The International Monetary Fund's (IMF) Financial System Stability Assessment (FSSA), carried out in 2002/3 and published in 2004, evaluates Singapore as being in high compliance with the International Organization of Securities Commissions Objectives and Principles of Securities Regulation. The report points out that Singapore has one of the most highly developed securities markets in the world. The risk-based regulatory and supervisory framework for securities markets, intermediaries, issuers, and collective investment schemes is in line with international standards. The few outstanding issues were believed to have been addressed at the time of the publication of the FSSA. The 2005 IMF Article IV Consultation with Singapore indicates that ongoing close surveillance is especially important with the growing sophistication of the capital markets. Since the FSSA, there have been a number of advances in securities legislation and the structure of the securities and derivatives markets, including amendments to the Securities and Futures Act, the Financial Advisers Act, the Companies Act (Chapter 50), and the Code on Collective Investment Schemes. In addition, the Payment Systems (Oversight) Act and several initiatives aimed at strengthening risk-management have been implemented, and an electronic bond trading system has been introduced.

General Overview

During 2002 and 2003, the International Monetary Fund (IMF) conducted a Financial System Stability Assessment (FSSA) of Singapore, part of which benchmarks Singapore's securities regulation framework against the International Organization of Securities Commissions (IOSCO) Objectives and Principles of Securities Regulation . The FSSA was published in 2004, and notes that "Singapore has achieved a high degree of compliance with the IOSCO principles. The framework for the oversight and regulation of securities markets, intermediaries, issuers, and collective investment schemes [CISs] is well developed, sophisticated, and meets international standards" (p. 27). According to the FSSA, Singapore has one of the most highly developed securities markets in the world. However, it recommends that there should be a requirement for the periodic reporting of net asset values, and special attention should be focused on the ability of CIS operators to accurately calculate net asset values. The Singaporean authorities were addressing these issues, according to the FSSA. The Monetary Authority of Singapore (MAS) "will be issuing requirements on the method and frequency of CIS valuation by end-2003". (p. 57). While the secondary market in debt securities is still developing, Singapore is working to establish a bond market, offering a 15-year government benchmark security. The MAS 2006/2007 Report indicates that, in 2005, an electronic bond-trading platform (SGS E-bond) was developed to facilitate the secondary market for government securities. The 2005 IMF Article IV Consultation with Singapore indicates that ongoing close surveillance is especially important with the growing sophistication of the capital markets.

The MAS, Singapore's central bank, is the country's unified financial sector regulator. The 2004 IMF FSSA notes that its regulatory scope includes securities markets, intermediaries, and CISs. To clarify regulatory responsibilities, the MAS became responsible for the on-site inspection of listed companies. The IMF notes that the unified structure has led to "greater consistency in standards across banks, insurance companies, and securities firms" (p. 39). More specifically, according to the MAS website, the Capital Markets Department (CMD), of the MAS, is responsible for (1) securities, business trusts, real estate investment trusts (REITs) and CIS offers; (2) securities and derivatives trading; (3) market operators and clearing houses; (4) takeover transaction conduct; (5) the SGX; (6) enforcing civil penalties for market misconduct; (7) fair competition and corporate governance. The Capital Markets Intermediaries Department is in charge of the licensing and supervision of capital market intermediaries including brokers, fund managers, financial advisors, and trust companies. Tijo and Eng report in 2006 that the amendments made to the Securities and Futures Act in 2005 diminished the authority of the MAS over the Singapore Exchange's (SGX) disciplinary procedures and changes to its rules. The SGX is in charge of the day-to-day supervision of the securities and derivatives markets.

The primary legislation governing the securities market are the Securities and Futures Act and the Financial Advisers Act, both enacted in 2001 and most recently amended in 2006 and 2007, respectively. According to the IMF FSSA, the Securities and Futures Act streamlined securities legislation governing the supervision of financial firms and the Financial Advisors Act did so for regulations governing financial intermediaries, strengthening of the MAS's enforcement and inspection capability. The MAS 2006/2007 Report mentions that the MAS released two consultation papers in 2006 that suggested amendments to the Securities and Futures Act and the Financial Advisers Act to increase the supervisory powers of the MAS over markets and clearing facilities in emergencies, as well as to market and clearing houses, licensing and business conduct rules, fidelity funds of securities and futures exchanges, the framework for the enforcement of market misconduct regulations, and regulations of offers on investments. Tijo and Eng report in 2006 that the Companies Act (Chapter 50, 2006 Revised Edition) covers requirements governing the formation of audit committees for listed companies and directors and substantial shareholders disclosure requirements. There is also subsidiary legislation and non-statutory rules, such as the Code on Take-overs and Mergers and the Code on Collective Investment Schemes. According to the MAS 2006/2007 Report, The Code on Collective Investment Schemes was amended in 2006 and the Payment Systems (Oversight) Act of 2006 was implemented in June 2006. In addition, there were several initiatives aimed at strengthening risk-management.

As reported on its website, the SGX is a demutualized integrated securities and derivatives exchange, first formed in 1999 as a merger of the Stock Exchange of Singapore (SES) and the Singapore International Monetary Exchange Limited (SIMEX). The SGX owns and operates the related clearing houses and is fully electronic. Commercial settlement banks carry out securities and futures clearing. Listed companies are governed by the SGX Rules and SGX Listing Manual, most recently revised in 2002 to include distribution guidelines for initial public offerings (IPOs) and extend the borrowing period for the securities-lending facility, according to the 2004 IMF FSSA. Tijo and Eng's 2006 article states that that in 2005 there were 817 listed companies on the SGX Main and Singapore Exchange Dealing and Automated Quotation Market System (SESDAQ) boards. Total market capitalization was S$43 billion. Also, the 67 IPOs in 2005 raised more than S$6 billion.

The IOSCO multilateral memorandum of understanding (MMoU) is based on the thirty IOSCO Objectives and Principles of Securities Regulation adopted in 1998 and the experience gathered by securities regulators in using bilateral MoUs. The IOSCO MMoU provides a standardized framework for sharing enforcement-related information and a gradually expanding network of participating regulatory agencies. IOSCO members who wish to sign the IOSCO MMoU participate in a comprehensive screening process to establish that they have the legal capacity to fully comply with the terms of the IOSCO MMoU. The MAS of Singapore is a signatory to the MMoU and an ordinary member of IOSCO.

The Principles

1. The responsibilities of the regulator should be clear and objectively stated.

FC

According to the 2004 IMF FSSA, the duties of the MAS are clearly stated in the Securities and Futures Act, Financial Advisors Act, the Exchanges Act, and other related legislation. The MAS carries out the prudential and conduct-of-business supervision of licensed intermediaries. The MAS is the country's unified financial sector regulator, as noted in the 2004 IMF FSSA. Its regulatory scope includes securities markets, intermediaries, and CISs. To clarify regulatory responsibilities, the MAS become responsible for the on-site inspection of listed companies. Also, there has been progress in the consistency of standards for securities firms, banks and insurance companies. More specifically, according to the MAS website, the CMD is responsible for (1) securities, business trusts, REITs, and CIS offers; (2) securities and derivatives trading; (3) market operators and clearing houses; (4) takeover transaction conduct; (5) the SGX; (6) enforcing civil penalties for market misconduct; (7) fair competition and corporate governance. The Capital Markets Intermediaries Department is in charge of the licensing and supervision of capital market intermediaries including brokers, fund managers, financial advisors, and trust companies. Tijo and Eng add that the 2005 amendments to the Securities and Futures Act diminished the MAS's authority over SGX disciplinary procedures and changes to its rules. The SGX is in charge of the day to day supervision of the market.

2. The regulator should be operationally independent and accountable in the exercise of its functions and powers.

FC

The 2004 IMF FSSA reports that the MAS is an autonomous regulator free from the influence of the executive and legislative branches of the government and it is accountable to the public.

3. The regulator should have adequate powers, proper resources and the capacity to perform its functions and exercise its powers.

FC

The 2004 IMF FSSA reports that the staff, powers, expertise, and resources of the MAS are sufficient to carry out its regulatory responsibilities. The MAS 2006/2007 Report mentions that the MAS has suggested amendments to the Securities and Futures Act and the Financial Advisers Act that would increase the supervisory powers of the MAS over markets and clearing facilities in emergencies.

4. The regulator should adopt clear and consistent regulatory processes.

CP

The Securities and Futures Act governs the employment of regulatory powers. The consultation process with the industry and public is considered, by the 2004 IMF FSSA, to be "in place and sound" (p. 55). However, since there are ties between the government statutory boards, the IMF recommends that better disclosure of the MAS' operating procedures would improve accountability and transparency.

5. The staff of the regulator should observe the highest professional standards, including appropriate standards of confidentiality.

II

The publicly available information does not directly address this principle.

6. The regulatory regime should make appropriate use of Self-Regulatory Organizations (SROs) that exercise some direct oversight responsibility for their respective areas of competence, to the extent appropriate to the size and complexity of the markets.

FC

Singapore is in compliance with IOSCO's principles on self-regulation, according to the 2004 IMF FSSA. The SGX-ST (Singapore Exchange Securities Trading) and SGX-DT (Singapore Exchange Derivatives Trading) are self-regulatory organizations and are responsible for the regulation of day to day securities and derivatives market activities.

7. SROs should be subject to the oversight of the regulator and should observe standards of fairness and confidentiality when exercising powers and delegated responsibilities.

FC

Singapore is in compliance with IOSCO's principles on self-regulation, according to the 2004 IMF FSSA. The MAS is responsible for oversight of the SGX and has increased oversight over exchanges and clearing houses since the demutualization of the SGX. Its duties include monitoring the quality of the SGX's regulation. The FSSA points out that the MAS does not have the power to review access-denial determinations and suggests that the MAS further clarify its strategy to avoid conflict of interest between its regulatory and other functions. Tijo and Eng report in 2006 that the amendments made to the Securities and Futures Act in 2005 diminished the authority of the MAS over the SGX's disciplinary procedures and changes to its rules.

8. The regulator should have comprehensive inspection, investigation and surveillance powers.

FC

According to the IMF's 2004 FSSA, "the MAS has comprehensive inspection, investigation, and surveillance powers" (p. 55). The report also notes that the MAS has established a routine inspection cycle and is developing a risk-based oversight and inspection program for intermediaries and markets. It has the authority to obtain the necessary data, information, documents, statements, and records. The MAS 2006/2007 report mentions that the MAS released two consultation papers in 2006 that suggested amendments to the Securities and Futures Act and the Financial Advisers Act to increase the supervisory powers of the MAS over markets and clearing facilities in emergencies.

9. The regulator should have comprehensive enforcement powers.

FC

The 2004 IMF FSSA reports that the MAS has the power to enforce compliance with its regulatory, investigative, and administrative authority; impose sanctions or seek court orders; suspend trading in securities; and enter into enforceable settlements. The Securities and Futures Act grants the MAS the authority to seek penalties for fraud or misrepresentation. Additional powers include the ability to revoke, suspend, or set conditions on a license and make criminal referrals. The FSSA recommends that there be an evaluation on protocols for cooperation with criminal authorities "on a results basis in practice" (p. 57), and modified if necessary. The MAS 2006/2007 report mentions that the MAS released two consultation papers in 2006 suggesting amendments to the Securities and Futures Act and the Financial Advisers Act to increase the supervisory powers of the MAS over markets and clearing facilities in emergencies.

10. The regulatory system should ensure an effective and credible use of inspection, investigation, surveillance and enforcement powers and implementation of an effective compliance program.

CP

See Principle 9.

11. The regulator should have authority to share both public and non-public information with domestic and foreign counterparts.

FC

While the MAS may share both public and non-public information with domestic and foreign regulators, it is subject to conditions set by the Securities and Futures Act. The 2004 IMF FSSA indicates that the MAS seeks to improve its cooperation with regulatory counterparts. It recommends that continuing commitment to cooperation should be made and "keep under review how legal predicates to sharing operate in practice" (p. 57).

The IOSCO multilateral MMoU is based on the thirty IOSCO Objectives and Principles of Securities Regulation adopted in 1998 and the experience gathered by securities regulators in using bilateral MoUs. The IOSCO MMoU provides a standardized framework for sharing enforcement-related information and a gradually expanding network of participating regulatory agencies. IOSCO members who wish to sign the IOSCO MMoU participate in a comprehensive screening process to establish that they have the legal capacity to fully comply with the terms of the IOSCO MMoU. The MAS of Singapore is a signatory to the MMoU and an ordinary member of IOSCO.

12. Regulators should establish information sharing mechanisms that set out when and how they will share both public and non-public information with their domestic and foreign counterparts.

FC

According to the 2004 IMF FSSA, the MAS sometimes cooperates informally with other regulators, but is more inclined to do so through by MoU. The MAS takes into consideration the willingness of the requesting regulator to reciprocate information sharing. The IMF recommends that continuing commitment to cooperation should be made and "keep under review how legal predicates to sharing operate in practice" (p. 57).

The IOSCO MMoU is based on the thirty IOSCO Objectives and Principles of Securities Regulation adopted in 1998 and the experience gathered by securities regulators in using bilateral MoUs. The IOSCO MMoU provides a standardized framework for sharing enforcement-related information and a gradually expanding network of participating regulatory agencies. IOSCO members who wish to sign the IOSCO MMoU participate in a comprehensive screening process to establish that they have the legal capacity to fully comply with the terms of the IOSCO MMoU. The MAS of Singapore is a signatory to the MMoU and an ordinary member of IOSCO.

13. The regulatory system should allow for assistance to be provided to foreign regulators who need to make inquiries in the discharge of their functions and exercise of their powers.

FC

The 2004 IMF FSSA reports that the MAS has the power to "provide full, effective, and timely assistance to foreign securities regulators in exercising their surveillance and enforcement functions" (p. 55). The IMF recommends that a continuing commitment to cooperation should be made, adding that the MAS should "keep under review how legal predicates to sharing operate in practice" (p. 57). Commercial settlement banks carry out securities and futures clearing.

The IOSCO MMoU is based on the thirty IOSCO Objectives and Principles of Securities Regulation (IOSCO Principles) adopted in 1998 and the experience gathered by securities regulators in using bilateral MoUs. The IOSCO MMoU provides a standardized framework for sharing enforcement-related information and a gradually expanding network of participating regulatory agencies. IOSCO members who wish to sign the IOSCO MMoU participate in a comprehensive screening process to establish that they have the legal capacity to fully comply with the terms of the IOSCO MMoU. The MAS of Singapore is a signatory to the MMoU and an ordinary member of IOSCO.

14. There should be full, timely and accurate disclosure of financial results and other information that is material to investors’ decisions.

FC

The 2004 IMF Article IV Consultation with Singapore reports that the standards for corporate governance, disclosure, and accounting are in line with international best practices. The Securities and Futures Act was amended in 2002 so that failure to comply with timely disclosure requirements is subject to criminal and civil liability. The IMF also mentioned that, as of 2003, there are requirements for companies with a market capitalization greater than S$75 million to issue quarterly reports, and compliance with accounting standards was made mandatory. The 2004 IMF FSSA indicates that there are requirements for the timely, adequate, and accurate disclosure of IPOs and continuing disclosure requirements for issuers. Disclosure requirements for prospectuses are more than sufficient. False, misleading, or insufficient information in prospectuses may lead to criminal and civil prosecution of the responsible issuers, directors, and underwriters.

The 2005 Code of Corporate Governance entered into force in January 2007 on a comply-or-explain basis, according to the 2005 Accounting and Corporate Regulatory Authority (ACRA) Digest. This means that a company must either comply with the Code or explain any deviations from the corporate governance practices recommended in the Code. As of 2005 the Disclosure and Accounting Standard Committee (DASC) recommendations pertaining to accounting standards and disclosure had been implemented, notes the U.S. Department of Commerce's 2005 Country Commercial Guide (CCG). The recommendations of the Company Legislation and Regulatory Framework Committee (CLRFC) were incorporated into the Companies Act, Securities and Futures Act and the SGX Listing Manual. The Companies (Amendment Act) entered into force in May 2003 and had a significant impact on the conduct of business. It included provisions on the duty for directors to disclosure interests in contracts as well as transactions, disclosure by nominee directors, and the disclosure of substantial shareholding. Further CLRFC recommendations were added in the Companies Act (Chapter 50, 2006 Revised Edition), according to the 2005 ACRA Digest, and entered into force in January 2006. The IMF calls this "is one of the most impactful pieces of corporate legislation to be introduced in recent years" (p. i). The Accounting Standards Council (ASC) website reports that in November 2007 the Accounting Standards Act entered into force. The responsibility for formulating and promulgating accounting standards was transferred from the Council on Corporate Disclosure and Governance (CCDG) to the ASC. The ACRA is responsible for monitoring and enforcing compliance with the accounting standards. Tijo and Eng report in 2006 that the Companies Act (Chapter 50, 2006 Revised Edition) covers requirements governing the formation of audit committees for listed companies and directors and substantial shareholders disclosure requirements. There are also subsidiary laws and non-statutory rules such as the Code on Take-overs and Mergers.

15. Holders of securities in a company should be treated in a fair and equitable manner.

FC

According to the 2004 IMF FSSA, the Company Law and listing rules provide "fair and equitable treatment to all shareholders" (p. 56). The 2002 CLRFC report made several recommendations pertaining to the legal rights of shareholders. The recommendations of the CLRFC were incorporated into the Companies Act, Securities and Futures Act and the SGX listing rules. The Companies (Amendment) Act entered into force in May 2003. The Alban Tay Mahtani & de Silva (ATMD) report indicates that the amended act had a significant impact on the conduct of business. Some changes include (1) a reduction in the notice period for shareholder meetings, (2) removal of the statutory requirement of audits for small private companies with the provision that a minimum of 5 percent of shareholders may choose to require a company to prepare audited accounts, (3) the allowance of contingency contracts with the requirements that members of the same share class be made the same offer, (4) the allowance for different classes of shares with the requirement that the one-share-one-vote principle applies to ordinary shares, (5) the provision that shareholders have the option of eliminating the formality of annual general meetings (AGM), (6) clarification that shareholder agreements need not be filed, and (7) changes to the reporting requirements for substantial shareholders. Further CLRFC recommendations were added in the Companies (Amendment No. 2) Act, 2005, according to the 2005 ACRA Digest, and entered into force in January 2006. It "is one of the most impactful pieces of corporate legislation to be introduced in recent years" (p. i). The Code of Corporate Governance, most recently updated in 2005, also includes a number of mandates for the equitable treatment of shareholders and enforces them on a comply-or-explain basis.

16. Accounting and auditing standards should be of a high and internationally acceptable quality.

FC

The 2004 IMF Article IV Consultation with Singapore reports that the standards for corporate governance, disclosure and accounting are in line with international best practices

17. The regulatory system should set standards for the eligibility and the regulation of those who wish to market or operate a collective investment scheme.

FC

The 2004 IMF FSSA reports that Singapore has standards regulating the authorization of CIS, as well as the eligibility and regulation of those who operate them. According to the MAS 2006/2007 Report, The Code on Collective Investment Schemes was amended in 2006.

18. The regulatory system should provide for rules governing the legal form and structure of collective investment schemes and the segregation and protection of client assets.

CP

According to the 2004 IMF FSSA, while all domestic CISs hold the form of unit trusts, the law allows for other forms. Foreign investment schemes are permitted subject to certain conditions. To guarantee that trustees practice due diligence in protecting the rights and interests of investors, the law includes provisions and the MAS has the necessary powers of inspection. The FSSA suggests that the MAS consider the promotion of other types of CIS vehicles beyond unit trusts. According to the MAS 2006/2007 report, the Code on Collective Investment Schemes was amended in 2006.

19. Regulation should require disclosure, as set forth under the principles for issuers, which is necessary to evaluate the suitability of a collective investment scheme for a particular investor and the value of the investor’s interest in the scheme.

II

The 2004 IMF FSSA indicates that there are similar disclosure standards and powers for reviewing, delaying, and halting offers and issuing shares and debentures. However, the FSSA recommends that the types of permissible offerings be clarified and the requirements pertaining to them allow greater accessibility. In addition, it should ensure that it has the capacity to identify potential violations. According to the MAS 2006/2007 report, the Code on Collective Investment Schemes was amended in 2006. The report does not directly address Singapore's compliance with this principle however.

20. Regulation should ensure that there is a proper and disclosed basis for asset valuation and the pricing and the redemption of units in a collective investment scheme.

II

The 2004 IMF FSSA recommends that there be periodic reporting requirements for asset valuation and that the MAS should ensure that the operators have the means to ensure the accuracy of net asset value. According to the MAS 2006/2007 report, the Code on Collective Investment Schemes was amended in 2006. The report does not directly address Singapore's compliance with this principle however.

21. Regulation should provide for minimum entry standards for market intermediaries.

II

There is one framework for licensing securities and futures market intermediaries, according to the 2004 IMF FSSA. Intermediaries conducting regulated activities are governed by the Securities and Futures Act, while intermediaries that provide financial advisory services are governed by the Financial Advisors Act. The report does not directly address Singapore's compliance with this principle however. The report does not directly address Singapore's compliance with this principle however.

22. There should be initial and ongoing capital and other prudential requirements for market intermediaries that reflect the risks that the intermediaries undertake.

II

The 2004 IMF FSSA reports that the MAS began utilizing a risk-based approach for supervising licensed intermediaries and there are capital requirements based on the Basel Core Principles. The assessment team recommends that the MAS evaluate the risk capital created by the new risk-based approach and ensure the development of expertise so that the approach may be used as a preventative measure for addressing systemic risks and protecting investor funds. The report does not directly address Singapore's compliance with this principle however.

23. Market intermediaries should be required to comply with standards for internal organization and operational conduct that aim to protect the interests of clients, ensure proper management of risk, and under which management of the intermediary accepts primary responsibility for these matters.

II

Licensed market intermediaries are required to follow customer protection procedures, as reported in the 2004 IMF FSSA. The assessment does not further address Singapore's compliance with this principle

24. There should be procedures for dealing with the failure of a market intermediary in order to minimize damage and loss to investors and to contain systemic risk.

FC

According to the 2004 IMF assessment, "the MAS has adopted a risk-based approach to supervising its licensed intermediaries. Capital requirements for licensees will be largely based on the analysis underlying the Basel Core Principles" (p. 56).

25. The establishment of trading systems including securities exchanges should be subject to regulatory authorization and oversight.

FC

The 2004 IMF FSSA considers that exchange and products structure in Singapore to be "sophisticated" (p. 56). The Securities and Futures Act requires the approval of trading systems for securities and futures as exchanges or they must be identified as a Recognized Trading Systems Provider. The MAS is responsible for the supervision of the SGX.

26. There should be ongoing regulatory supervision of exchanges and trading systems which should aim to ensure that the integrity of trading is maintained through fair and equitable rules that strike an appropriate balance between the demands of different market participants.

FC

The Securities and Futures Act requires that exchanges include in their rules provision for recording and publishing trade information, in order to promote transparency. The MAS and the SGX both have implemented sophisticated electronic and surveillance systems. The MAS is responsible for the supervision of the SGX.

27. Regulation should promote transparency of trading.

FC

See Principle 26.

28. Regulation should be designed to detect and deter manipulation and other unfair trading practices.

II

There is a significant amount of contra-trading in Singapore, which may create financial risks. The IMF FSSA points out the importance for the MAS to continue monitor trading and investigate unusual activity so that error accounts are not misused and the adverse effects of contra-trading are prevented. It should also ensure that market users have sufficient access to default rules and subsequent guidance. The report does not directly address Singapore's compliance with this principle however.

29. Regulation should aim to ensure the proper management of large exposures, default risk and market disruption.

FC

The securities and derivatives exchanges have the resources to effectively carry out surveillance of large exposures and have rules for handling and limiting them, as well as the ability to isolate a defaulting firm's risk. There is also a significant amount of contra-trading in Singapore, which may create financial risks. The IMF FSSA points out the importance for the MAS to continue monitor trading and investigate unusual activity so that error accounts are not misused and the adverse effects of contra-trading are prevented. It should also ensure that market users have sufficient access to default rules and subsequent guidance. According to the MAS 2006/2007 report, there were several initiatives aimed at strengthening risk-management.

30. Systems for clearing and settlement of securities transactions should be subject to regulatory oversight, and designed to ensure that they are fair, effective and efficient and that they reduce systemic risk.

FC

The 2004 IMF FSSA considers Singapore to be in full compliance with "the IOSCO principles for futures clearing and settlement systems" (p. 57). The MAS is responsible for oversight of the SGX clearing and settlement systems. The assessment team also points out that the clearing and settlement systems are "fair, efficient and reduce systemic risk" (p. 57).

The MAS 2006/2007 report mentions that the MAS released two consultation papers in 2006 suggesting amendments to the Securities and Futures Act and the Financial Advisers Act that would increase the supervisory powers of the MAS over markets and clearing facilities in emergencies. According to the MAS 2006/2007 report, the Payment Systems (Oversight) Act of 2006 was implemented in June 2006.