An important function of the capital markets is to provide opportunities for businesses to raise capital to fund their business activities. These capital-raising activities take place in the primary market. Businesses raise capital through the issuance of various securities instruments such as shares / common stock / equity securities, bonds / fixed income securities and company warrants. Investors would then provide the capital by buying these instruments.

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, Extended Settlement Contracts, and Issuer Warrants.

An exchange provides a centralized market where buyers and sellers can congregate. This allows for the easy discovery of the prices and quantities at which each participant is interested to buy or sell securities. In order to trade on an exchange, the buyer or seller needs to either be a Trading Member of the exchange, or a customer of a Trading Member of the exchange.

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.

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/-.

Offshore banks can generally carry on any banking business subject to restrictions on Singapore dollar business. Offshore banks are not allowed to accept Singapore dollar deposits whether in the form of fixed deposits or savings deposit from Singapore residents. It is also restricted in lending in Singapore dollars.

Qualifying Full Banks and Full Banks provide the whole range of banking business approved under the Banking Act and are allowed to take deposits of any amount in any currency, including offering savings accounts. They are also allowed to provide capital market products, custodial business, underwriting, corporate finance activities and some even offer life policies as distributors for insurance companies. In view of the fact that they do not have restrictions in offering deposit products, many of the Qualifying Full Banks or Full Banks are also in the retail banking business as well.

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 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.

These companies hold a CMS Licence to carry out fund management activities. Until 2012, there were also Exempt Fund Management Companies, which managed no more than 30 accredited investors. Since 2012, MAS requires all Fund Management Companies to be registered or licensed in order to regulate all the players in the market that provide fund management services. Fund Management Companies manage investments on behalf of investors, which include both institutions and individuals.

These entities are required to hold a CMS Licence in providing custodial services. Custodians serve institutional clients, as well as individual clients. Besides providing general custodial services, custodians maintain records of the movement of securities to and from their clients’ accounts and are the interface for their clients to the exchanges for the settlement and delivery of securities.

Finance companies are licensed under the Finance Companies Act and are not required to apply for a CMS Licence for regulated activities which are not prohibited by the Finance Companies Act or where the finance company has been granted an exemption under Section 25(2) of the Act, and are exempted institutions. Finance Companies generally are not active participants but usually use the services of Trading Members for the delivery or settlement of purchases and sales of their clients who are their customers with share financing facilities.

MAS was established under the MAS Act (1970), which came into force in 1972. Its mission is to promote sustained non-inflationary economic growth, and a sound and progressive financial centre. Its functions are to:
1. Act as the central bank of Singapore, including the conduct of monetary policy, the issuance of currency, the oversight of payment systems and serving as banker to and financial agent of the Government;
2. Conduct integrated supervision of financial services and financial stability surveillance;
3. Manage the official foreign reserves of Singapore; and
4. Develop Singapore as an international financial centre

The SFA gives MAS a wide range of powers to enable the sound development of the securities and futures market. These include (but are not limited to) the power to:
– Approve securities exchanges, futures exchanges and clearing houses;
– Review any amendments to rules and regulations of the Exchanges and clearing houses;
– Take disciplinary actions (such as warning, fine, reprimand, suspension of licence, revocation of licence and issuance of prohibition order) if the licensed person contravenes any condition or restriction imposed on its licence, or any direction issued to it by MAS under the SFA, or any provision in the SFA;
– Inspect the books of Exchanges, a person operating an exempt market, clearing house, a person operating an exempt clearing facility, the holder of a capital markets services licence, an exempt person or a representative; and
– Conduct investigation into alleged or suspected contravention of any provision of the SFA or written direction issued under the SFA.

SGX connects investors in search of Asian growth to corporate issuers in search of global capital. SGX is Asia’s most international exchange with a large proportion of companies listed on SGX originating outside of Singapore. It also offers clients the world’s biggest offshore market for Asian equity futures, centered on Asia’s three largest economies – China, India and Japan.

II & III.
In conducting its regulation of the markets, SGX has adopted six guiding principles:
– Guiding Principle One: Disclosure-Based Regulation – The facilitation of fair access to information for all market users for achieving a fair, orderly, and transparent market.
– Guiding Principle Two: Comprehensive Risk Management – SGX focuses regulatory attention on the safe and efficient operation of its clearing houses and requires a comprehensive, integrated, and reliable approach to the management of the counterparty risks from clearing and trading members as well as other risks within the clearing houses.
– Guiding Principle Three: Risk-Based Targeting of Regulatory Activities – SGX
adopts a pragmatic risk-based approach. Supervisory activities focused on principles one and two are tailored according to risk profiles developed for issuer sponsors and Member firms. Resources are allocated to those matters that it considers as posing the greatest risks to achieving a fair, orderly, and transparent market and safe and efficient clearing outcomes.
– Guiding Principle Four: Balanced Approach to International Best Practice – SGX aims to ensure that its rules and regulatory activities are consistent with international best practice for exchanges and clearing houses, striking an appropriate balance between internationally recognised practices and local needs and conditions.
– Guiding Principle Five: Transparency – SGX seeks to be open and transparent in all its regulatory operations to the extent consistent with its statutory obligations and the public interest.
– Guiding Principle Six: SGX as a Frontline Regulator and Managing Regulatory Conflict – MAS is the statutory regulator and has oversight over SGX’s regulatory responsibilities. SGX performs a frontline regulatory role in maintaining fair, orderly, and transparent markets, as well as safe and efficient clearing facilities

II & IV.
SGX-ST is a subsidiary of SGX incorporated under the Companies Act. It undertakes the day-to-day regulation of the securities market and administers the SGX-ST rules, which governs the access to and conduct in the securities market of the SGXST. SGX-ST Trading Members are required to adhere to the SGX-ST Rules. SGX-ST is the only approved securities exchange in Singapore and is responsible for setting the rules and membership and trading requirements of the exchange. SGX-ST can mete out disciplinary action for non-compliance with any of the requirements. SGX-ST allows companies and investors to achieve capital-raising and investment objectives through its rules, such as the listing requirements for companies who wish to raise capital and have their securities traded on SGX-ST. Companies which are already listed can also raise further capital through the market and SGX-ST.

III & IV.
CDP was established in 1987 as a wholly owned subsidiary of the Stock Exchange of Singapore (SES). It provides integrated clearing, settlement and depository facilities for the securities market, including both equities, fixed income instruments as well as funds. CDP principally serves the Singapore market, but has links with other central depositories in the United States, Japan and China to support settlement of cross-border trades. CDP holds the book-entry securities deposited with it as a bare trustee for the collective benefit of depositors. Securities are immobilized at CDP where ownership is transferred via book-entry. The physical certificates of immobilized instruments are safe kept with a CDP nominated custodian bank.

I & III.
SGX-DT was established under the Companies Act and carries on the business of establishing, conducting and regulating a futures market with underlying assets such as commodities and financial instruments under the SFA. SGX-DT lays down the rules and requirements to ensure orderly trading and settlement of futures and options on various products, including interest rates, equity and equity indices and energy, covering major markets such as Asia, Europe and United States. These are contained in the Futures Trading Rules, which govern SGX-DT Trading Members.

I & IV.
Trading Members are permitted to conduct trading activities, but do not engage in clearing activities. A Trading Member’s trades would have to be cleared through a Clearing Member. There are 2 classes of Trading Members:
(i) General Trading Members – A General Trading Member refers to a non-bank corporation which is admitted as a Trading Member
(ii) Bank Trading Members – A Bank Trading Member refers to a Bank which is admitted as a Trading Member.

II & IV.
The board of directors and senior management of the applicant should uphold good corporate governance standards and practices in directing and managing the applicant’s business. The board of directors should comprise a minimum of 2 members, at least one of whom is resident in Singapore. The chief executive officer of the applicant should also be a resident in Singapore.

I & III.
1. Implementing effective written policies on all operational areas, including financial policies, accounting and internal controls, and internal auditing. CMS licence holders must ensure compliance with the policies;
2. Putting in place compliance function and arrangements, including specifying the roles and responsibilities of officers and employees in helping to ensure its compliance with all applicable laws, codes of conduct and standards of good practice in order to protect investors and reduce the CMS licence holder’s risk of incurring legal or regulatory sanctions that may be imposed by MAS or any other public authority, financial loss, and reputational damage;
3. Identifying, addressing and monitoring the risks associated with the trading or business activities;
4. Ensuring that their business activities are subject to adequate internal audit.

III & IV.
Members, Approved Traders and Registered Representatives are required at all times to observe high standards of integrity, market conduct and fair dealing. They are also required to act with due skill, care and diligence and refrain from any act or course of conduct which is likely to harm the reputation of the SGX-DT markets or any Member firms.

I & II.
A Member must inform SGX-DT in writing immediately if the Member, or any of its Approved Traders, Registered Representatives, directors, officers or employees:
(a) Breaches any provisions of the SFA, Futures Trading Rules or any applicable laws (foreign or local) governing the Member’s activities, as well as any other exchange or market (foreign or local) which has jurisdiction;
(c) Breaches any provision involving fraud or dishonesty, whether in or out of Singapore;
(d) Breaches any director’s duties as contemplated under common law or otherwise;
(e) Is the subject of a written complaint or investigation involving an allegation of fraud or dishonesty, whether in or out of Singapore;
(f) Is the subject of any disciplinary action taken by the Member involving suspension, termination, withholding of commissions, fines or any other significant limitation of activities;
(g) Engages in conduct that circumvents the SFA, or other relevant applicable laws and regulatory requirements;
(h) Engages in conduct which is inconsistent with the principles of good business practice or is detrimental to the financial integrity, reputation or interests of the Exchange or the Markets; or
(j) Is insolvent, or is the subject of bankruptcy or winding up proceedings.

II & IV.
Penalties – SGX Futures Trading Rule 3.2.5
(i) Any Member that conducts business in any market prohibited by the Exchange is subject to a mandatory minimum penalty of $10,000.
(ii) Any Member that does not comply with the rules and regulations of other markets where it conducts its business is subject to a compoundable fin, depending on the number of violations.

II & IV.
1. Any individual who conducts a regulated activity when he is not an appointed, provisional or temporary representative contravenes SFA 99B(1) and shall be guilty of an offence and liable to a fine not exceeding $50,000 or to imprisonment for a term not exceeding 12 months, or to both. In the case of a continuing offence, to a further fine not exceeding $5,000 for every day or part thereof during which the offence continues after conviction.
2. A financial institution which permits any individual who is not an appointed provisional or temporary representative
to conduct any type of regulated activity under the SFA contravenes SFA 99B (3) and shall be guilty of an offence and shall liable on conviction to a fine not exceeding $150,000 and, in the case of a continuing offence, to a further fine not exceeding $15,000 for every day or part thereof during which the offence continues after conviction.

II & III.
To be eligible for registration as a Representative, an applicant must fulfil all the following conditions:
1. Be at least 21 years old.
2. Have a minimum education level equivalent to:
– At least 4 GCE ―O‖ Level credit passes; or
– At least 2 GCE ―O‖ Level credit passes if he has 3 continuous years of relevant working experience over the last 5 years.
3. Have satisfied the CMFAS examination requirements for those regulated activities he will deal in.
4. Be a fit and proper person, which includes38:
– Possessing qualities of honesty, integrity and sound reputation;
– Competence and capability;
– Financial soundness, e.g. not being an undischarged bankrupt, whether in or out of Singapore.

I & IV.
2.3.2.2 Competence and Capability
Whether the person:
1. Has satisfactory past performance or expertise in regards to the nature of his business or duties whether in Singapore or elsewhere;
2. Is assuming concurrent responsibilities which would give rise to a conflict of interest or otherwise impair his ability to discharge his duties in relation to any activity regulated by MAS;
3. Has satisfactory educational qualification or experience, relevant skills and knowledge in relation to the nature of duties they are required to perform. The person should have satisfied the minimum entry and examination requirements for representatives conducting any activity regulated by MAS.

I & II.
2.3.2.1 Honesty, Integrity and Reputation
Whether the person:
1. Has been refused the right or restricted in his right to carry on any trade, business or profession for which a specific licence, registration or other authorisation is required by the law in any jurisdiction;
2. Has been the subject of any investigations or disciplinary proceedings or been issued a warning or reprimanded by MAS or any other regulatory authority, an operator of a market or clearing facility, any professional body or government agency, whether in Singapore or elsewhere;
3. Has been convicted of any offence or is being subject to any pending proceedings which may lead to such a conviction under any law in any jurisdiction;
4. Has any judgement debt (in particular that associated with a finding of fraud, misrepresentation or dishonesty) entered against the person in any civil proceedings or is a party to any pending proceedings which may lead to such a judgement under the law in any jurisdiction;
5. Is or has been a director, partner, substantial shareholder or concerned in the management of a business that has been censured, disciplined, prosecuted or convicted of a criminal offence or been the subject of any disciplinary or criminal investigation or proceeding, in Singapore or elsewhere, in relation to any matter that took place while the person was a director, partner, substantial shareholder or concerned in the management of the business;

I & III.
2.3.2.4 Financial Soundness
Whether the person:
1. Is or has been unable to fulfil all or any of his financial obligations in Singapore or elsewhere;
2. Has entered into a compromise or scheme of arrangement with his creditors;
3. Is subject to a judgement debt which is unsatisfied, either in whole or in part, in Singapore or elsewhere;
4. Is an undischarged bankrupt in Singapore or elsewhere;
5. Is or has been the subject of a bankruptcy petition or any other similar process in Singapore or elsewhere.