Singapore Capital Markets Intermediaries Cross-Border Arrangement Rules
- a22162
- Jun 30
- 6 min read
Updated: Jul 1
Requirements under the Exemption Frameworks for Cross-Border Business Arrangements of Capital Markets Intermediaries Involving Foreign Related Corporations and Foreign Offices
The Monetary Authority of Singapore (MAS) introduced new Exemption Frameworks for cross-border business arrangements of capital markets intermediaries involving Foreign Related Corporations (FRCs) and Foreign Offices (FOs) with effect from 9 October 2021. These frameworks aim to streamline the regulatory approach and move towards an ex-post notification system (instead of ex-ante approval for FRCs), while also extending a similar framework to FOs.
Here's a summary of the key requirements and conditions under these frameworks:
I. General Scope and Applicability:
Who is covered? Singapore-regulated financial institutions (Specified Regulated Entities) that have cross-border arrangements with their FRCs or FOs. These include:
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.
What activities are covered? Regulated activities under the Securities and Futures Act (SFA) and/or the Financial Advisers Act (FAA) carried out by the FRC/FO with clients or prospects in Singapore under an arrangement with the Singapore FI.
Exemption from:
Applicable business conduct requirements under the SFA and/or FAA for the FRC/FO.
Requirement for representatives of the FRC/FO to be appointed as overseas-based representatives of the Singapore FI when serving Singapore customers under the arrangement.
Key shift: For FRCs, it moved from a case-by-case approval to an ex-post notification approach, provided certain conditions are met. For FOs, it introduced a new exemption framework with a similar outcome.
II. Key Requirements and Conditions for the Exemption:
To qualify for the exemption, the cross-border arrangement must satisfy certain "boundary conditions" and ongoing requirements. These generally include:
Permissible Clientele:
All customers of the arrangement must be Accredited Investors (AIs), Expert Investors (EIs), or Institutional Investors (IIs).
For AIs, the "opt-in" requirements apply, meaning they must be explicitly informed of and consent to being treated as AIs.
Regulatory Oversight of the FRC/FO:
The FRC/FO must be adequately regulated and supervised for the activities it carries out by the relevant foreign regulatory authorities in its home jurisdiction.
The FRC/FO and its foreign jurisdiction must not be subject to any sanctions imposed by a United Nations Security Council resolution.
Anti-Money Laundering (AML) / Countering the Financing of Terrorism (CFT) Measures:
The FRC/FO must be subject to AML/CFT requirements in its home jurisdiction that are consistent with the standards issued by the Financial Action Task Force (FATF).
The Singapore FI is responsible for ensuring that customer due diligence (CDD) is conducted in accordance with applicable MAS Notices on AML/CFT.
The Singapore FI must maintain or have timely access to all CDD records kept overseas by the FRCs or FOs.
Singapore FI's Role and Responsibility:
The Singapore FI must be one of the contractual parties to the transactions, and be liable (solely or jointly with the FRC/FO) for the obligations and liabilities arising from the regulated activities conducted under the arrangement. This ensures clear accountability to Singapore customers.
The Singapore FI's role should not be limited solely to marketing activities. Where it involves client servicing, the Singapore FI should carry out a substantial portion of such activities.
The Singapore FI must establish and maintain written policies and procedures governing the cross-border arrangement, including marketing and solicitation of customers in Singapore by the FRC/FO and its representatives, and handling of customer complaints.
The Singapore FI must maintain a register of foreign representatives of the FRCs/FOs, including details of their visits to Singapore and the purpose/description of activities conducted.
Notification to MAS:
New arrangements: Singapore FIs must notify MAS using Form FN within 14 calendar days from the commencement date of the arrangement.
Changes to arrangements: Singapore FIs must notify MAS of any changes in particulars to notified arrangements using Form FC within 14 days after the date of the change.
Annual Declaration: Singapore FIs must submit an annual declaration (Form FR) to MAS not later than 5 months from the end of their financial year, confirming compliance with the exemption requirements.
III. Important Considerations:
Extra-territoriality: The Exemption Frameworks are relevant where the activities conducted by the FRC/FO and its representatives are regulated under the SFA and/or FAA, not otherwise exempted, and where the extra-territoriality of the Act applies. FIs should refer to MAS's guidelines on the application of Section 339 (Extra-Territoriality) of the SFA.
Disclosure to customers: Where an individual is acting on behalf of the FRC/FO in dealings with customers in Singapore, MAS expects the Singapore FI to disclose to customers that fact, and that the individual is not subject to MAS' regulation.
No "shell companies" or "marketing entities": MAS intends to prevent the establishment of entities or branches in Singapore that are shell companies, marketing entities with minimal business presence, or facilitate business practices that could undermine regulatory objectives.
It's crucial for capital markets intermediaries in Singapore to refer to the specific regulations and notices issued by MAS, including:
Securities and Futures (Exemption for Cross-Border Arrangements) (Foreign Related Corporations) Regulations 2021
Securities and Futures (Exemption for Cross-Border Arrangements) (Foreign Offices) Regulations 2021
Relevant MAS Notices (e.g., SFA 04-N17, SFA 04-N18, SFA 04-N19, SFA 04-N20, FAA-N22, FAA-N23, FAA-N24, FAA-N25)
FAQs on the Exemption Frameworks for Cross-Border Business Arrangements of Capital Markets Intermediaries involving Foreign Related Corporations and Foreign Offices (available on the MAS website).
These documents provide the comprehensive and definitive requirements for compliance.
How Bestar can Help
Navigating the MAS Exemption Frameworks for cross-border business arrangements involving Foreign Related Corporations (FRCs) and Foreign Offices (FOs) can be complex due to the detailed requirements and ongoing obligations. Bestar can provide invaluable assistance in several key areas:
1. Professional Advisory and Interpretation:
Understanding the Frameworks: Bestar can provide precise interpretations of the SFA, FAA, and the specific Exemption Regulations and Notices (e.g., SFA 04-N17, FAA-N22, AML/CFT Notices). We can clarify ambiguous clauses and explain their practical implications for your specific business model.
Applicability and Extra-Territoriality: Determining whether your cross-border activities fall within the scope of these exemptions and how Singapore's extra-territoriality rules apply can be intricate. Legal professionals can assess your operations to confirm if the frameworks are indeed relevant, or if other licensing or exemption regimes might apply.
Defining "Accredited Investor" (AI) Opt-in: Ensuring strict compliance with the AI opt-in requirements is critical. Bestar can guide you on the specific procedures and disclosures needed to properly classify and onboard AI clients under these frameworks.
2. Structuring and Documentation of Arrangements:
Designing Compliant Arrangements: Bestar can help design the structure of your cross-border arrangements to ensure they meet all "boundary conditions" set by MAS. This includes advising on the roles and responsibilities of the Singapore FI and the FRC/FO, and ensuring the Singapore FI's substantive involvement and liability.
Drafting Agreements and Policies: We can draft or review the necessary contractual agreements between the Singapore FI and its FRC/FO, as well as internal policies and procedures. This ensures that the documentation accurately reflects the requirements regarding client onboarding, transactions, complaint handling, and regulatory oversight.
AML/CFT Compliance Integration: Integrating the MAS AML/CFT requirements into your cross-border operations is paramount. Bestar can help develop robust AML/CFT policies and procedures for the arrangement, including ensuring proper CDD is conducted by the FRC/FO and that the Singapore FI has timely access to all relevant records.
3. Regulatory Filings and Notifications:
Form FN (Notification of Commencement): Bestar can assist in preparing and submitting Form FN accurately and within the 14-day deadline from the commencement of the arrangement. This includes gathering all required information and ensuring its completeness.
Form FC (Notification of Change): We can advise on what constitutes a "material change" that necessitates a Form FC filing and assist with the timely submission of such notifications.
Form FR (Annual Declaration): Bestar can help in preparing the annual declaration, ensuring all compliance aspects are reviewed and attested to correctly, and that it's submitted within 5 months of the financial year-end.
4. Ongoing Compliance and Governance:
Establishing Internal Controls: Setting up effective internal controls, risk management frameworks, and governance structures tailored to the cross-border arrangements is essential. Bestar can help develop these, including procedures for monitoring compliance with the boundary conditions.
Foreign Representative Register: We can guide you on the proper maintenance of the register of foreign representatives, detailing their visits and activities in Singapore, as required by MAS.
Training and Awareness: Providing training to relevant staff in both the Singapore FI and the FRC/FO on the requirements of the exemption frameworks and the associated compliance obligations.
Responding to MAS Inquiries: In the event of an MAS inquiry or audit, Bestar can assist in preparing responses, providing necessary documentation, and representing the firm.
Regular Compliance Reviews: Conducting periodic reviews to ensure ongoing adherence to the exemption framework requirements, identifying any gaps or potential non-compliance, and recommending corrective actions.
Who to Engage:
Law Firms (Financial Services & Regulatory Practices): For legal interpretations, structuring advice, drafting of legal documents, and representation in MAS interactions. Many major law firms in Singapore have dedicated financial services regulatory teams experienced with MAS regulations.
Compliance Consultancies: For practical implementation of compliance programs, development of policies and procedures, assistance with regulatory filings, and ongoing compliance support.
By engaging Bestar, financial institutions can effectively navigate the complexities of the MAS Exemption Frameworks, ensuring compliance, mitigating regulatory risks, and efficiently conducting their cross-border capital markets activities.
Comments