Singapore legislation
Regulation 45
of Securities and Futures (Licensing and Conduct of Business) Regulations
Regulation 45
Specified products borrowing and lending
Subregulation 1
Subject to paragraph (2), where a holder of a capital markets services licence —
borrows specified products from an owner of those specified products (referred to in this regulation as the lender), the holder shall provide Collateral to the lender for the borrowing of the specified products; and
lends specified products, including specified products belonging to its customer, to any person (referred to in this regulation as the borrower), the holder shall obtain Collateral from the borrower for the lending of the specified products.
Subregulation 2
Paragraph (1)(a) shall not apply to a holder of a capital markets services licence when the holder borrows specified products from an accredited investor, expert investor or institutional investor.
Subregulation 3
For the purposes of paragraph (1)(a) and (b), the holder of a capital markets services licence shall ensure that the Collateral provided to the lender or obtained from the borrower, as the case may be, shall, throughout the period that the specified products are borrowed or lent, have a value not less than 100% of the market value of the specified products borrowed or lent.
Subregulation 4
Where the holder of a capital markets services licence borrows or lends specified products in accordance with paragraph (1), it shall ensure that the terms and conditions of the borrowing or lending, as the case may be, are recorded in a prior written agreement, which complies with paragraph (5) and is entered into between the holder and the lender or borrower or their duly authorised agent, as the case may be.
Subregulation 5
For the purposes of paragraph (4), the written agreement shall —
state the capacities in which the parties are entering into the agreement (whether as principal or agent);
provide for the transfer of the title to and interest in the specified products lent from the lender to the holder, or the holder to the borrower, as the case may be;
provide for the transfer of the title to and interest in the whole or part of the Collateral provided or obtained by the holder which is valued to be at least 100% of the market value of the specified products (referred to in this regulation as minimum Collateral) which is borrowed by the holder from the lender, or lent by the holder to the borrower, as the case may be;
provide for the following rights throughout the period that the specified products are borrowed or lent:
in the case where the holder borrows specified products from a lender, the rights of the lender in relation to the minimum Collateral and the rights of the holder in relation to the specified products borrowed; and
in the case where the holder lends specified products to a borrower, the rights of the holder in relation to the minimum Collateral and the rights of the borrower in relation to the specified products borrowed,including the treatment of dividend payments, voting and other rights and arrangements for dealing with any corporate action;
provide for the procedure for calculating the lending or borrowing fees, as the case may be;
include the requirement to mark to market on every business day the specified products lent or borrowed, as the case may be, and all minimum Collateral comprising specified products and the procedures for calculating the margins;
provide for the procedures for the request for the return of the specified products lent, and the arrangements for dealing with the situation where such specified products cannot be delivered by —
the holder, where the holder borrows specified products from a lender; and
the borrower, where the holder lends specified products to a borrower;
provide for the termination of the agreement by any party to the agreement, including any early termination fee which that party may be subject to;
state whether there is any right of set-off of claims;
set out the events of default and the rights and obligations of the parties to the agreement in such events of default; and
provide for the law governing the agreement and the jurisdiction to which it is subject.
Subregulation 6
Where the holder of a capital markets services licence borrows specified products from an accredited investor, expert investor or institutional investor, the holder shall ensure that the terms and conditions of the borrowing are recorded in a prior written agreement, which complies with paragraph (7) and is entered into between the holder and the accredited investor, expert investor or institutional investor or their duly authorised agent, as the case may be, regardless of whether the holder provides any assets to the accredited investor, expert investor or institutional investor as collateral for the borrowing.
Subregulation 7
For the purposes of paragraph (6) —
the terms and conditions in the written agreement that apply to the borrowing of specified products shall include the details set out in paragraph (5), with the exception of paragraph (5)(f), and for this purpose —
any reference to the minimum Collateral in paragraph (5) shall be construed as a reference to any asset which may be provided to the accredited investor, expert investor or institutional investor as collateral for the borrowing; and
any reference to the lender shall be construed as a reference to the accredited investor, expert investor or institutional investor; and
where assets are provided to the accredited investor, expert investor or institutional investor as collateral for the borrowing, the written agreement shall specify —
whether the specified products borrowed and the assets provided comprising specified products, if any, are marked to market; and
if so, the procedures for calculating the margins.
Subregulation 8
Without prejudice to paragraph (3), the holder of a capital markets services licence may —
where it borrows specified products from a lender, provide assets other than Collateral (referred to in this regulation as additional assets) to the lender if the Collateral already provided to the lender is valued at not less than 100% of the market value of the specified products borrowed as at the time the additional assets are provided to the lender; and
where it lends specified products to a borrower, obtain additional assets from the borrower if the Collateral already obtained from the borrower is valued at not less than 100% of the market value of the specified products lent as at the time the additional assets are obtained from the borrower.
Subregulation 9
In this regulation —[Deleted by S 667/2018 wef 08/10/2018]
Definition
“Collateral” means —
cash;
Government securities;
marginable specified products;
guarantees issued by banks licensed under the Banking Act 1970;
letters of credit;
any asset that —
is liquid and readily convertible into cash;
is in the possession or control of —
the holder where the holder borrows specified products from a lender; and
the borrower where the holder lends specified products to a borrower;
is subject to a legally binding agreement between the lender and the holder or the holder and the borrower, as the case may be, which —
is evidenced in writing;
is irrevocable and enforceable against —
(AA)the holder where the holder borrows specified products from a lender; and
(BB)the borrower where the holder lends specified products to a borrower; and
confers an unconditional right to apply the asset, to sell the asset or to otherwise convert the asset into cash on —
(AA)the lender where the holder borrows specified products from a lender; and
(BB)the holder where the holder lends specified products to a borrower;
is not a security issued by —
in the case where the holder borrows specified products from a lender —
(AA)the holder, that gives rise to exposure to the holder; or
(BB)a related corporation of the holder; and
in the case where the holder lends specified products to a borrower —
(AA)the borrower, that gives rise to exposure to the borrower; or
(BB)a related corporation of the borrower; and
is not a security that is prohibited from serving as collateral by any approved exchange or approved clearing house, as the case may be; or
such other instruments as the Authority may from time to time, by a guideline issued by the Authority, determine;
Definition
“customer” means —
a person on whose behalf the holder of a capital markets services licence carries on any regulated activity; or
any other person with whom the holder enters or will enter into transactions as principal for the sale or purchase of specified products;
Definition
“marginable specified products” means —
specified products listed for quotation or quoted on the Singapore Exchange Securities Trading Limited;
in the case of an initial public offer, specified products to be listed for quotation or quoted on the Singapore Exchange Securities Trading Limited, for which the holder of a capital markets services licence has received full payment from the borrower;
specified products quoted on a recognised group A exchange, and issued by a corporation with shareholders’ funds of not less than $200 million or its equivalent in a foreign currency; or
such other specified products as the Authority may approve and set out in a guideline issued by the Authority;
Definition
“market value”, in relation to specified products listed for quotation or quoted on an approved exchange or overseas exchange, means —
the last transacted price of the specified products traded on the exchange on the preceding business day;
if there was no trading in the specified products on the exchange on the preceding business day, then, subject to paragraph (c), the lower of the last transacted price and the last bid price of the specified products on the exchange; or
if there was no trading in the specified products on the exchange in the preceding 30 days, the value of the specified products as estimated by the exchange or the holder and approved by the Authority;
Definition
“recognised group A exchange” has the same meaning as in regulation 2 of the Securities and Futures (Financial and Margin Requirements for Holders of Capital Markets Services Licences) Regulations (Rg 13).