How are capital markets regulated?
According to Ravi Menon's speech on Singapore's approach to the regulation of capital markets
The purpose of regulating capital markets is to safeguard the interests of investors, ensure that risks are kept to an acceptable level, promote efficient price discovery, and maintain confidence in the market.
In Singapore, the regulatory framework for capital markets is underpinned by the Securities and Futures Act (SFA) and the Financial Advisers Act (FAA). Consumers who invest in products or deal with entities that are regulated under this framework will enjoy the safeguards provided under these laws.
REGISTRATION AND LICENCING
MAS imposes a registration/licensing requirement on certain entities. They can be found below:
Types of entities
Corporate finance advisers
Credit rating agencies
Real estate investment trust (REIT) managers
Securities-based crowdfunding operators
Securities and Futures Act (SFA) Capital markets services (CMS) licence Fund managers SFA Fund management licensing and registration Approved CIS trustee SFA Approval of CIS trustee Licensed trust companies Trust Companies Act (TCA) Trust business licence Financial advisers Financial Advisers Act (FAA) Financial adviser's licence Markets and exchanges SFA Approved exchange (AE) or recognised market operator (RMO) Clearing houses SFA Approved clearing house (ACH) or recognised clearing house (RCH) Trade repositories SFA Licensed trade repository (LTR) or licensed foreign trade repository (LFTR) Benchmark administrators and submitters SFA Authorised benchmark administrator, authorised benchmark submitter and designated benchmark submitter
View full details on each type of entity in MAS website.
OFFERS OF INVESTMENT
MAS imposes stringent rules requiring issuers of securities to disclose and disseminate all material information. The SFA requires all offers of securities or securities-based derivatives contracts, all offers of units or derivatives of units in a business trusts (BT) and all offers of units in a CIS to be accompanied by a prospectus and product highlights sheet registered with MAS.
- A BT must be registered by MAS if it is constituted in Singapore
- A CIS must be authorised (if it is constituted in Singapore) or recognised (if it is constituted outside Singapore) by MAS
- The CIS and their managers and trustees must also comply with MAS’ Code on Collective Investment Schemes (CIS Code).
Prospectus registration requirements do not apply to certain offers of securities or securities-based derivatives contracts (“exempted offers ”). Registration of a BT and prospectus registration requirements do not apply to certain offers of units in or derivatives of units in a BT (“exempted offers ”). These offers include:
- Offers where the minimum transaction amount is S$200,000
- Small Offers – Total amount raised is S$5 million or less in 12 months
- Private Placement – Offers made to no more than 50 persons in 12 months (Does not apply for CIS)
- Offers targeted at accredited or institutional investors
> Links to find prospectuses for offers of shares and debentures.
There are 4 components that are regulated under the capital markets ecosystem;
- Issuers – those who issue securities to raise capital
- Investors – those who invest in these securities
- Intermediaries – those who advise issuers or investors and facilitate the trading of securities
- Infrastructure – the platforms or systems through which securities are traded