Securities and Futures Act 2001

Monetary Authority of Singapore SECURITIES AND FUTURES ACT (ACT 42 OF 2001) GUIDELINES ON CRITERIA FOR THE GRANT OF A CAPITAL MARKETS SERVICES LICENCE AND REPRESENTATIVE’S LICENCE Guidelines on Criteria for the Grant of a Capital Markets Services Licence and Representative’s Licence 1 Guideline No : SFA 04-G01 Issue Date : 1 October 2002 (Last revised on 15 June 2004) GUIDELINES ON CRITERIA FOR THE GRANT OF A CAPITAL MARKETS SERVICES LICENCE AND REPRESENTATIVE’S LICENCE 1 Purpose of these Guidelines 1.1 These Guidelines are issued pursuant to Section 321 of the Securities and Futures Act (Act 42 of 2001) [“SFA”]. 1.2 The Guidelines set out the licensing requirements under the SFA and the licensing admission criteria for persons applying for a Capital Markets Services [“CMS”] licence or a representative’s licence. 1.3 These Guidelines should be read in conjunction with the provisions of the SFA and the Securities and Futures (Financial and Margin Requirements for Holders of Capital Markets Services Licences) Regulations 2002. 2 Who needs to hold a CMS licence 2.1 A company that carries on a business in any regulated activity in Singapore would need to hold a CMS licence under the SFA. Individuals who are employed by or acting for the company to carry out the regulated activity [other than sub-paragraphs (f) and (g) below] are required to hold a representative’s licence under the SFA. 2.2 The regulated activities are specified in the 2nd schedule of the SFA as follows: a) Dealing in securities; b) Trading in futures contracts; c) Leveraged foreign exchange trading; d) Advising on corporate finance; e) Fund management; f) Securities financing; Guidelines on Criteria for the Grant of a Capital Markets Services Licence and Representative’s Licence 2 g) Providing custodial services for securities. 2.3 The definitions of the regulated activities are provided in the 2nd Schedule to the SFA. 3 Criteria for CMS licence 3.1 A CMS licence will only be granted to a corporation1. A company applying for a CMS licence is required to establish a physical office in Singapore and to employ at least 2 full time representatives. 3.2 The applicant should also satisfy the base capital requirements for its proposed regulated activities, as set out in the Securities and Futures (Financial and Margin Requirements for Holders of Capital Markets Services Licences) Regulations 2002. The base capital requirement [“BCR”] for each regulated activity is as follows: Regulated Activity BCR (S$) Dealing in securities (SGX-ST clearing members) 5 million Dealing in securities (SGX-ST non-clearing members) 1 million Dealing in securities (non-members) 1 million Dealing in securities (introducing brokers*) 500,000 Dealing in securities (restricted brokers**) 250,000 Trading in futures contracts (SGX-DT clearing members) 5 million Trading in futures contracts (SGX-DT non-clearing members) 1 million Trading in futures contracts (non-members) 1 million 1 Refers to any body corporate incorporated in Singapore or outside Singapore. Guidelines on Criteria for the Grant of a Capital Markets Services Licence and Representative’s Licence 3 Trading in futures contracts (introducing brokers*) 500,000 Trading in futures contracts (restricted brokers**) 250,000 Leveraged foreign exchange trading 1 million Advising on corporate finance 250,000 Fund management (including management of collective investment schemes) 1 million Fund management (excluding management of collective investment schemes) 500,000 Fund management for accredited investors 250,000 Securities financing 1 million Providing custodial services for securities 1 million *Refers to a corporation which deals in securities or trades in future contracts which (i) does not carry customers’ positions, margins or accounts in its own books; and (ii) undertakes the business of soliciting or accepting orders for the purchase or sale of any securities or futures contract or deals or trades only with accredited investor(s). **Refers to a corporation which deals in securities or trades in future contracts which (i) does not carry customers’ positions, margins or accounts in its own books; (ii) only carries on the business of soliciting or accepting orders for the purchase or sale of any securities or futures contract or deals or trades only with accredited investor(s); and (iii) does not accept money or assets from a customer as a margin for, or to guarantee or secure, the futures contracts of that customer. Guidelines on Criteria for the Grant of a Capital Markets Services Licence and Representative’s Licence 4 3.3 Where more than one BCR is applicable, the amount of BCR required shall be the highest of the applicable BCRs. 3.4 In addition, the applicant will have to satisfy the following requirements: a) be a reputable entity that has established track record in the proposed activity to be conducted in Singapore or in a related field, at least over the past 5 years; b) have the relevant competence and expertise to carry out the proposed activity; c) satisfy the Monetary Authority of Singapore [“MAS”] that it would discharge its duties efficiently, honestly and fairly; d) have good ranking in their home country; and e) is subject to proper supervision by a recognized home regulatory authority. 3.5 Applicants applying to provide fund management (other than boutique fund management as stated in para 3.7) should have global funds under management of at least S$1 billion. 3.6 Applicants applying to deal in securities or trade in futures contracts should have minimum group shareholders’ funds of S$500 million and S$100 million, respectively. 3.7 Licence Requirements for a Boutique Fund Management A corporation may apply for a CMS licence to provide boutique fund management if they meet the following requirements: Requirements Funds Under Management (Discretionary/ Non-Discretionary) Must have at least S$100 million of funds under management. This could be funds under management in Singapore or elsewhere. Shareholding Must be majority-owned by local fund management professionals or local entities. Foreign BFMs will be considered on a case-by-case basis. Guidelines on Criteria for the Grant of a Capital Markets Services Licence and Representative’s Licence 5 Track Record Minimum 3-year corporate track record in the fund management business. Management Expertise At least 2 fund managers, at least one of whom must be a shareholder. The shareholder must have at least a 10- year acceptable track record in fund management or in a closely related area, with at least 3 years of experience in fund management itself. In addition, at least one other fund manager must have at least 5 years of experience in fund management or in related areas. The fund managers must also have acceptable academic qualifications such as a degree or professional qualification including as a Chartered Financial Analyst. Professional Indemnity Insurance 1-3% of funds under management, as determined by MAS. Investment Management Association of Singapore [“IMAS”] Must be a member of IMAS Clientele Restricted to the following investors: - Individuals whose total net personal assets exceed S$1 million or its equivalent in foreign currencies or whose income in the preceding 12 months is not less than S$200,000 or its equivalent in foreign currencies; and - Corporations whose total net assets exceed S$5 million in value or its equivalent in foreign currencies as determined by the last audited balance sheet of the corporation. Guidelines on Criteria for the Grant of a Capital Markets Services Licence and Representative’s Licence 6 3.8 Licence Requirements for Start-up Boutique Fund Management A corporation which does not possess corporate track record as required under the boutique fund management scheme may apply for a CMS licence to provide start-up boutique fund management if they meet the following requirements, in addition to the requirements stated in para 3.7: Requirements Key Officers2 Must be resident in Singapore, and any replacement of Key Officers within the first three years will be subject to MAS approval. Clientele Restricted to 100 qualified investors3 for the first three years of operations. These additional requirements may be lifted after 3 years. 3.9 Representatives of start-up boutique fund managers are not exempted from the requirement to pass Module 3 (Rules and Regulations of Fund Management) of the CMFAS examination even though their clientele is restricted to qualified investors during the first three years of operation. 2 Refers to the fund managers holding the requisite individual track record under the "Management Expertise" requirement. 3 As defined under section 5(3) of the Second Schedule to the SFR. Guidelines on Criteria for the Grant of a Capital Markets Services Licence and Representative’s Licence 7 4 Criteria for Representative’s Licence A representative’s licence will only be granted to an individual who is at least 21 years old. The applicant must possess at least 4 credits in the GCE “O” level Examination (or its equivalent), and satisfy the examination requirements as prescribed in MAS Notice No: SFA 04-N03. In addition, the MAS will take into account the following information on the applicant: a) financial status and solvency; b) other qualifications or experience, having regard to the nature of the duties the applicant will perform; c) ability to perform the functions of a representative efficiently, honestly and fairly; and d) reputation, character and integrity.