its objective is to borrow or lend cash or cash equivalent assets.

Click here to read the regulatory update.

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