The Monetary Authority of Singapore (MAS) said on Monday it is planning regulatory amendments to the Securities and Futures Act (SFA) under which it will takeover the regulation of over-the-counter (OTC) derivatives activities in the country. The watchdog will be in charge of the market operators and capital markets intermediaries in the sector, which are currently under the scope of the Commodity Trading Act administered by the International Enterprise Singapore (IE Singapore), a government agency promoting international trade and partnering Singapore companies in going global.
The SFA has been approved on a first reading and is yet to be further finalized.
The MAS has been empowered to require derivatives contracts that meet prescribed criteria to be traded on exchanges or other organized trading facilities OTC. The regulator said it would take into account liquidity conditions in the country and international developments in determining whether any derivatives contracts should be subject to the trading mandate.
The latest changes of the SFA also envision the introduction of new terms such as “exchange-traded derivatives contract”, and an update of existing terms such as “securities”, “futures contract”, “debenture”, “derivatives contract”, “accredited investors” and “institutional investors”.
The MAS is also introducing amendments aimed at enhancing regulatory safeguards for retail investors, enhancing the credibility and transparency of the capital markets, and strengthening MAS’ ability to take enforcement action against market misconduct.
On one hand, under the proposed law the scope of the MAS will widen its regulatory parameter to non-conventional investment products (debentures, collective investment schemes). The move will allow investors in such products to be accorded the same regulatory safeguards as investors in capital markets products.
The watchdog will require market participants to specifically indicate securities short-sell orders to the relevant exchange and to report short positions above a prescribed threshold amount. Moreover, the bill will introduce a new regulatory framework for financial benchmarks which play an important role in the pricing of financial instruments and contracts.
New criminal sanctions and civil penalties will be introduced to deter manipulation of financial benchmarks. The bill envisions a number of other novice measures to be taken against market misconduct. Some of them aim to clarify the scope of prohibition against false or misleading disclosures, while others are designed to standardize penalty policies and introduce a cap on the penalty that can be awarded in a civil penalty case.