Module 1B Key Notes Set 1

It provides opportunities for businesses to raise capital to fund
their business activities. 

Businesses raise capital through the issuance of various securities instruments e.g shares, common stocks etc.

Investors would then provide the capital by buying these instruments.

The capital-raising activities in Singapore take place either in the primary market or secondary market.

Benefit of a Secondary Market:

The secondary market allows investors to manage or
transfer their risk to other parties.

Risk transfer or risk management can also be achieved by trading in futures or derivatives products instead of simply selling the shares or bonds.

Some examples of derivatives include Futures, Options, and Issuer or
Company Warrants.

An exchange provides a centralized market.

Here buyers and seller can congregate.

This helps in discovering prices and quantities 

For trading, The buyer/seller must be Trading Member of the exchange/a customer
of a Trading Member of the exchange.

Primary and secondary market activities can either take place in the over-the-counter (OTC) markets or on
regulated exchanges.

The OTC market is also known as the “call around” market, because market participants
call each other directly to determine each other’s interest to buy or sell any given security.

The types of banking licences include:
i. Qualifying Full Banks/ Full Banks
ii. Wholesale Banks
iii. Offshore Banks
iv. Merchant Banks

Qualifying Full Banks/ Full Banks:

It provide the whole range of banking business approved under the Banking Act.

These banks are allowed to take deposits of any amount in any currency.

They can also provide capital markets products, custodial business, underwriting, corporate finance activities.

They may also offer life policies as distributors for insurance companies.

Wholesale banks are licensed under and governed by the Banking Act.

These banks are abided by the rules of Banking Act.

Due to their licences restrictions, they cannot 

The Act prohibit wholesale banks to engage in non-financial activities.

Wholesale Banks are only allowed to take foreign currency deposits.

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 runs bussiness via High Net Worth Individuals (HNWI) and for this they utilize their private banking arms.

Such clients are usually more interested in capital markets products for investments.

Offshore banks are allowed to carry any banking bussiness.

They only face restrictions in Singaporian dollar bussiness.

They cannot accept Singaporian dollar fixed deposits or even saving deposits from Singaporian residents.

 It is also prohibited to lend in Singaporian dollars.

The lending cannot in aggregate exceed $500 million at any one time.

The limit can only be exceeded with the prior approval of MAS.

The bank can accept Singapore dollar deposit from non-residents only with the threshold of

Similarly, It cannot operate a savings deposit account even for non-residents.


No, merchant banks are not licensed under the Banking Act.

They are only approved under MAS Act.

They are restricted to accept deposits or borrow from the public in any form.

However there are some exceptions; they can only accept/borrow from banks, finance companies,
shareholders and companies controlled by shareholders.

Due to this, Merchant banks are also not found in the retail space.

The good part is that these banks can undertake corporate finance activities.


Yes, broker/dealer companies are another class of financial intermediaries.

They are CMS licence holders related to securities.

These companies do not engage in the deposit-taking and credit extension activities.

They specialize in matching buyers with sellers.

They can also be Trading or Clearing Members.

Hence they can provide trading or clearing facilities to their customers for trading on exchange.

Custodians are responsible for serving institutional clients, as well as individual clients.

They also maintain records of the movement of securities to and from their clients’ accounts.

They may also provide securities financing and
securities lending services.

Additionally, they are interface for their clients to the
exchanges for the settlement and delivery of securities.

These entities must possess a CMS licence in providing custodial services.

Finance companies are licensed under the Finance Companies Act.

Due to this, they are not required to apply for a CMS licence for regulated activities.

Finance companies operate MAS’ regulation, supervision and inspections.

Finance Companies are indeed not an active participant.

They usually utilize the services of other trading members.

They aid in settlement of purchases and sales of securities of their clients who are their customers with share financing facilities.

They also provide custodial services of securities to their clients.



They help in  promoting a sound, stable and progressive financial
services sector through regulation and supervision.

They work hard to safeguard interests of investors by:

  • Keeping customers well-informed and updated
  • Ensure safe, efficient and transparent organised markets 
  • Maintainance of upgraded and efficient financial infrastructure

The regulatory bodies on the other hand issues relevant rules for trading and clearing of securities.

MAS Act aims at promoting a continuous economic growth, and progressive financial centre.

It functions are:

  • To supervise  financial services and other financial stability surveillance
  • To Manage the official foreign reserves of Singapore
  • To develop Singapore as an international financial centre.

Key Responsibilities:

MAS needs to administer the following legislations which are related to
the securities and futures industry:

  • Securities and Futures Act (Cap. 289) (SFA)
  • Securities and Futures (Licensing and Business Conduct) Regulations
  • Securities and Futures (Markets) Regulations
  • Securities and Futures (Clearing Facilities) Regulations etc

The SFA has empowered MAS to a great extent.

It can vest the power for the development of the securities and futures market.

Some key powers are highlighted below:

  • Approving securities exchanges, futures exchanges and clearing houses
  • Reviewing any needed amendments to rules and regulations of the Exchanges and clearing houses
  • Taking disciplinary actions if licensed person disobeys any directions
  • Inspection of  the books of Exchanges, clearing house or the holder of a capital markets services licence etc

It has a large number of companies listed on SGX that originates outside of Singapore.

It helps in connecting investors that are in search of Asian growth  with issuers in search of global capital.

It also offers clients the world’s biggest offshore market for Asian equity.

It is centred on Asia’s three largest economies – China, India and Japan.

SGX is also  one of the Asia’s pioneering central clearing house.

  • Guiding Principle One: Disclosure-Based Regulation
  • Guiding Principle Two: Comprehensive Risk Management
  • Guiding Principle Three: Risk-Based Targeting of Regulatory Activities
  • Guiding Principle Four: Balanced Approach to International Best Practice
  • Guiding Principle Five: Transparency
  • Guiding Principle Six: SGX as a Frontline Regulator and Managing Regulatory Conflict

SGX-ST is a subsidiary of SGX that runs under the Companies Act.

It performs day-to-day regulation of the securities market.

SGX-ST Trading Members are required to obey the SGX-ST Rules.

It is the only approved securities exchange in Singapore.

SGX-ST is empowered to take any disciplinary action for noncompliance
with any of the requirements.

It allows companies and investors to achieve capital-raising and investment objectives through its rules.


CDP stands for The Central Depository (Pte) Limited.

It was established in 1987 as a completely owned subsidiary of SGX.

CDP particularly serves the Singapore market.

It also has some strong links  with other central depositories in the United States, Japan
and China.

It aids in settlement of cross-border trades.

CDP is now a Qualifying CCP (Central Counterparty).

Clearing Members of CDP must follow the CDP Rules. These are the:

  •  CDP Clearing Rules
  •  CDP Depository Rules

SGX-DC is an entirely owned SGX subsidary, and gives clearing to:

  • Products cited on Singapore Exchange Derivatives Trading (SGX-DT)
  • OTC commodity trades registered by means of the SGX OTC Trade Registration Platform (TRS)
  • OTC financial derivatives trades registered through industry-used trade registration system

SGX-DC is presently a Qualifying CCP.

Futures Clearing Members are run by the SGX-DC Clearing Rules.

An organization seeking listing in the SGX must first apply to SGX.

It requires the submission of an application.

Prior to making the application, the organization will initially engage an adviser.

He acts as the issue manager to prepare for the listing application.

The company then empower the issue manager to deal with
the SGX on its behalf.

He then gathers the required information, liaise with the SGX on matters relating to the application.

Then he makes the final submission

The average timeline for submission to approval and trading is as follows:

  •  Pre-submission consultation – 2-6 month
  •  SGX & MAS review 9 – 12 weeks
  • Lodgement & Public Exposure on MAS Opera website – 2 weeks
  • Registration & Launch – 1-2 weeks
  •  Trading Commences

Primary Listing:

Here Companies must meet SGX’s initial listing requirements.

Secondary listing:

Companies that are already listed on an acceptable exchange may seek a secondary listing on SGX Mainboard/

It does not require to comply with SGX’s continuing
listing obligations.

Global Depository Receipts (GDR):

A company that is as of now recorded on an overseas exchange must maintain the guidelines of its home exchange.




It can only choose the primary listing route.

It must also have a sponsor for the Catalist listing, approved by SGX.

Sponsors are responsible for following obligations of companies listed on Catalist.

SGX then no longer undertakes direct supervision.

Before registering with Catalist, the company must submit an Offer Document on SGX Catalodge website.

The Offer Document must adhere with the same disclosure requirements.

The Offer Document is to be lodged with SGX.

It acts as agent of MAS.

The Offer Document will be posted on
the SGX’s Catalodge website for  at least 14 days.

It would be open for public comments.

The public may then show concerns they may have of the company and its status.

They are products which may possess derivatives.

They come  up with complex features and potentional risks.

Thats the reason, investors are exposed to more losses.

Examples of SIPs cited on an Exchange:

  • Certain exchange traded funds and notes
  • Structured warrants etc

Examples of SIPs Not Listed on an Exchange:

  •  Certain unit trusts
  •  Certain investment-linked life insurance policies


Terrorism Financing (TF) can be defined as:

Provision of  funds to terrorists to carry out acts of terrorism.

They usually 
have their background in  political ideology.

They seek to impact governments into particular
course of action.

They may also disrupt with the security of the public.

Embargo is considered as a complete ban or bycott of trade or financial dealings with a specific country.

This is done to isolate a country from taking part in economic activities.

Here are some categories of Embargoes:

  • Embargoes that has an impact on all relations with a particular country.
  • Embargoes that only affect few named individuals or entities
  • Economic sanctions

Singapore is a member and signatory to the Financial Action Task Force (FATF).

It is an Inter-Governmental
body that was developed in 1989.

It aims at combating money laundering, terrorist
financing and other threats by setting high standards.

Singapore follow the rules of FATF and is  committed to the effective implementation  of the FATF



Some examples of suspicious Transactions are:

  • Transactions with unusually large cash deposits made by an individual or company.
  • Transactions by means of numerous credit slips so that the total of each deposit is unremarkable.
  • Transactions of customers whose deposits contain counterfeit notes or forged instruments.

All representatives are given a unique representative number.

It will be with them even if they change principals.

This number is used for verification of representatives whom they are dealing with
against the Register of Representatives.

Financial institutions appreciate the assignment of these numbers, so verification of representative’s regulatory status becomes easier.



Its not possible for all customers to understand SIP’s complex features.

Therefore, CMS licence holders and exempt financial institutions must conduct:

Customer Account Review (CAR):

It enables to assess if you have the relevant knowledge or experience to trade in listed SIP products.

Customer Knowledge Assessment (CKA):

It enables the customers to access the relevant knowledge or experience to trade in unlisted SIP products.

For joint trading accounts, the necessity to lead the CAR or CKA will apply to each of the customers who is planning to open the joint SIP trading account.

It is required for senior managment to be involved in particular account opening process.

Financial institutions are required to formally assess your investment knowledge and experience before selling SIPs .

This is to ensure that you have the relevant knowledge and experience to understand the features and risks associated with investing in such products.