On 4 December 2018, the Monetary Authority of Singapore (MAS) published a consultation paper (the MAS CP) proposing changes to the exemption framework for business arrangements between financial institutions and their foreign related corporations (FRCs).
These arrangements, commonly known as ‘Paragraph 9’ and ‘Paragraph 11’ arrangements, allow FRCs of Singapore regulated entities which hold a licence or exemption under the Securities and Futures Act (Cap. 289) (SFA) and/or the Financial Advisers Act (Cap. 110) (FAA), to provide their services into Singapore, subject to conditions. Paragraph 9/11 arrangements form an important cornerstone of inbound cross-border financial services in Singapore, and these proposals will therefore be of significant interest to the industry.
This alert provides an overview of the MAS’ proposals and considers some of the key practical implications for Singapore regulated entities and FRCs.
Overview of proposals
The SFA, which regulates the activities of capital markets intermediaries, and the FAA, which regulates financial advisory services, have extraterritorial effect. Entities conducting activities partly or even wholly outside Singapore may therefore, where such activities are licensable under the SFA and/or FAA and are undertaken with Singapore-based customers, trigger a licensing requirement under the SFA and/or FAA, unless an exemption applies.
Paragraph 9/11 arrangements (based on the exemptions in paragraph 9 of the Third Schedule to the SFA and paragraph 11 of the First Schedule to the FAA) allow FRCs of Singapore regulated entities which hold an appropriate licence or exemption under the SFA and/or FAA, and representatives of the FRCs, to conduct such activities in Singapore. Such arrangements must be approved by the MAS and are subject to conditions which aim at mitigating risks to customers in Singapore.