Thu, Feb 20, 2020

Singapore Regulatory Calendar 2020

The experts at Duff & Phelps provide a calendar of key dates for the financial services industry in Singapore.

Topic Update Date

Launch of Sandbox Express

The MAS consulted in November 2018 on proposals to create pre-defined sandboxes, known as Sandbox Express. The intent of Sandbox Express is to enable firms that intend to conduct certain regulated activities where the risks are generally low and well understood to experiment more quickly within pre-defined sandboxes. MAS responded to feedback from the public on August 2019 and simultaneously released the Sandbox Express Guidelines.

Sandbox Express covers the regulated activities of carrying on business as an insurance broker; establishing or operating an organized market; and remittance business. MAS continues to review whether appropriate constructs could be established to facilitate meaningful experiments for other activities regulated by MAS while containing risk

Effective from August 2019.

Proposed regulatory approach for derivative contracts on payment tokens

The Payment Services Act was passed by Parliament in January 2019. It introduces licensing and regulation of payment service providers in various segments, including remittance, e-wallet and digital payment tokens. This new framework modernizes the existing regulatory framework to incorporate recent fintech developments that have led to the convergence of payment and remittance services.

The regulation of licensees will be calibrated according to the activities undertaken, based on the risks or regulatory concerns they pose to the following: money laundering and terrorism financing; user protection; interoperability; and technology risk.

The Payment Services Act came into operation on January, 28, 2020. The accompanying regulatory framework comes into operation at staggered timeframes starting from 28 January 2020.

Effective January 28, 2020, onwards.

Commencement of the Payment Services Act and accompanying regulatory framework

The MAS consulted in November 2019 on regulating under the Securities and Futures Act ("SFA") payment token derivatives offered by approved exchanges. The MAS does not intend to regulate payment token derivatives that are not offered by an approved exchange. A number of measures will be introduced for retail investors who trade in payment token derivatives offered or distributed by regulated FIs. These measures for retail investors are expected to be introduced by 30 June 2020.

June 30, 2020.

Notice on Cyber Hygiene

The MAS proposed in September 2018 to issue a Notice on Cyber Hygiene, prescribing a set of essential cyber security practices that FIs must put in place to manage cyber threats. The Notice was issued on August 6 2019 and comes into effect on August 6, 2020. A 12-month transition period from the date of issuance of the Notice.was given for FIs to implement the frameworks, processes and controls to comply with the requirements.

Effective 6 August 2020.

Individual Accountability and Conduct ("IAC") Guidelines

Currently, the MAS has in place existing legislation and guidelines that address many elements of accountability and conduct regimes in other jurisdictions. The MAS intends to intensify its regulatory and supervisory emphasis on FIs’ culture and conduct and to reinforce FIs’ responsibilities in three key areas:

  • Promoting the individual accountability of senior managers
  • Strengthening the oversight of employees in material risk functions
  • Embedding standards of proper conduct among all employees.

The proposals, to be enacted via a new set of Guidelines, set out five accountability and conduct outcomes that FIs are expected to work towards.

MAS also released a related consultation in June 2019 seeking additional feedback on the revised scope of FIs on which the IAC Guidelines will be applied. It proposed to extend the scope of application of the IAC Guidelines to all FIs regulated by the MAS, but sought to exclude the smaller FIs (such as those with a headcount of less than 20).

MAS will implement the IAC Guidelines with a transitional period of one year after they are published. The effective date will be announced after the conclusion of the public consultation on MAS’s revised proposals on the scope of application of the Guidelines and the calibrated approach for smaller FIs.


Disapplication of notification requirements for representatives serving only non-retail customers

The MAS consulted in 2017 on streamlining the Representative Notification Framework and applying the notification requirements only to representatives who serve retail customers. The proposals mean FIs will not be required to submit notifications for their representatives who serve only non-retail customers, as such customers are generally better able to protect their own interests.


Notice on Controls against Market Abuse

The MAS consulted in August 2019 on issuing a Notice on Controls against Market Abuse to improve controls and facilitate investigations into cases of market abuse, such as market manipulation and insider trading, so as to maintain a fair, orderly and transparent market.

The proposals include enhanced requirements around a range of issues:

  • Identification of ultimate beneficial owners of orders and trades (O&T) executed in omnibus accounts
  • Record-keeping of instructions received for broker-assisted O&T
  • Unique client device identifier for O&T executed via mobile trading applications; and d) cash payments and Payments by third parties for non-account holders.

The Notice will only apply to licensed and exempt FIs in Singapore that undertake the regulated activity of dealing in capital markets products.

There is no clear timeframe for when the Notice will be issued, but the MAS proposes a six-month transition period for financial institutions ("FI") to implement the controls to comply from the date of issuance.


Proposed amendments to the Payment Services Act for AML/CFT of digital payment token service providers

The MAS consulted in December 2019 on proposed amendments to the Payment Services (PS) Act to align with the enhanced Financial Action Task Force (FATF) standards applicable to digital payment token (DPT) service providers. The FATF revised the FATF Standards to require countries to regulate what it has termed as virtual asset service providers (VASP) for AML/CFT in light of the inherent ML/TF risks posed.

The proposed amendments to the PS Act relate to the expansion of the scope of the DPT service providers' activities to include transfer of DPTs; provision of custodian wallets for and on behalf of customers; brokering of DPT transactions (without possession of money or DPTs by the DPT service provider); and brokering of cross-border money transfer services (without moneys accepted or received in Singapore by the payment service provider).

The MAS also intends to introduce two new powers in the PS Act, namely powers to enable MAS to impose user protection measures and restrictions on certain DPT service providers; and to equip MAS with the ability to mitigate new risks as and when they arise and impose appropriate measures in a timely manner.


Proposed amendments to the Payment Services Act on scope of e-money and Digital Payment Tokens

The PS Act will come into effect on 28 January 2020 and will regulate payment services such as the issuance of e-money and DPT services. Since MAS published its consultation papers in June 2019 on the draft PS Act, there have been changes in product development of e-money and DPTs – such as stablecoins, for example – as well as in the way which the public has been using these modes of payment.

The MAS consulted in December 2019 to seek views from the public on its understanding of money, e-money and DPTs, including features that distinguish these forms of payments from one another. The MAS also sought views on the regulatory treatment of e-money based on payment services, and DPT services, including on whether the existing definitions of e-money and DPT in the PS Act remain relevant.


Exemption framework for cross-border business arrangements of Capital Market Intermediaries

The MAS consulted in December 2018 on proposals to streamline the exemption framework for business arrangements between FIs in Singapore and their foreign related corporations (FRC). It has proposed boundary conditions to mitigate risk from cross-border arrangements, including notification and reporting requirements, regulatory statuses of FRCs and the Singapore entity and internal controls. The intention is to replace the current case-by-case approval with ex-post notification to MAS of such arrangements.

FIs are expected to submit relevant attestation and information on a periodic basis to enable MAS to monitor and address the risks that may arise from such business arrangements under the proposed ex-post notification approach.


Revisions to Misconduct Reporting Requirements

The MAS consulted in July 2018 on extending the misconduct reporting requirements to registered fund management companies (RFMCs) and introducing changes to the misconduct reporting requirements to provide greater clarity on the intended types of misconduct that should be reported to MAS. The proposals also require FIs to update MAS on the outcome of police investigations and notify representatives when the representatives are under investigation to enable them to make full and accurate disclosures on their compliance history and past misconduct record if applying to join a new principal company.

The MAS also proposed to standardize industry practices by mandating FIs to carry out and respond to reference check requests on representatives, as well as setting out the mandatory information that must be provided in a reference.


Recognized Market Operators (RMO) regime

The MAS consulted in May 2018 on proposals to introduce two additional tiers in the regulatory regime for market operators to allow the MAS to better calibrate the regulatory requirements and supervisory intensity based on systemic importance and target clientele. The proposed tiers within the RMO regime will provide market operators with greater flexibility to choose a regulatory tier that better matches their risk profile and business model.

The MAS plans to introduce RMO Tier 1, targeted at market operators with limited access to Singapore-based retail investors; and RMO Tier 3, targeted at market operators that have a significantly smaller scale of business compared to more established operators under the current Approved Exchanges and RMO regime. The market operators that qualify under the current RMO regime will be classified under RMO Tier 2.


Proposed revisions to guidelines on business continuity management

The MAS consulted in March 2019 on proposed revisions to the current Business Continuity Management (BCM) Guidelines issued in 2003. The proposed changes are part of MAS' efforts to help FIs strengthen their resilience to disruptions. The proposals include revising the definition of business function to a service that an FI ultimately provides to its customers, instead of the current focus being on the business processes performed by individual organizational units. The draft Guidelines also place more responsibilities on the Board and senior management for the business continuity of their FI and revise the scope of each FI's business continuity plan (BCP) to include a comprehensive risk assessment, understanding of internal and external business dependencies, crisis communication plans and proper documentation and maintenance.

Each FI is expected to test and audit its BCM to ensure that its response and recovery arrangements are effective and developed based on a sound understanding of existing systems and processes. There is no clear timeframe as to when the guidelines will be published, but FIs are expected to adopt them within a year following its publication.


Proposed notice and guidelines on best execution

The MAS consulted in 2017 on draft regulations that would formalise its expectations in relation to best execution. The proposals would require holders of capital markets services licence, banks, merchant banks and finance companies to have policies and procedures to place or execute customers' orders on the best available terms. They can take into account various factors in calibrating their policies, including the type of customers they service, the types of capital markets products and the characteristics of their execution venues.


Proposed revisions to Technology Risk Management guidelines

The MAS consulted in March 2019 on proposed revisions to the current Technology Risk Management guidelines issued in 2013. The proposed changes are part of MAS’s efforts to help FIs put in place adequate and robust risk management systems, as well as operating processes to manage risks arising from the rapid transformation of the technology landscape of the financial sector. The proposed Guidelines will be updated with greater focus on technology risk governance and oversight, software development and management, emerging technologies and cyber resilience.


Proposed notice on outsourcing

The MAS responded in November 2019 to the proposed notice on outsourcing for banks and merchant banks and concurrently released a new consultation on the draft notice on outsourcing for banks that defines a set of minimum standards for outsourcing management. There is no clear timeframe as to when the notice will be issued, but the consultation papers suggest that a specific proposed notice on outsourcing for capital markets intermediaries could follow.


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