RES 3 – Rules, Ethics and Skills for Fund Management

While it is not considered market misconduct or an offence, representatives should not engage in late trading to ensure that they adhere to fund management best practices. Late trading refers to the practice where an investor places an order to subscribe, switch, cancel or redeem units or shares in a CIS after the time which the CIS has calculated its net asset value, and the investor receives a price per unit or price per share based on the net asset value already determined earlier that day

The main motivation for short selling is profit,

In the case of a connected person, it has to be proven that the connected person possessed information which was not generally available.

As mentioned previously, non-public price-sensitive information or ͞inside information͟ is information that is not generally available and if it were generally available, might have a material effect on the price or value of the securities.

Pre-arranged trading occurs when a trade purports to have been executed in the exchange’s competitive trading system when in fact it was pre-arranged. This may mean that, although the trade took place in the exchange, it had been covertly agreed beforehand. In extreme cases, pre-arranged trades are deliberately used to distort the exchange price.

Broadly, market manipulation involves the intentional interference with the free forces of supply and demand to deceive or defraud investors, or for some other ulterior purpose.

Members and representatives are prohibited from engaging in any practices, or inducing any person to create a false or misleading appearance of active trading in any securities. Member and representative are not allowed to deal in securities in a manner that may affect or maintain the price of securities.

Nevertheless, the market activity itself may mislead investors as they might assume that a sudden price change in the issuer’s securities reflects a corresponding change in its business or prospects.

The content of a press release or other public announcement is as important as its timing. Each announcement should:
– Be factual, clear and succinct;
– Contain sufficient quantitative information to allow investors to evaluate its relative importance to the activities of the issuer
– Be balanced and fair

Each announcement should:
i. Be factual, clear and succinct;
ii. Contain sufficient quantitative information to allow investors to evaluate its relative importance to the activities of the issuer;
iii. Be balanced and fair

A LFMC and its representatives may receive soft dollars from a broker for directing business to the broker in the management of an authorized scheme.

However, the LFMC does not need to provide a monthly statement if there is no change in any particulars since the date of the last account statement. The LFMC also does not need to provide monthly and quarterly statements if the customer is an accredited investor or a related corporation of LFMC

A LFMC does not have absolute discretion to draw down on its customers͛ monies and/or assets. A LFMC may make withdrawals from a customer’s trust account only for few exceptions.

When applying for approval of the arrangement under the Singapore entity should ensure that its foreign related corporation meet the following criteria:
• It has maintained a track record of at least 3 years in the proposed activity
• It discharges its functions in an efficient, honest and fair manner
• It maintains a good ranking in its home country
• It is subject to proper supervision by its home regulatory authority for the activities carried out under the arrangement.

LFMCs are not required to segregate their managed assets if the assets are not listed or quoted on a securities market.

This section prescribes how investment managers should conduct investment transactions and includes provisions relating to:
• Conflict of interest

To determine whether a person can exercise control over the investment portfolio, MAS may consider factors such as whether the person is involved in the construction of the investment portfolio, has knowledge of, or access to the holdings of the portfolio beyond what is publicly available, or is named or referred to in the fund͛s prospectus, offering documents or marketing materials.

In normal circumstances, it would not be considered a pre-arranged cross trade if there is more than 10 seconds between the 1st and 2nd legs of the order. It should be noted that the firm should have in place internal policies and procedures to ensure that the 10-second rule is not breached

If found guilty, the CMS licence holder or its representative may also face civil action and the relevant authority is empowered to bring a court action which could result in the court imposing a civil penalty in place of the criminal penalty

They are also allowed to provide capital markets products, custodial business, underwriting, corporate finance activities and some even offer life policies as distributors for insurance companies.