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The Monetary Authority of Singapore (MAS) published today a consultation paper on measures to strengthen Singapore’s over-the-counter (OTC) derivatives market and to enhance the provision of financial advisory services.
The paper contained the following:
- proposed regulatory framework for capital markets intermediaries dealing in OTC derivative contracts; and
- proposed refinements to rules governing financial advisory services
Strengthening Oversight of OTC Derivatives Intermediaries
Under the proposed framework, intermediaries dealing in OTC derivatives will have to meet prescribed capital and business conduct requirements. This includes putting in place risk management policies and controls to safeguard customers’ assets. MAS also proposes to introduce a set of risk mitigation requirements for intermediaries that deal in non-centrally cleared OTC derivatives. The requirements will enhance legal certainty over the terms of non-centrally cleared OTC derivatives transactions, foster effective management of counterparty credit risk, and facilitate timely dispute resolution.
Refining the Rules Governing Financial Advisory Services
MAS proposes to exempt from the Financial Advisers Act (FAA) Trading Representatives (TRs) who provide advice that is incidental to their execution services. This follows feedback that TRs who provide execution-based services find the existing FAA rules a challenge, such as the need to take into account the investment objectives, financial condition and risk profile of customers. The exemption will be subject to safeguards, and apply to listed Excluded Investment Products, which include stocks and shares, real estate investment trusts and simpler exchange-traded funds. The proposals will allow TRs to continue providing general financial advice to their customers as a value-added service.
MAS also proposes to allow financial advisers to help customers transact in collective investment schemes (CIS) when an investment recommendation on CIS has been accepted by their customers. The proposal is made in response to industry feedback and will help financial advisers better serve their customers.
The consultation paper may be accessed here. MAS invites interested parties to submit their comments to cmi-reply@mas.gov.sg by 3 July 2015.
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Background
MAS issued a consultation paper “Proposed Amendments to the SFA” on 11 February 2015 which proposed legislative amendments to the Securities and Futures Act to effect reforms to the regulation of OTC derivatives trading and the securities market. The proposals included extending the regulatory regime to OTC derivative trading platforms and intermediaries, introducing simplified, principle-based definitions of securities and derivatives, and measures to strengthen Singapore’s securities market in the area of short-selling and enforcement actions against market misconduct. The press release and consultation paper may be accessed here.
