On March 15, 2021, the Monetary Authority of Singapore (MAS) issued a Consultation Paper on Proposed Exemption Framework for Cross-Border Business Arrangements of Capital Markets Intermediaries Involving Foreign Offices (Second Consultation Paper). The Second Consultation Paper follows an earlier consultation published by MAS and sets out the proposed draft regulations and notices as well as forms for the revised exemption framework for cross-border business arrangements of capital markets intermediaries with their foreign related corporations (FRC Framework) under the Singapore Securities and Futures Act (SFA) and Financial Advisers Act (FAA).
This briefing focuses on the key rules to be put in place under the revised FRC Framework as applicable to Singapore fund management companies that hold a capital markets services licence (CMS licence).
MAS published the first consultation on the FRC Framework, the Consultation Paper on Proposed Revisions to the Exemption Framework for Cross-Border Business Arrangements of Capital Markets Intermediaries (First Consultation Paper), on December 4, 2018. The First Consultation Paper sought to revise the existing prior approval–based FRC Framework, commonly known in the industry as the “para 9 exemption” (SFA) or “para 11 exemption” (FAA), to a more streamlined notification framework. MAS issued its response to feedback received on the First Consultation Paper on June 5, 2020, and indicated that it would proceed generally with the majority of the proposals in the First Consultation Paper.
Following the First Consultation Paper, MAS published the Second Consultation Paper seeking comments on the proposed draft regulations and notices for the revised notified FRC Framework as well as the notification forms to be submitted.
The Second Consultation Paper also sets out MAS’ proposals on introducing a new exemption framework to cover cross-border business arrangements of capital markets intermediaries with their foreign head offices or foreign branches (Branch Framework). The Branch Framework will be substantially similar to the FRC Framework and is not the focus of this briefing.
Notified FRC Framework
Under the revised notified FRC Framework, where a foreign related corporation (FRC) of a Singapore capital markets intermediary (Singapore Entity) conducts any regulated activity partly in and partly outside Singapore, or where the conduct of the regulated activity takes place wholly outside Singapore but has a substantial and reasonably foreseeable effect in Singapore, the FRC and its overseas-based representatives will be exempted from the SFA or FAA licensing and applicable business conduct requirements provided that:
(i) the FRC conducts the regulated activity under an arrangement put in place with the Singapore Entity pursuant to the FRC Framework (Cross-Border Arrangement);
(ii) the Cross-Border Arrangement complies with the boundary conditions of the FRC Framework; and
(iii) a notification is submitted to MAS within 14 days of the commencement of the Cross-Border Arrangement.
A key change to the FRC Framework is that the framework will be moving from the current ex-ante approval framework, where MAS prior approval has to be sought before commencing business activities under the Cross-Border Arrangement, to an ex-post notification framework.
Please refer to the Annex here for a table that sets out a summary of the key boundary conditions under the revised notified FRC Framework.
The revised notified FRC Framework is targeted to commence on Saturday October 9, 2021.
Singapore Entities and FRCs that are currently carrying out regulated activities under existing MAS-approved Cross-Border Arrangements pursuant to the current FRC Framework will have to comply with the new boundary conditions of the notified FRC Framework, including submitting an initial commencement notification to MAS.
A transition time of six months will be provided. Singapore Entities and FRCs under such existing MAS-approved Cross-Border Arrangements will have to comply with the new notified FRC Framework and submit the commencement notification to MAS no later than Friday April 8, 2022.
Invitation for Comments
Please refer to the Second Consultation Paper for full details on the boundary conditions for the new notified FRC Framework as well as the draft notification forms to be submitted. The deadline for comments and feedback to be submitted to the MAS is Thursday April 15, 2021.
We are collating comments from clients and industry participants for submission to the MAS. If you have comments on the proposals that you would like us to submit on your behalf, please contact any of the lawyers listed below.
Sidley Austin LLP provides this information as a service to clients and other friends for educational purposes only. It should not be construed or relied on as legal advice or to create a lawyer-client relationship.
Attorney Advertising - For purposes of compliance with New York State Bar rules, our headquarters are Sidley Austin LLP, 787 Seventh Avenue, New York, NY 10019, 212.839.5300; One South Dearborn, Chicago, IL 60603, 312.853.7000; and 1501 K Street, N.W., Washington, D.C. 20005, 202.736.8000.