SingaporeOctober 21 2021
Introduction
On 9 October 2021, the Monetary Authority of Singapore ("MAS") put in place an exemption framework to exempt the foreign head offices or branches (collectively, "Foreign Offices" or "FOs") of relevant financial institutions in Singapore ("Singapore FIs") conducting capital markets services and/or financial advisory services from applicable business conduct and representative notification requirements when the FOs conduct business in Singapore, subject to boundary and notification conditions ("Branch Framework"). The Branch Framework aims to level the playing field between FOs and foreign-related corporations of the Singapore FIs ("FRCs") which provide cross-border financial services in Singapore under a MAS approved arrangement with the Singapore FI ("FRC Framework").
At the same time, the FRC Framework has been streamlined, moving away from the case-by-case approval approach to an ex-post notification approach. Before 9 October 2021, FRCs have to be approved by MAS to operate under the FRC Framework so that they are exempted from the licensing and applicable business conduct requirements under the Securities and Futures Act ("SFA") and Financial Advisers Act ("FAA").
With effect from 9 October 2021, FOs or FRCs of Singapore FIs must ensure that their new cross-border business arrangements comply with the boundary conditions under the Branch Framework or FRC Framework and submit notifications of such arrangements to MAS within 14 calendar days from the commencement date of the arrangements. FOs or FRCs which are currently operating under existing approved cross-border business arrangements or relevant exemptions before 9 October 2021 will have 12 months (on or before 8 October 2022) to comply with the boundary conditions under the new Branch Framework or revised FRC Framework and submit notifications on such arrangements to MAS. There will be no "grandfathering" of existing arrangements from the notification requirement.
This Update provides an overview of the: (i) scope and boundary conditions under the Branch Framework and FRC Framework; (ii) notification requirement for cross-border arrangements under the Branch Framework and the FRC Framework; and (iii) on-going requirements in relation to the Singapore FI's cross-border arrangements with its FOs and FRCs (including anti-money laundering and countering of the financing of terrorism ("AML/CFT") requirements).
This development follows from the following public consultation exercises conducted by MAS to gather feedback on the operation details on the two Frameworks. MAS has reviewed the feedback received from these consultations and issued its Responses to these consultations. For more information, please click on the links below:
- Consultation paper on "Proposed Revisions to the Exemption Framework for Cross-Border Business Arrangements of Capital Markets Intermediaries" issued on 4 December 2018;
- Consultation paper on "Proposed Exemption Framework for Cross-Border Business Arrangements of Capital Markets Intermediaries Involving Foreign Offices" issued on 15 March 2021; and
- Consultation paper on "Proposed AML Notices for Cross-Border Business Arrangements of Capital Markets Intermediaries under Proposed Exemption Framework" issued on 12 May 2021.
Scope of Branch Framework and FRC Framework
Who is covered under the Branch Framework and FRC Framework?
The Branch Framework and the FRC framework apply to the following Singapore FIs:
- Capital markets services licence holders (other than venture capital fund managers);
- Licensed financial advisers;
- Banks, merchant banks, finance companies, insurers conducting relevant capital markets services and financial advisory businesses as exempt capital market intermediaries or exempt financial advisers; and
- Exempt futures brokers and exempt over-the-counter derivatives brokers,
which have entered into cross-border arrangements with their FOs or FRCs to conduct regulated activities under the SFA and/or financial advisory service (other than advising other by issuing or promulgating research analyses or research reports[1]) under the FAA ("Arrangements").
The Branch Framework or FRC Framework applies to a Singapore FI where the activities conducted by its FOs or FRCs are regulated under the SFA and/or FAA and where the extra-territoriality of the SFA and/or the FAA extends to such activities, as further elaborated in the MAS Guidelines on the Application of Section 339 (Extra-Territoriality) of the Securities and Futures Act [SFA 15-G01], and where no other exemptions apply.
Illustrations of the common Arrangements that are subject to the Branch Framework or FRC Framework are provided in "Annex 2 to the MAS Response to Feedback Received – Proposed Exemption Framework for Cross-Border Business Arrangements of Capital Markets Intermediaries Involving Foreign Offices" released by MAS on 8 October 2021.
What are the exemptions?
Under the new Branch Framework and revised FRC Framework, an FO or FRC which conducts regulated activities pursuant to an Arrangement with its Singapore FI that satisfies the boundary conditions and has been notified to MAS is exempted from the:
- Applicable business conduct requirements under the SFA and/or FAA; and
- Requirement for the representatives of the FO or FRC to be appointed as overseas-based representatives of the Singapore FI when they serve Singapore customers under the applicable Arrangement.
Boundary Conditions of Branch Framework and FRC Framework
The boundary conditions under the Branch Framework are largely similar to the FRC Framework, with appropriate modifications. These are summarised below.
Notification Requirement for Arrangements under Branch Framework and FRC Framework
The following requirements apply to a Singapore FI under the Branch Framework and FRC framework.
Ongoing Requirements for Arrangements under Branch Framework and FRC Framework
Singapore FIs must have and maintain policies and procedures to oversee the conduct of the FOs and FRCs and their representatives under the Arrangement with regard to, among other things, the following matters.
Further Information
For details, please refer to the subsidiary legislation issued under the SFA and FAA, MAS Notices, Guidelines and Forms that have been issued and/or revised to implement the new Branch Framework and revised FRC Framework which took effect from 9 October 2021.
If you have any queries on the above development, please feel free to contact our team members below who will be happy to assist.
