RES 4 – Rules, Ethics and Skills for Corporate Finance Set Two

Correct: In accordance with MAS anti-money laundering and countering the financing of terrorism (AML/CFT) notices, such as MAS Notice 626, financial institutions in Singapore are required to maintain all relevant customer due diligence (CDD) information and transaction records for at least five years. This period begins from the date the business relationship is terminated or, for one-off transactions, from the date the transaction was completed. This ensures that records are available to the authorities for the investigation of potential money laundering or terrorism financing activities.

Incorrect: The suggestion of a two-year retention period is incorrect as it falls short of the statutory five-year minimum required by Singapore regulations. The idea that records must be kept for seven years from the account opening date is incorrect because the retention clock starts from the termination of the relationship, not the opening. Linking the retention period to the completion of the next annual statutory audit is incorrect because record-keeping obligations are fixed by law and are not dependent on the timing of external audits.

Takeaway: Financial institutions in Singapore must retain all CDD and transaction records for a minimum of five years after the business relationship has ended to comply with AML/CFT regulatory standards.

Correct: In accordance with SGX-ST requirements for automated trading, Trading Members are mandated to implement effective real-time monitoring of their automated order flow. This includes ensuring that the personnel tasked with monitoring have a clear understanding of the trading strategies and the technical capability to intervene. Crucially, they must have the immediate authority to use a ‘kill switch’ or similar mechanism to stop the system and cancel outstanding orders to prevent market disruption.

Incorrect: Relying solely on self-correction scripts is insufficient as regulatory standards require human oversight and intervention capabilities. Notifying MAS before taking action is incorrect because the priority during a malfunction is to stop the disruptive flow to protect market integrity. While independence in risk management is important, the responsibility for real-time monitoring and immediate intervention cannot be fully outsourced to a third party; the Trading Member remains directly accountable for its order flow on the exchange.

Takeaway: Trading Members must maintain real-time monitoring by competent personnel authorized to immediately terminate malfunctioning automated order flows to preserve market integrity on the SGX.

Correct: Under the MAS Guidelines on Outsourcing, a financial institution (FI) remains fully responsible for the outsourced activity and its compliance with all regulatory requirements. The FI must conduct regular due diligence and ongoing monitoring, which includes reviewing the service provider’s internal controls, business continuity plans, and financial health to ensure that the risks associated with the outsourcing are effectively managed.

Incorrect: The responsibility for compliance cannot be transferred to a third party through an SLA or indemnity clause. While the PDPA is relevant for data protection, it does not exempt an institution from its broader risk management and oversight obligations. Furthermore, the location of the service provider does not waive the requirement for the institution to perform its own due diligence and monitoring, regardless of whether the provider is local or foreign.

Takeaway: Financial institutions in Singapore retain ultimate accountability for outsourced functions and must maintain active, ongoing oversight of their service providers’ risk management frameworks.

Correct: Rule 10 of the Singapore Code on Take-overs and Mergers (the Code) addresses ‘Special Deals with Favorable Conditions.’ It stipulates that, except with the consent of the Securities Industry Council (SIC), an offeror or persons acting in concert with it may not make any arrangements with shareholders, or enter into arrangements to purchase or sell shares of the offeree company, if such arrangements involve favorable terms which are not extended to all shareholders. This ensures the fundamental principle of equal treatment for all shareholders of the same class, preventing minority interests from being disadvantaged by private inducements given to others.

Incorrect: The suggestion that benefits are permitted if they are under a 5% threshold is incorrect as the Code focuses on the principle of equality rather than a specific de minimis monetary threshold for special deals. The Independent Financial Adviser’s (IFA) opinion on the fairness of the offer price does not waive the requirement for equal treatment; a special deal is prohibited regardless of whether the base offer is ‘fair.’ Board approval from the offeree company is insufficient to authorize a special deal, as the Code is designed to protect shareholders directly and such arrangements typically require SIC consultation and potentially a minority shareholder vote.

Takeaway: The Singapore Code on Take-overs and Mergers protects minority interests by strictly prohibiting special deals or arrangements that provide favorable terms to specific shareholders at the expense of equal treatment for all class members.

Correct: Under Section 197 of the Securities and Futures Act (SFA), wash sales occur when there is no change in the beneficial ownership of the securities traded. Even if the accounts are legally separate, if the ultimate control remains with the same person, the trades are deemed to create a false or misleading appearance of active trading. This is a form of market manipulation because it misleads other investors regarding the genuine demand and liquidity of the security.

Incorrect: The suggestion that trades are legitimate cross-trades based solely on price range is incorrect because the lack of change in beneficial ownership overrides the pricing factor in market manipulation assessments. Claiming that tax efficiency justifies matched orders is a common misconception; the SFA focuses on the effect of creating a false appearance of trading, regardless of the purported secondary motive. There is no specific five percent volume threshold in the SFA that exempts wash sales from being classified as market manipulation; any trade intended to create a false appearance is prohibited.

Takeaway: Under the Securities and Futures Act, transactions involving no change in beneficial ownership are prohibited as wash sales because they create a false or misleading appearance of market activity.

Correct: According to the SGX-ST Listing Rules, if an issuer is unable to make an immediate announcement of material information during trading hours, it should request a trading halt. This mechanism is designed to prevent a disorderly market and ensure that no person trades on the basis of undisclosed price-sensitive information, thereby maintaining the integrity of the Singapore securities market.

Incorrect: Waiting until the end of the trading day is incorrect because material information must be disclosed immediately; delaying it increases the risk of information leakage and insider trading. Requesting a suspension is inappropriate because suspensions are typically for longer-term issues or when an issuer can no longer meet listing requirements, whereas a halt is the standard tool for short-term dissemination of information. Seeking an exemption from MAS is incorrect as continuous disclosure is a fundamental requirement for listed entities to ensure transparency and investor protection.

Takeaway: A trading halt is the primary regulatory tool used in Singapore to manage the timely and fair dissemination of material information during market hours.

Correct: Under the Securities and Futures (Licensing and Conduct of Business) Regulations in Singapore, holders of a capital markets services license must maintain books and records for at least five years. For electronic records, the storage must ensure data integrity by preventing unauthorized alteration (often through WORM technology) and must be readily accessible for regulatory review by the Monetary Authority of Singapore (MAS) or the Singapore Exchange (SGX).

Incorrect: Retaining logs for only three years or relying on summary reports fails to meet the five-year statutory requirement for full trading records under Singapore law. Manual deletion protocols or allowing trading heads administrative rights over record modification creates significant risks of data loss or tampering, which violates the requirement for secure, reliable, and immutable record-keeping.

Takeaway: Singapore regulations require electronic trading records to be stored securely and immutably for a minimum of five years to ensure auditability and regulatory compliance.

Correct: Under Section 48 of the CDSA, tipping off occurs when a person discloses information to another person that is likely to prejudice an investigation. By providing a neutral explanation related to standard internal processes, the TR avoids alerting the client to the STR, thereby ensuring the integrity of any potential investigation by the STRO or law enforcement agencies.

Incorrect: Disclosing the filing of an STR, mentioning the specific AML alerts triggered, or naming the regulatory bodies involved in an investigation (like the STRO or MAS) constitutes tipping off. Such disclosures alert the client that they are under scrutiny, which is a criminal offense under the CDSA as it may allow the client to destroy evidence, move funds, or otherwise obstruct justice.

Takeaway: To avoid a tipping-off offense under the CDSA, financial professionals must never disclose the existence of a Suspicious Transaction Report or any information that might alert a client to an ongoing AML investigation.

Correct: In Singapore, FIDReC provides a two-stage dispute resolution process consisting of mediation and adjudication. According to FIDReC’s Terms of Reference, an adjudication award is final and binding on the financial institution (the Member) if the complainant (the client) accepts the award. However, if the complainant is dissatisfied with the adjudicator’s decision, they are not bound by it and may choose to reject it to pursue the matter through other legal channels, such as the courts.

Incorrect: The suggestion that a Member can appeal to the Monetary Authority of Singapore (MAS) is incorrect because MAS is a regulatory body and does not act as an appellate court or tribunal for FIDReC decisions. The idea that mediation can be bypassed is incorrect because mediation is a mandatory first step in the FIDReC process before a case can be escalated to adjudication. The claim that parties must be bound by mediation outcomes before discussions begin is incorrect because mediation is a non-binding process aimed at reaching a voluntary settlement; only the adjudication stage results in a decision that can become binding.

Takeaway: Under the FIDReC framework in Singapore, adjudication awards are binding on the financial institution only if the consumer accepts the decision, preserving the consumer’s right to legal recourse.

Correct: Under the MAS Guidelines on Risk Management Practices and SGX-ST internal control requirements, a fundamental principle is the segregation of duties. The functions of trade execution (front office) and trade reconciliation/settlement (back or middle office) must be kept separate. Independent verification by personnel who are not involved in the trading process is essential to detect and prevent unauthorized trading, as it ensures that any discrepancies or fraudulent activities cannot be concealed by the person who initiated the trade.

Incorrect: Allowing dealers to reconcile their own trades, even with a secondary sample review, creates a conflict of interest and fails the requirement for independent verification. Relying solely on automated credit limit alerts is insufficient because unauthorized trades can occur within established limits and still be fraudulent or erroneous. Assigning IT to verify system logs focuses on technical uptime and data integrity rather than the business-level verification of whether a trade was actually authorized by a client or the firm’s management.

Takeaway: Effective internal control against unauthorized trading requires a strict segregation of duties where trade reconciliation is performed by a function independent of the trading desk.

Correct: Under the Securities and Futures Act (SFA) and SGX Listing Rules, a director of a listed issuer is required to notify the company of any changes in their interest in the company’s securities within 2 business days of becoming aware of the change. This disclosure obligation includes ‘deemed interests’ as defined in Section 4 of the SFA, which encompasses interests held through trusts, corporations, or other arrangements where the director has an interest in the underlying securities.

Incorrect: The 5-business-day and 7-calendar-day timelines are incorrect as the SFA and SGX Listing Rules mandate a 2-business-day window for director notifications. The 1% threshold mentioned is a requirement for substantial shareholders under the SFA, whereas directors must disclose any change in interest regardless of the percentage. Deemed interests are not restricted solely to spouses and children; they include any situation where the director is deemed to have an interest in the securities, such as through a trust.

Takeaway: Directors of SGX-listed companies must disclose both direct and deemed interests in securities to the issuer within 2 business days of becoming aware of the transaction.

Correct: Under the Securities and Futures Act (SFA), the MAS has the statutory power to issue written directions to an approved clearing house, such as the CDP. These directions are binding and can be issued if MAS considers it necessary or expedient to ensure the stability of the financial system, the protection of investors, or in the public interest. This allows MAS to directly influence the CDP’s risk management practices when systemic risks are identified.

Incorrect: The suggestion that MAS is restricted to non-binding recommendations is incorrect because the SFA grants MAS formal enforcement and directive powers over designated clearing houses. The reference to the Singapore Code on Take-overs and Mergers is irrelevant as that code governs M&A activity, not the operational oversight of the CDP. Furthermore, MAS does not require a court order under the Companies Act to exercise its regulatory functions under the SFA; its power to issue directions is an administrative authority granted by the SFA itself.

Takeaway: The MAS has broad statutory powers under the SFA to issue binding directions to the CDP to ensure market integrity and investor protection.

Correct: Under the SGX-ST T+2 settlement cycle, which was implemented to align Singapore with international standards and reduce counterparty risk, securities traded on T must be settled by T+2. If a seller does not have sufficient securities in their CDP account to meet the delivery obligation by the settlement deadline on T+2, SGX-ST will commence an automated buying-in process on the afternoon of T+2. This ensures that the buyer receives the securities they purchased, maintaining market integrity.

Incorrect: The suggestion that delivery is required on the trade date (T) is incorrect as Singapore operates on a T+2 cycle. The idea that trades are voided or that a grace period is provided before a fine is issued by the MAS is not the standard SGX-ST procedure for settlement failures. The T+3 cycle is outdated, as Singapore moved to T+2 in December 2018. Furthermore, the Monetary Authority of Singapore (MAS) does not maintain a reserve of shares for borrowing to settle private market trades; the market-based buying-in mechanism is the primary remedy for failed deliveries.

Takeaway: In Singapore’s T+2 settlement framework, failure to deliver securities by the T+2 deadline triggers an automated buying-in process by SGX-ST to ensure market integrity and settlement finality.

Correct: Under SGX-ST Rules and the conduct requirements for trading representatives in Singapore, unauthorized trading is a serious violation. A representative must not execute any transaction for a client unless they have received a specific order or the account has been formally designated as a discretionary account with a written agreement. Verbal understandings or ‘rebalancing’ agreements do not satisfy the regulatory requirement for written authorization or specific trade instructions.

Incorrect: The idea of an ‘implied mandate’ based on profit is not recognized under the Securities and Futures Act (SFA) as a defense for unauthorized trading. Subsequent ratification by a client does not clear the representative of the initial regulatory breach of trading without authority. Internal compliance documentation of a verbal agreement or setting percentage limits on unauthorized trades does not override the fundamental SGX-ST requirement for specific instructions or a formal written discretionary mandate.

Takeaway: In the Singapore regulatory landscape, any trade executed without specific client instructions or a formal written discretionary mandate is considered unauthorized trading, regardless of the trade’s performance or prior verbal agreements.

Correct: The Securities Industry Council (SIC) is the regulatory body in Singapore responsible for administering and enforcing the Singapore Code on Take-overs and Mergers. Under the Securities and Futures Act (SFA), the SIC has the authority to issue rulings on the interpretation of the Code and to determine if a mandatory offer is triggered (such as when the 30% threshold is crossed). According to the SFA, the SIC’s rulings on the interpretation of the Code are final and not subject to appeal in any court.

Incorrect: The SIC does not act as a commercial arbitrator for share valuations; that is the role of the Independent Financial Adviser (IFA) who provides an opinion to the offeree’s board. The SIC is an independent body and not a subcommittee of the SGX; while they coordinate, the SIC has autonomous authority over the Code. Criminal prosecution for breaches of the SFA is handled by the Monetary Authority of Singapore (MAS) and the Attorney-General’s Chambers, rather than the SIC, which focuses on the administration of the Code.

Takeaway: The Securities Industry Council (SIC) is the sole authority for interpreting the Singapore Code on Take-overs and Mergers and its rulings on the Code are final.

Correct: According to SGX-ST trading rules for the closing auction, the matching engine follows a specific priority logic to determine the Equilibrium Price. Market orders (which include Market-on-Close instructions) are given priority over limit orders because they represent a commitment to trade at whatever price the auction determines. Once the Equilibrium Price is established, market orders are filled first, followed by limit orders that are at or better than the Equilibrium Price.

Incorrect: The suggestion that market orders are matched after limit orders is incorrect as market orders always take precedence in an auction to maximize volume. Treating market orders and limit orders with equal priority based only on time ignores the fundamental price-priority rule where a market order is considered ‘better’ than any limit order. The claim that market orders are automatically cancelled due to price deviation is a confusion with price collars or trade cancellation policies, which do not specifically target the validity of market orders in the auction phase.

Takeaway: In the SGX-ST closing auction, market orders have execution priority over limit orders when matching at the Equilibrium Price.

Correct: In accordance with MAS Notice 626 and SGX-ST requirements, Member Firms must perform Customer Due Diligence (CDD) by identifying and taking reasonable measures to verify the identity of beneficial owners. This is a critical control because it prevents individuals from using complex corporate layers or shell companies to obscure their identity and engage in money laundering or terrorism financing. A risk-based approach ensures that higher-risk entities receive more stringent scrutiny.

Incorrect: Relying solely on third-party declarations without independent verification fails to meet the firm’s regulatory obligation to conduct its own due diligence. Simplified due diligence cannot be applied blanketly to all local companies; it is only permissible when the customer presents low risks based on specific criteria. Ongoing monitoring is a mandatory requirement under Singapore regulations, so exempting accounts from periodic reviews based on a lack of immediate suspicious activity is a compliance failure.

Takeaway: Effective KYC requires the proactive identification and verification of beneficial owners to ensure the firm understands the ultimate human control behind every legal entity it services in the Singapore capital markets or SGX-ST environment.

Correct: According to the MAS Notice on Technology Risk Management (such as Notice SFA 04-N02 for capital markets intermediaries), a Financial Institution must notify MAS of a relevant incident as soon as possible, but not later than 1 hour upon discovery. A relevant incident includes any event that has a severe and widespread impact on the FI’s operations or a system that is critical to the FI’s operations or service to customers.

Incorrect: Waiting until 4 hours after resolution is incorrect because the regulatory trigger is discovery, not resolution, to ensure MAS is informed of ongoing disruptions. Reporting by the end of the next business day is insufficient for technology-related incidents which have a strict 1-hour notification window. Waiting for Board categorization or a 24-hour window is incorrect as the discovery by any relevant staff member or monitoring system starts the 1-hour reporting clock.

Takeaway: Financial Institutions in Singapore must notify MAS of critical technology-related incidents within 1 hour of discovery to facilitate timely regulatory oversight of systemic risks.

Correct: Section 234 of the Securities and Futures Act (SFA) provides a statutory right for investors who suffered loss due to market misconduct (such as market manipulation or insider trading) to seek damages through a civil suit. This right to private action exists independently of the Monetary Authority of Singapore’s (MAS) power to seek a civil penalty under Section 232. The claimant must generally show they traded contemporaneously with the contravening act and suffered a loss as a result.

Incorrect: The claim that a private civil action is stayed during a civil penalty action is incorrect because the SFA allows both regulatory enforcement and private recovery to proceed as distinct legal mechanisms. The suggestion that a criminal conviction is a prerequisite is false; the civil liability regime under the SFA is a standalone path that does not require criminal proceedings. The requirement for a direct contractual relationship is also incorrect, as the SFA’s market misconduct provisions are designed to protect the integrity of the open market, allowing those who traded contemporaneously to seek redress even without privity of contract.

Takeaway: The SFA provides a statutory pathway for private civil recovery of losses from market misconduct that operates independently of MAS’s regulatory enforcement actions.

Correct: In the Singapore securities market, the Central Depository (Pte) Limited (CDP) acts as the Central Counterparty (CCP). Through the process of novation, the original contract between the buyer and seller is replaced by two new contracts: one between the CDP and the buyer, and another between the CDP and the seller. This allows the CDP to guarantee the performance of the trade, effectively absorbing the risk of a clearing member failing to meet its delivery or payment obligations.

Incorrect: The suggestion that the clearing house guarantees market price stability is incorrect as its role is to manage settlement risk, not to protect against market price fluctuations. The idea that the clearing house acts as an insurer for retail investors against fraud is incorrect; such protections are typically handled through the Fidelity Fund or dispute resolution via FIDReC. The claim that MAS maintains trust accounts for all retail trade values is incorrect, as settlement is managed through clearing members and the CDP’s clearing fund and margin requirements rather than direct MAS intervention in retail transactions.

Takeaway: The CDP ensures market integrity by acting as the central counterparty through novation, guaranteeing that trade settlement occurs even in the event of a clearing member’s default.

Correct: According to the SGX Listing Rules (specifically Rule 703 and the Corporate Disclosure Policy), while an issuer may temporarily withhold material information regarding incomplete negotiations, this exception applies only if the information remains confidential. If there is a leak (evidenced by rumors or unusual price/volume movements), the issuer is no longer able to rely on the confidentiality exception and must immediately issue a clarification announcement to the SGX-ST to ensure a fair and orderly market and avoid the establishment of a false market.

Incorrect: Delaying disclosure until a definitive agreement is signed is incorrect because the obligation to disclose is triggered immediately once confidentiality is lost or market activity is affected. Waiting for a formal query from SGX RegCo is incorrect because the primary responsibility for disclosure rests with the issuer’s board to act proactively. Requiring an audit firm’s formal sign-off before disclosure is not a regulatory requirement under the SGX Listing Rules and would cause an unacceptable delay in informing the market.

Takeaway: Under SGX rules, the privilege of withholding confidential material information is lost immediately if a leak occurs or if there is unusual trading activity, necessitating an immediate public announcement.

Correct: In the SGX-ST trading system, a Fill-or-Kill (FOK) order qualifier dictates that the order must be executed immediately and in its entirety. If the total quantity (in this case, 100,000 shares) cannot be filled immediately against existing orders in the central limit order book at the specified price or better, the system will not perform a partial fill; instead, it cancels the entire order. Since only 40,000 shares were available, the FOK condition was not met, leading to the cancellation of the full 100,000 shares.

Incorrect: A Fill-and-Kill (FAK) order would have resulted in a partial fill of 40,000 shares with only the remaining 60,000 shares being cancelled. Market-to-Limit orders behave differently and are not characterized by immediate ‘all-or-nothing’ cancellation based on quantity. FOK and FAK qualifiers are generally used during continuous trading to manage execution certainty and are not mandatory or restricted to specific routines like the Pre-Open in the manner described.

Takeaway: A Fill-or-Kill (FOK) order is an all-or-nothing instruction that cancels the entire order if it cannot be fully executed immediately upon entry into the SGX-ST system.

Correct: In Singapore, the Auditor-General’s Office (AGO) is an independent organ of state. Under the Constitution, the Auditor-General is appointed by the President to audit the accounts of Government ministries, departments, and statutory boards (such as MAS). The AGO’s role is to provide an independent audit and report to the President and Parliament on whether public funds have been properly accounted for and used legally and efficiently. This ensures a high level of public accountability for regulatory bodies.

Incorrect: The Auditor-General is not a department under the Ministry of Finance; it is an independent organ of state to ensure unbiased oversight. It does not set capital requirements for the SGX, as that is a regulatory function of MAS. The AGO does not supervise private sector license holders under the Securities and Futures Act; that responsibility lies with MAS. Furthermore, the Auditor-General does not have the judicial or regulatory power to overturn MAS enforcement actions, as its mandate is focused on financial and performance auditing of public entities.

Takeaway: The Auditor-General provides independent constitutional oversight of statutory boards like MAS to ensure financial accountability and proper use of public resources in Singapore’s regulatory framework.

Correct: According to SGX-ST Rules and the Securities and Futures (Licensing and Conduct of Business) Regulations, Trading Members are responsible for all orders entered through their DMA facilities. They must maintain a comprehensive audit trail that includes the identity of the DMA client and the specific authorized user or automated system that initiated the order. These records must be kept for at least five years to facilitate market surveillance and regulatory investigations.

Incorrect: The suggestion that user identification is the sole responsibility of the client is incorrect because the Trading Member remains regulatory accountable for all orders routed through its ID. The claim that records only need to be kept for two years is incorrect as the standard retention period under the Securities and Futures Act and SGX-ST rules is five years. Delegating record-keeping to the client with a quarterly attestation is not a valid substitute for the Trading Member’s own regulatory obligation to maintain these records.

Takeaway: Trading Members must maintain detailed records of DMA orders, including specific authorized user identities, for at least five years to ensure full regulatory transparency and auditability.

Correct: Under the Securities and Futures (Financial and Margin Requirements for Holders of Capital Markets Services Licenses) Regulations and SGX-ST Rules, a Trading Member is required to notify the Exchange and the Monetary Authority of Singapore (MAS) immediately if its financial resources fall below 120% of its Total Risk Requirement. This serves as a critical early warning threshold to ensure the member can take corrective action before a technical insolvency or a breach of the primary requirement (where financial resources must be at least equal to the TRR) occurs.

Incorrect: Notifying only when financial resources fall below 100% of the Total Risk Requirement is incorrect because that constitutes an actual breach of the maintenance requirement rather than the early warning trigger. A 150% threshold, while a safe internal buffer, is not the specific regulatory trigger mandated for immediate notification to the SGX-ST. Referencing 120% of the minimum Base Capital is incorrect because the early warning notification for financial resources is specifically linked to the Total Risk Requirement, which accounts for various operational and market risks, whereas Base Capital is a separate fixed minimum requirement.

Takeaway: Trading Members must immediately notify SGX-ST and MAS if their financial resources drop below the 120% early warning threshold of their Total Risk Requirement.

Correct: According to SGX-ST Listing Rules, an issuer may request a trading halt to ensure that material information is disseminated in an orderly manner. This is common when an announcement is imminent but not yet ready for release. Such halts are temporary and generally should not exceed three market days. If the issuer requires more time, they must typically request a trading suspension.

Incorrect: The suggestion that a legal indemnity for lost commissions is required is incorrect as the Exchange prioritizes market integrity and fair disclosure over commission concerns. The idea that a halt automatically upgrades to a suspension within eight business hours is false; the standard timeframe for a halt is up to three market days. The claim that suspensions are strictly limited to insolvency cases is incorrect because the SGX-ST has broad powers to suspend trading for various reasons, including when an issuer is unable to comply with listing requirements or to maintain a fair and orderly market.

Takeaway: Trading halts are short-term tools used to manage the release of price-sensitive information, while suspensions are for more prolonged periods of uncertainty or non-compliance with SGX-ST Listing Rules.

Correct: The Commercial Affairs Department (CAD) is a department of the Singapore Police Force and is the primary agency for investigating white-collar crimes. Under a joint investigation arrangement, MAS and CAD collaborate to investigate market misconduct offenses (such as market manipulation or insider trading) under the Securities and Futures Act (SFA). This allows for a more efficient use of resources and legal powers to tackle complex securities fraud cases.

Incorrect: The suggestion that the CAD adjudicates civil claims is incorrect, as civil disputes between financial institutions and consumers are typically handled by the Financial Industry Disputes Resolution Centre (FIDReC) or the courts. The CAD does not manage the licensing of financial institutions; the Monetary Authority of Singapore (MAS) is the body responsible for issuing and suspending Capital Markets Services (CMS) licenses. Furthermore, the CAD is a law enforcement agency and does not provide private legal consultancy or defense strategies to banks for liability mitigation.

Takeaway: The CAD and MAS conduct joint investigations into securities fraud to leverage both regulatory and criminal enforcement powers under the Securities and Futures Act.

Correct: Under the SGX-ST rules and the specific market-making agreements, Designated Market Makers (DMMs) have a primary obligation to provide liquidity by maintaining continuous two-way quotes (bid and offer). Their performance is measured against specific criteria, including ‘presence time’ (the percentage of the trading day they must be active), ‘maximum spread’ (the widest allowable difference between the bid and ask prices), and ‘minimum quote size’ (the minimum number of units they must offer).

Incorrect: The requirement to keep spreads within one tick size at all times is not a universal rule, as spreads vary by product and agreement. DMMs are not required to be the sole counterparty for all large retail trades; their role is to provide liquidity to the central limit order book where any participant can trade. While there are provisions for ‘fast market’ conditions where obligations might be relaxed, DMMs cannot unilaterally withdraw all quotes based solely on internal bank thresholds without adhering to the protocols established by SGX-ST.

Takeaway: Designated Market Makers on SGX-ST are contractually obligated to maintain market liquidity through continuous two-way quotes within defined spread and size parameters to ensure an orderly trading environment.

Correct: According to the SGX-ST Rules, every Trading Member is required to have its accounts audited annually by an auditor approved by the Exchange. These audited financial statements, together with the auditor’s report, must be submitted to the Exchange no later than three months after the close of the financial year to which they relate. This ensures that the Exchange can monitor the financial integrity and regulatory capital compliance of its members.

Incorrect: The requirement for an annual audit is a mandatory statutory and regulatory obligation for all Trading Members, regardless of their Risk-Based Capital (RBC) levels; it is not a conditional requirement based on financial performance. While MAS is the primary regulator, the SGX-ST Rules specifically require direct submission to the Exchange within a three-month timeframe, not four or six months. Unaudited management accounts are insufficient for the annual filing requirement, as the rules specifically mandate the submission of the auditor’s report to provide independent assurance.

Takeaway: Trading Members must submit their audited financial statements and the auditor’s report to SGX within three months of the financial year-end to maintain regulatory compliance.

Correct: Under the Securities and Futures Act (SFA) and SGX-ST Rules, Trading Members are strictly required to segregate client assets from their own. By placing client funds and securities in a designated trust account or a segregated custody account, these assets are protected from the claims of the Trading Member’s general creditors in the event of insolvency, as they do not form part of the member’s liquidation estate. This trust-based protection is the cornerstone of investor protection in Singapore’s capital markets.

Incorrect: The approach of commingling assets is a direct violation of the SFA segregation requirements, and high capital ratios do not substitute for the legal protection of a trust account. Treating client assets as unsecured debts is incorrect because the purpose of segregation is to ensure clients have a proprietary claim to their specific assets rather than being mere creditors in a liquidation. Using client assets for proprietary trading is a fundamental breach of the member’s fiduciary duty and is prohibited under Singapore law, regardless of any general waivers or participant rankings.

Takeaway: The Securities and Futures Act mandates the strict segregation of client assets into trust accounts to ensure they remain beyond the reach of a Trading Member’s general creditors during insolvency.