What are the requirements for opening corporate customer accounts for a trading member?
Before opening a corporate customer account, a Trading Member must:
1. Obtain particulars of the customer, including the full name, registered and mailing addresses, names and
signatures of person authorised to trade, and investment objectives;
2. Obtain a certified true copy of the certificate of incorporation of the customer; and
3. Obtain either:
i. A copy of the directors’ resolution of the customer approving the opening of the trading account with the Trading Member and empowering specific directors and officers to:
Trade in securities or futures contracts for the customer’s account; and
Execute all documentation for trading and settlement in the account;
ii. A power of attorney (in English) certified by a notary public authorising identified person to open a trading account and trade on behalf of the customer; or
iii. Note in writing the basis upon which it believes the customer may open the account and engage in transactions and that the persons acting for the customer have been duly authorised to trade on the customer’s behalf.
Give any example of financial intermediary in primary market and secondary market?
In the primary market, the process of raising capital through new securities is a complex process through which businesses are able to reach out to potential investors. For example in the equity market, new shares are issued through a process termed the Initial Public Offering (IPO) where a business is required to present investors with accurate information on its financial standing, future potential and any other relevant information. Financial intermediaries such as banks or financial institutions with a capital markets services licence to advise on corporate finance are usually appointed as issue managers, as most businesses are unlikely to have such expertise in-house.
In the secondary market, it would be difficult for an investor who is holding a security to directly find a buyer for the same security. In this case, other financial intermediaries such as brokers function as a middle agent to match selling interest and buying interest.
Briefly explain the wholesale banks.
Wholesale Banks provide the full range of banking business but are restricted in their deposit taking activities. Wholesale Banks are only allowed to take foreign currency deposits in any amount but are restricted to take deposits in Singapore dollars. They can only accept Singapore dollar deposits of at least S$250,000. They are not allowed to operate Singapore dollar savings deposit accounts. Many wholesale banks therefore prefer to solicit business from High Net Worth Individuals (HNWI) through their private banking arms. Such clients are usually more interested in capital markets products for investments.
Merchant Banks are not licensed under the Banking Act but are approved under the MAS Act. They are not allowed to accept deposits or borrow from the public in any form except from banks, finance companies, shareholders and companies controlled by shareholders. Merchant banks therefore are also not found in the retail space but can undertake corporate finance activities (including flotation, underwriting, buying and selling of shares and other securities), which falls under capital markets services or private banking through its Asian Currency Unit for non-Singapore dollar banking business
What are the sponsor’s roles and responsibilities with regard to the catalist board?
The main obligations are summarized below and include:
i. Ensuring the proper assessment of eligibility criteria or conditions imposed by SGX for listing of companies under their sponsorship;
ii. Reporting to SGX any material or adverse matters which may impact the company;
iii. Seeking SGX’s advice about the application or interpretations of rules;
iv. Notifying SGX promptly on the employment of new professional to be registered and the resignation of registered professionals;
v. Having adequate systems and resources to discharge its obligations including having sufficient number of registered professionals who are “Fit and Proper”;
vi. Acting professionally, transparently and efficiently in its dealings with the listing applicants or companies
What are the SGX’s roles and responsibilities with regard to the catalist board?
SGX’s role is to lay down the rules and review the performance, processes and controls of the sponsors against these rules. In carrying their reviews they ascertain:
i. The quality and due diligence standards of the sponsor’s assessment process.
ii. The quality of its continuing activities;
iii. Whether there are breaches of the rules.
What is the criteria for granting CMS license?
The minimum licensing admission criteria for corporations applying for a CMS licence ensure that only financially sound and reputable corporations that are prudently managed and directed by officers who are competent and have integrity.
How the CMS license be revoked or lapsed by the MAS?
A CMS Licence will lapse if the CMS licence holder is wound up or dissolved, whether in Singapore or elsewhere. MAS may also revoke or suspend a CMS licence if it has reasons to believe that the CMS licence holder or its representatives or officers had failed to discharge its duties efficiently, honestly and fairly, or had not acted in the best interest of its customers or had breached the conditions imposed on their licences.
How CMS license holders should ensure that representatives meet “fit and proper“ criteria?
CMS licence holders must also ensure that independent and rigorous due diligence checks are conducted to ensure that representatives meet “fit and proper” criteria. They have to file a “Report on Misconduct of Representative” if any of its representatives fail to meet the “fit and proper” criteria or have committed acts relating to market misconduct within 14 days after the discovery of the misconduct.
What are the objectives of the one-representative-one-principal rule are two-fold?
The objectives of the one-representative-one-principal rule are two-fold:
1. To secure clarity for investors about the status of representatives, the principals they represent, and more importantly, where responsibility rests for complaints and redress; and
2. To ensure that principals closely monitor and supervise their representatives at all times.
How the decision is made to register or revoke the representative registration?
The decision whether to register a representative or to revoke a registration depends on the following:
1. The seriousness or severity of circumstances surrounding the person’s failure to meet a specific criteria;
2. The relevance of the unfulfilled criteria in relation to the duties that are, or are to be performed and the responsibilities that are, or are to be assumed by the person;
3. The amount of time that has lapsed since the person’s failure to meet a specific criteria.
What is the importance of RNF (Representative Notification Framework) number?
All representatives are assigned a unique representative number, which will stay with them even if they change principals. With this number, members of the public may verify the representatives whom they are dealing with against the Register of Representatives, thereby reducing their risk of dealing with unregulated individuals. Financial institutions are encouraged to make the unique representative numbers of their representatives readily available to consumers for consumers to verify the representative’s regulatory status. It is thus important for representatives to know their own RNF number.
Under which circumstances the status of the representative ceases?
The status of an appointed, provisional or temporary representative in respect of any regulated activity is valid until it ceases under the following circumstances:
i. The principal notifies MAS of such cessation;
ii. The appointed representative has ceased to act as a representative for a continuous period of one month, and his principal has not notified MAS of his cessation as a representative;
iii. MAS has revoked the status of the appointed representative;
iv. The principal ceases to carry on business in that type of regulated activity;
v. The licence of his principal lapses, the licence is revoked by MAS, or a prohibition order is issued by MAS against his principal prohibiting it from carrying out that type of regulated activity.
What should be considered by the trading member before opening an individual customer account?
Before opening an individual customer account, a Trading Member must:
1. Obtain particulars of the customer (and any person authorised to trade for the customer), including the full name, a copy of the identity card/passport, specimen signature, residential and mailing addresses, telephone numbers, occupation, and the name, address and telephone number of the customer’s
employer, and investment objectives; and
2. Take appropriate steps to verify the customer’s identity and intention if the customer does not open the account in person.
What are some examples of SIPs listed on an exchange and SIPs not listed on an exchange?
Examples of SIPs Listed on an Exchange:
Certain exchange traded funds and notes
Structured warrants
Futures
Certificates
Examples of SIPs Not Listed on an Exchange
Structured notes (e.g. equity-linked structured notes, credit linked structured notes)
Certain unit trusts
Certain investment-linked life insurance policies
Under which circumstances the bank can disclose the customer information?
Under Section 47 of the Banking Act, a bank in Singapore or any of its officers cannot disclose customer information to any third party except as permitted under the Banking Act. These would include following circumstances:
1. Where the bank has the prior written consent of the customer, and in accordance with the terms of the consent;
2. The disclosure is necessary for risk management of the bank and for the internal audit by internal and external auditors, lawyers, or consultants approved or engaged by the bank;
3. The disclosure is required under any law or rules for investigating or prosecuting an offence alleged or suspected to have been committed under any written law (which is in turn defined in the Banking Act).
When the member does not need to send monthly reports to the customer?
The Member does not need to send a monthly statement to a customer if:
a) The information that is to be contained in the statement has already been sent to the customer by a Clearing House, which the Member is a member of; or
b) There has been no change to the customer’s account in the month; or
c) The customer is an Accredited Investor, or a corporation related to the Member, and:
A. Real-time electronic statements have been made available to the customer, and the customer has agreed to using these electronic statements; or
B. The customer has requested, in writing, not to receive such monthly statements.
A Trading Member must not accept a house cheque, i.e. a crossed cheque issued by the Trading Member in favour of a customer, from a customer unless:
a) The customer is the payee of the cheque; and
b) The cheque is used to settle an amount owing by the customer to the Trading Member or is deposited into a trust account as directed by the customer.
Which of the goods or services do not qualify as acceptable soft dollar receipts or payments?
The following goods and services do not qualify as acceptable soft dollar receipts or payments:
Travel, accommodation and entertainment expenses.
General administrative goods and services including office equipment and premises expenses.
Membership fees.
Employees’ salaries.
Direct money payment. This does not include payment of referral fees under a referral agreement.
The auditor should immediately send a report in writing to MAS if it discovers any of the following matters or irregularity whilst performing its duties as an auditor:
i. Any matter which adversely affects or may adversely affect the financial position of the CMS licence holder to a material extent;
ii. Any matter which constitutes or may constitute a contravention of any provision of the SFA or an offence involving fraud or dishonesty; or
iii. Any irregularity that has or may have a material effect upon the accounts, including any irregularity that may affect or jeopardise the money or assets of any customer of the CMS licence holder.
Under which circumstances the the licensee’s own money in a customer’s trust account?
A CMS licence holder may advance sufficient money to a customer’s trust account from its own funds under the following circumstances:
i. To prevent the customer’s trust account from being under-margined or under-funded; or
ii. To ensure the continued maintenance of that account.
The CMS licence holder may retain any interest earned and return arising on the moneys which it has advanced to the account.
What are the duties of CMS license holders upon receipt of customer’s assets?
The CMS licence holder must deposit a customer’s assets in a custody account held on trust for the customer and ensure that the customer’s assets are not commingled with any other assets. They should make arrangements for a custodian to maintain the custody account.
The CMS licence holder shall deposit the customer’s assets in the custody account no later than the business day immediately following the day on which they receive the assets or is notified of the receipt of such assets,
whichever is the later, unless the assets have in the meantime been returned to the customer or deposited in an account directed by the customer.
A customer’s assets may be commingled with the assets of another customer and deposited in the same custody account. The CMS licence holder must separately account for the assets of each customer.
How the suitability of a custodian is determined for the customer’s assets?
The CMS licence holder which maintains its customer’s assets in a custody account must:
i. Before opening the custody account, conduct due diligence as to the custodian’s suitability for the holder’s customer or class of customers; and
ii. Maintain records of the grounds on which it has satisfied itself of the suitability of the custodian.
What is included in the false trading?
False Trading includes:
Creating or having the intention to create an appearance of active trading on any securities;
Buying and selling any securities that do not involve a change in beneficial ownership of those securities in order to maintain, change or cause fluctuations in the market price of the securities in the market;
Doing anything that creates or is likely to create a false or misleading appearance of active trading or with respect to the market for or the price of securities if the person is reckless as to whether doing that act would
so create or be so likely to create; or
That person is guilty of an offence if he, or a person associated with him:
1. has entered into or purports to enter into the illegal transaction; or
2. has received or expects to receive, any consideration or benefit for circulating or disseminating the information or authorising the circulation or dissemination of such information.
Inside or “insider” information is information that is not generally available, and if known would or would be likely to have a material effect on the price of value of securities. A reasonable person would be taken to expect
information to have a material effect if the information is likely to influence persons who commonly invest in securities in deciding whether or not to buy, subscribe for or sell the securities.
When a person is considered as connected to a corporation?
A person is connected to a corporation if he/she:
i. Is an officer of the corporation or of a related corporation;
ii. Is a substantial shareholder in that corporation or in a related corporation;
iii. Occupies a position that may reasonably be expected to give them access to price sensitive information by virtue of:
a) any professional or business relationship existing between them (or their employer or a corporation of which they are an officer) and that corporation or a related corporation; or
b) them being an officer of a substantial shareholder in that corporation or in a related corporation.
What is meant by “securities hawking“?
Securities hawking refers to making an offer of securities in an unsolicited meeting. The securities hawking prohibition aims to prevent pressure selling of financial products to retail clients (e.g. “boiler room” practices,
badgering). Representatives are not allowed to offer or invite any subscription or purchase of securities, during any unsolicited meetings with clients or other investors. This requirement does not apply to offers made to securities
that do not need a prospectus, such as those to institutional investors, accredited investors.
Unauthorised trading occurs when a Trading Representative executes trades in a customer’s account without the customer’s knowledge or approval. Sometimes, the customer may not even be aware of such trades because
the Trading Representative had directed the contract notes (which depict the trade executed under the customer’s account) to another address. Dormant account are particularly at risk to such activity.
Accordingly, SGX-ST Rule 13.6 prohibits unauthorised trading and the Trading Representative must not:
1. Execute his personal trades in the account of a customer; and
2. Use a customer’s account for third party trading without the customer’s prior written authorisation.
Where the proposed transaction involves the placing of multiple buy and sell order at various prices higher or lower than the market price, or placing of buy and sell order which give the appearance of increased volume, this may be indicative of an attempt to create a false and misleading appearance.
For their own part, Trading Member or Trading Representative should not make large entries above or below the prevailing spread to facilitate filling an order on the other side of the market. The placing of buy (sell) orders
at various price steps below (above) the market may create a false or misleading appearance that the entries are on behalf of genuine buyers (sellers). The layering of orders also translates into a change in the depth screen and may mislead market participants with respect to interest in the counter.