Provide some examples of some designated securities by SGX-ST.
Examples of some designated securities by SGX-ST:
– Dayen Environmental Limited in 2002
– Jade Technologies in 2008
– Blumont Group Limited in 2013
– Asiasons Capital Ltd in 2013
– LionGold Corp Ltd in 2013
When corner is declared on a security?
In extreme circumstances, if the SGX-ST Board is of the view that a single party or a group has acquired enough control over supply of a security to be able to dictate its price for delivery, or if it is otherwise desirable in the interests of the markets, it may declare a corner on the security.
What conditions may be imposed when corner is declared on a security?
The Board may impose conditions on delivery (by extending the due date of delivery) or declare that contracts be cash settled (without delivery). Other cash settlement terms imposed can include:
i. If a seller (buyer) contracted to sell for less than the fair settlement price, he/she must pay the buyer (seller) the difference between the fair settlement price and the contract price; or
ii. If a seller (buyer) contracted to sell for more than the fair settlement price, the buyer (seller) must pay the seller the difference between the contract price and the fair settlement price.
Bucketing occurs when a representative directly or indirectly takes the opposite side of a customer’s order into his own account or any account in which he has an interest. It is an offense because the customer is deprived of the chance to be exposed to competitive bids or asks and from achieving the best price.
Briefly explain the pre-arranged trades?
All trading activity must take place within the SGX QUEST system’s central order book. Trades discussed and arranged outside of the system will be deemed to be ‘prearranged trades’, which are forbidden.
The following are not considered pre-arranged trades under the SGX-DT Futures Trading Rules:
1. An Exchange of Underlying for Futures Contracts; or
2. A Negotiated Large Trade; or
3. A request for a quote from a designated market maker approved by SGX.
When does the “Front Running – Priority of Customer’s Orders“ rule is not applied?
CMS licence holders and representatives are prohibited from trading in contracts for their own accounts or any associated or connected accounts, if they have in hand customer’s orders (including discretionary orders) to do the same at the prevailing
market price or at the same price.
This rule does not apply if:
1. CMS licence holders and representatives have no access to the customer’s order flow information;
2. The customer has instructed that the order be executed under specified conditions and the order cannot be executed due to those conditions; or
3. The transaction is entered into in circumstances prescribed by MAS.
“Customer” as defined here does not include the CMS licence holders’ representatives or any persons associated with or connected to them.
What is cross trading and why is it not allowed?
CMS licence holders who receive buy and sell orders from different customers at the same time and price, for the same contract month of the same contract are not allowed to match the 2 orders internally (also known as crossing the trade). Instead, they have to enter the order/leg which has the better price than the last traded price, or if there is no last traded price, the last settlement price.
1. Does it partly in and partly outside Singapore; or
2. Does it outside Singapore, where the act has a substantial and reasonably foreseeable effect in Singapore.
i. Securities of a corporation or business trust the trustee of which is formed or carrying on business in Singapore;
ii. Securities listed for quotation or quoted on a securities market in Singapore;
iii. Securities traded on a futures market in Singapore;
iv. Futures contracts traded on a futures market in Singapore;
v. Foreign exchange in connection with leveraged foreign exchange trading in Singapore; or
vi. Foreign exchange in connection with leveraged foreign exchange trading that is accessible from Singapore.
What are penalties for market misconduct under the SF
Any contravention of the provisions of the market conduct rules will result in:
• Criminal penalties;
• Civil penalties;
• Civil liabilities, financial and reputational loss; or
• The suspension or loss of licence.
What is the sum for civil penalty?
A civil penalty can be the higher of either the following sums:
a) A sum not exceeding 3 times the amount of profit the defendant gained or the amount of loss that was avoided, as a result of the contravention; or
b) A sum equal to SGD50,000 if he is not a corporation or SGD100,000 if he is a corporation.
When does the SFA attribute liability to the corporation?
The SFA attributes liability to a corporation where:
i. An offence has been created by an employee or officer with the consent or connivance of the corporation; and
ii. The corporation, through its negligence, fails to prevent or detect a contravention of any provision in Part XII of the SFA committed by an employee or officer of the corporation
provided that the contravention was committed for the benefit of the corporation.
When the liability is attributed to an individual?
Liability may also be attributed to an officer of a corporation if the corporation is found guilty of any market misconduct. The SFA provides that where it appears that a corporation has contravened any market conduct rules either with the consent or connivance of an officer or associated person of the corporation, or as a result of any neglect by individual, court action may be brought against the individual.
How Collective Investment Scheme is defined?
A CIS is an arrangement in respect of any property under which the property is managed by a manager who manages contributions of participants which are pooled together for the purpose of enabling participants to participate in or receive profits, income or other forms of returns arising from investments by the CIS.
What are the principal regulations that govern CIS?
• Legislation and Regulations. CISs are regulated under the SFA and the Securities and Futures (Offers of Investments) (Collective Investment Schemes) Regulations 2005 (SFR-CIS).
• Regulatory Authority. MAS is the regulatory authority that carries out supervision over the offer, management and distribution of CISs in Singapore.
• Code on Collective Investment Schemes. The Code on Collective Investment Schemes (“Code on CIS” or “the Code”) is a non-statutory document that sets out the best practices on the management, operation and marketing of CIS in Singapore that managers and trustees are expected to observe.
What should be the name of CIS?
The name of a CIS should be appropriate and not undesirable or misleading. In addition, the use of the terms ‘capital protected’ and ‘principal protected’ (or any other derivative or form of such terms) in a CIS’s name and description is prohibited.
How a typical unit trust is structured?
A typical unit trust structure is as follows:
1. It is constituted by a trust deed;
2. It is usually set up by the fund management company who may act as the manager; in some cases, a sub-manager may be appointed to manage part of the CIS, or the CIS may invest in another CIS;
3. A trustee is appointed who will safeguard the interests of the CIS participants and who is independent from the fund manager; and
4. The CIS may be distributed through fund distributors or banks that sell units in the CIS to retail investors.
When does the MAS may authorise a CIS that is constituted as a unit trust in Singapore?
MAS may authorise a CIS that is constituted as a unit trust in Singapore if:
i. The manager for the CIS satisfies the SFA requirements
ii. The trustee for the CIS is approved under the SFA
iii. There is a trust deed for the scheme that complies with prescribed requirements
iv. The CIS, its manager and the trustee comply with SFA, SFR-CIS and the Code.
What are the borrowing and investment guidelines for specialised CIS?
• Money Market Funds. These CISs invest primarily in high quality debt securities and money market instruments or place eligible deposits with eligible financial institutions;
• Hedge Funds. These CISs generally aim to achieve a high return through the use of advanced investment strategies;
• Capital Guaranteed Funds. These CISs guarantee the return of capital invested by participants at a pre-determined date in the future;
• Index Funds. These CISs seek to track, replicate or correspond to an index on permissible investments, commodities, interest rates, foreign exchange rates or currencies with an aim of providing or achieving investment results or returns that closely match or correspond to the performance of the index; and
• Property Funds. These CISs invest primarily in real estate and real estate-related assets.
When the breach may not be notified by manager or trustee of authorized CIS?
Any breach as a result of any:
(a) Appreciation or depreciation in the value of the CIS’s underlying investments;
(b) Redemption of units or payments made from the CIS;
(c) Change in the capital of a company;
(d) Reduction in the weight of any of the components of the benchmark being tracked by a CIS; or
(e) Downgrade in or cessation of a credit rating,
does not need to be reported to MAS as long as the breach is rectified within 3 months from the date of the breach, unless otherwise specified in the relevant guidelines and limits applicable to that CIS
How trustee plays a role in the custody and control of CIS property?
The trustee for an authorised CIS must, in respect of those CISs for which it acts as trustee:
(a) Take custody or control of all the CIS properties and hold it in trust for the participants;
(b) Ensure that all properties of the scheme are properly accounted for; and
(c) Ensure that the CIS’s property is kept distinct from the trustee’s own property and the property of its other clients.
What is a trust deed of authorized CIS?
An authorised CIS that is constituted as a unit trust requires a trust deed that is entered into by the manager and the trustee. The trust deed is the document that states how the trust will operate. The trust deed contains covenants that states the responsibilities of the manager and the trustee. Essentially, the covenants seek to bind the manager and the trustee to use their best endeavours in the conduct of their business, to act in accordance with the Code, and to maintain proper records.
What should be the frequency of valuation and what are the exceptions?
Generally, a manager should ensure that the units in a CIS are valued every business day. Exceptions are allowed for:
(a) CISs which do not offer dealing every business day, in which case it should be valued every regular dealing day, but in any event, at least once a month; and
(b) Property funds which comply with the Code on CIS: Property Funds in which case it should have a full valuation at least once a year.
Which details are included in the register of each participant in the CIS?
The register must include the following details of each participant in the CIS:
His/her name and address;
The extent of his/her holding;
The date on which his/her name was entered in the register as a participant; and
If applicable, the date on which he/she ceases or ceased to be a participant.
The trustee should send the following reports and accounts to the participants:
(a) Semi-annual accounts and semi-annual reports relating to the CIS within 2 months from the end of the period covered by the accounts and report; and
(b) Annual accounts, the auditors’ report of the annual accounts and annual report relating to the CIS within 3 months from the end of each financial year of the CIS.
The manager should obtain an extraordinary resolution of participants for any modification of the trust deed unless the trustee certifies that the modification:
(a) Does not materially prejudice the interests of participants and does not release the manager from any responsibility to the participants;
(b) Is necessary in order to comply with applicable fiscal, statutory or official requirements; or
(c) Is made to remove obsolete provisions or to correct errors.
When the MAS should recognize a CIS?
MAS may recognise a CIS only if it is satisfied that:
1. The laws and practices of the jurisdictions under which the CIS is constituted and regulated offer Singapore investors at least equivalent protection to that provided by comparable authorised schemes in Singapore;
2. The manager for the CIS must satisfy SFA requirements
3. The CIS must appoint a representative who is:
(a) an individual who is resident in Singapore; or
(b) a company, or a foreign company registered under the Companies Act,
and
4. The CIS, manager and trustee (where applicable) comply with SFA and the Code.
When does the MAS may refuse to withdraw the authorisation or recognition of a CIS?
MAS may withdraw the authorisation or recognition of a CIS once it receives an application in writing from a responsible person for a CIS. However, MAS may refuse to withdraw such authorisation or recognition, if it is of the opinion that:
(a) There is any matter which should be investigated before the authorisation or recognition is withdrawn; or
(b) The withdrawal of the authorisation or recognition is not in the public interest.
When determining whether a direction should be issued to the responsible person, MAS will consider whether the responsible person for the CIS can liquidate the CIS’s property without adversely affecting the participants. This includes factors such as:
(i) Whether a significant amount of the participants’ funds have been invested;
(ii) The liquidity of the property of the CIS; and
(iii) The penalties, if any, for liquidating the property
The trustee shall summon a meeting of the CIS’s participants to determine the course of action if:
(a) The responsible person is in liquidation;
(b) The CIS is constituted as a unit trust and the trustee is of the view that the responsible person has ceased to carry on business; or
(c) The CIS is constituted as a unit trust and the trustee is of the view that the responsible person has failed to comply with the trust deed in respect of the CIS.
What should be included in the first page of Money Market Fund Prospectus?
The first page of a money market fund (MMF) prospectus shall clearly state that:
(a) The purchase of a unit in the MMF is not the same as placing funds on deposit with a bank or deposit-taking company;
(b) Although the manager may seek to maintain or preserve the principal value of the MMF, there is no assurance that the fund will meet this objective; and
(c) The MMF is not a guaranteed fund, in that there is no guarantee on the amount of capital invested or return received.
In addition, the prospectus of an MMF shall disclose the maximum percentage of an MMF’s deposited property that can be invested in derivatives for hedging, tactical asset allocation or efficient portfolio management.