Banking (Merchant Banks) Regulations 2021

a bank;

a finance company licensed under the Finance Companies Act (Cap. 108);

a shareholder of the merchant bank in Singapore;

a company controlled by any shareholder of the merchant bank in Singapore.

holds the right (directly or indirectly) to appoint or remove the directors or equivalent persons of the company, where such directors or equivalent persons hold a majority of the voting rights at any meeting of the directors or equivalent persons of the company on all or substantially all matters;

holds (directly or indirectly) more than 25% of the rights to vote on any matter that is to be decided upon by a vote of the members or equivalent persons of the company; or

has the right to exercise, or actually exercises, significant influence or control over the company.

the merchant bank, at the request of and for the purpose of financing the purchase of an asset by a customer, purchases the asset from the seller in circumstances where the asset is existing at the time of the purchase;

the merchant bank sells the asset to the customer;

the customer is under a legal obligation to the merchant bank to take delivery of the asset;

the amount payable by the customer for the asset (the marked‑up price) is greater than the amount paid by the merchant bank for the asset (the original price), and the difference between the marked‑up price and original price is the profit or return to the merchant bank for providing the financing to the customer;

the merchant bank does not derive any gain or suffer any loss from any movement in the market value of the asset other than as part of the profit or return mentioned in sub‑paragraph (d);

the customer is not required to pay the marked‑up price or any part of the marked‑up price to the merchant bank until after the date of the sale mentioned in sub‑paragraph (b).

intention to commence the business mentioned in paragraph (1); or

commencement of the business within 14 days after the date of its commencement.

for the purpose of making funds of a customer available to a merchant bank, the customer appoints the merchant bank or another person as an agent, to purchase on behalf of the customer, an asset for an amount of money (the original price), in circumstances where the asset is existing at the time of the purchase;

the merchant bank —

purchases the asset from the customer at a price (the marked‑up price) that is greater than the original price; and

sells the asset or appoints the customer, or another person as an agent of the merchant bank, to sell the asset on behalf of the merchant bank;

both the merchant bank and customer do not derive any gain or suffer any loss from any movement in the market value of the asset other than the difference between the marked‑up price and the original price (which represents the profit or return to the customer for making funds available to the bank);

the merchant bank is not required to pay the marked‑up price or any part of the marked‑up price to the customer until after the date of the sale mentioned in sub‑paragraph (b)(ii).

intention to commence the business mentioned in paragraph (1); or

commencement of the business within 14 days after the date of its commencement.

for the purpose of making funds of the merchant bank (A) available to another bank or merchant bank (B), A purchases, or appoints B or another person as an agent of A to purchase on A’s behalf, an asset for an amount of money (the original price), in circumstances where the asset is existing at the time of the purchase;

B —

purchases the asset from A at a price (the marked‑up price) that is greater than the original price; and

sells the asset, or appoints A or another person as an agent of B, to sell the asset on behalf of B;

both A and B do not derive any gain or suffer any loss from any movement in the market value of the asset other than the difference between the marked‑up price and the original price (which represents the profit or return to A for making funds available to B);

B is not required to pay the marked‑up price or any part of the marked‑up price to A until after the date of the sale mentioned in sub‑paragraph (b)(ii).

intention to commence the business mentioned in paragraph (1); or

commencement of the business within 14 days after the date of its commencement.

the merchant bank, or the merchant bank’s agent, purchases an asset at the request of a customer for an amount of money (the original price) for the purposes of financing the use or purchase (or both) of the asset by the customer;

the merchant bank, or the merchant bank’s agent, leases the asset to the customer;

if the asset is not in existence at the time the merchant bank, or the merchant bank’s agent, leases the asset to the customer, an amount of money (the advance payment) may be paid by the customer to the merchant bank, or the merchant bank’s agent, for the subsequent use of the asset;

an amount of money (the rental) is paid by the customer to the merchant bank, or the merchant bank’s agent, for the lease of the asset;

the merchant bank, or the merchant bank’s agent, appoints the customer or a third party, to take on the obligations in connection with the use of the asset, including its maintenance and insurance;

in the event of an early termination of the lease, the customer, or a third party, must purchase the asset from the merchant bank, or the merchant bank’s agent, at a price determined at the start of the lease (the early termination price);

upon expiry of the lease —

where the aggregate of all rental and advance payments made under the lease is greater than the original price, the merchant bank, or the merchant bank’s agent, must, whether with or without consideration, transfer the ownership of the asset to the customer or a third party; or

where the aggregate of all rental and advance payments made under the lease is equal to or less than the original price, the customer or a third party must purchase the asset from the merchant bank, or the merchant bank’s agent, at a sale price determined at the start of the lease (the sale price), which amount is the consideration for the transfer of the asset;

the total amount payable by the customer and such third party mentioned in either sub‑paragraph (f) or (g) (if any) for the asset comprising —

the advance payment;

the rental; and

the sale price or early termination price,is greater than the original price, and the difference between the total amount payable and original price is the profit or return to the merchant bank for providing such financing to the customer;

the merchant bank, or the merchant bank’s agent, does not derive any gain or suffer any loss from any movement in the market value of the asset, including total loss of the asset, other than as part of the profit or return mentioned in sub‑paragraph (h).

intention to commence the business mentioned in paragraph (1); or

commencement of the business within 14 days after the date of its commencement.

the merchant bank, or the merchant bank’s agent, jointly purchases an asset with the customer at the request of the customer and contributes an amount of money towards the purchase price (the contribution) for the purposes of financing the use or purchase (or both) of the asset by the customer;

the merchant bank or the merchant bank’s agent —

sells a portion of its share of the asset on a periodic basis to the customer for an amount of money determined at the start of the arrangement (the redemption); and

leases the unsold portion of its share of the asset to the customer for an amount of money determined at the start of the arrangement (the rental);

if the asset is not in existence at the time of the joint purchase and the merchant bank, or the merchant bank’s agent, leases the unsold portion of its share of the asset to the customer, an amount of money (the advance payment) may be paid by the customer to the merchant bank, or the merchant bank’s agent, for the subsequent use of that portion of the asset;

the merchant bank, or the merchant bank’s agent, appoints the customer, or a third party, to take on the obligations in connection with the use of the asset, including its maintenance and insurance;

in the event of an early termination of the arrangement, the customer must purchase from the merchant bank, or the merchant bank’s agent, the remainder of the unsold portion of the share of the asset of the merchant bank, or the merchant bank’s agent, at a price determined at the start of the arrangement (the early termination price);

upon expiry of the arrangement, the customer must have purchased from the merchant bank, or the merchant bank’s agent, the whole of the share of the asset of the merchant bank, or the merchant bank’s agent, and obtained full ownership of the asset;

the total amount payable by the customer for the asset comprising —

the advance payment;

the redemption;

the rental; and

the early termination price,is greater than the contribution, and the difference between the total amount payable and the contribution is the profit or return to the merchant bank for providing such financing to the customer;

the merchant bank, or the merchant bank’s agent, does not derive any gain or suffer any loss from any movement in the market value of the asset, including total loss of the asset, other than as part of the profit or return mentioned in sub‑paragraph (g), except in the circumstances provided in sub‑paragraph (i);

in a case where the customer is unable to pay the merchant bank, or the merchant bank’s agent, the early termination price, the merchant bank, or the merchant bank’s agent, may sell the asset to a third party at a price lower than the outstanding amount payable by the customer.

intention to commence the business mentioned in paragraph (1); or

commencement of the business within 14 days after the date of commencement of the arrangement mentioned in paragraph (1).

for the purposes of effecting payment resulting from the carrying on of any business by the merchant bank in Singapore under section 55V(1)(a), (b) or (c) of the Act —

the merchant bank undertakes to purchase an asset from a customer (merchant bank purchase undertaking);

the customer undertakes to purchase an asset from the merchant bank (customer purchase undertaking);

the merchant bank undertakes to sell an asset to a customer (merchant bank sale undertaking); or

the customer undertakes to sell an asset to the merchant bank (customer sale undertaking),for an amount of money determined at the time the undertaking is given by the merchant bank or the customer, as the case may be (the agreed price);

where the merchant bank purchase undertaking is exercised by the customer, or the customer sale undertaking is exercised by the merchant bank, the merchant bank purchases the asset from the customer at the agreed price in circumstances where the asset is existing at the time of the purchase, and immediately sells the asset to a third party at spot price;

where the customer purchase undertaking is exercised by the merchant bank, or the merchant bank sale undertaking is exercised by the customer, the merchant bank purchases the asset from a third party at spot price in circumstances where the asset is existing at the time of the purchase, and immediately sells the asset to the customer at the agreed price;

the merchant bank does not take physical delivery of the asset;

the merchant bank does not derive any gain or suffer any loss from any movement in the market value of the asset other than the difference between the spot price and the agreed price.

intention to commence the business mentioned in paragraph (1); or

commencement of the business within 14 days after the date of its commencement.

the merchant bank, or the merchant bank’s agent, at the request of the customer and for the purposes of financing the procurement and the use or purchase, or both, of an asset by the customer, commissions the customer to construct the asset in accordance with the customer’s specifications for an amount of money (the purchase price);

contemporaneously with the commissioning mentioned in sub‑paragraph (a) —

the merchant bank, or the merchant bank’s agent, and the customer enter into an arrangement prescribed under regulation 10 where the asset is not in existence at the time the asset is leased to the customer (the lease arrangement); or

the customer gives an undertaking to the merchant bank, or the merchant bank’s agent, to purchase the asset from the merchant bank, or the merchant bank’s agent, immediately after the transfer of the ownership of the asset to the merchant bank, or the merchant bank’s agent, by the customer under sub‑paragraph (e)(i) (the purchase undertaking);

the customer procures the construction of the asset by a third party;

the merchant bank, or the merchant bank’s agent, makes payment of the purchase price to the customer on a periodic basis (the progress payment);

one of the following takes place:

the customer transfers the ownership of the asset to the merchant bank, or the merchant bank’s agent, on a mutually agreed date on or after the completion of the construction of the asset by the third party;

the customer refunds all progress payments to the merchant bank, or the merchant bank’s agent, and the lease arrangement or the purchase undertaking (as the case may be) is cancelled;

the merchant bank, or the merchant bank’s agent, agrees to the substitution of the asset that is the subject of the lease arrangement or the purchase undertaking with a comparable asset, and the customer transfers the ownership of the comparable asset to the merchant bank, or the merchant bank’s agent, on a mutually agreed date;

the merchant bank, or the merchant bank’s agent, does not take physical delivery of the asset or the comparable asset;

at the end of the arrangement, the merchant bank, or the merchant bank’s agent, transfers ownership of the asset, or of the comparable asset, to the customer pursuant to the lease arrangement or the purchase undertaking, except in the circumstances mentioned in sub‑paragraph (e)(ii);

the amount payable by the customer for the asset, or the comparable asset, is greater than the purchase price, and the difference between the total amount payable and the purchase price is the profit or return to the merchant bank for providing such financing to the customer;

the merchant bank, or the merchant bank’s agent, does not derive any gain or suffer any loss from any movement in the market value of the asset, including from the total loss of the asset, other than the profit or return mentioned in sub‑paragraph (h).

intention to commence the business mentioned in paragraph (1); or

commencement of the business within 14 days after the date of its commencement.

carried on by a company or the trustee of a trust; and

a business that a merchant bank in Singapore has determined to have potential for high growth or value creation,is a prescribed business for the merchant bank in Singapore.

the business of engaging in any property‑related activity; or

the business of factoring, leasing equipment or otherwise purchasing debt obligations from third parties.

the business is related or complementary to a core financial business of the merchant bank;

the business is not —

any other business prescribed for the purposes of section 55V(1)(d) of the Act, including any prescribed business under regulation 16(1); or

any business approved under section 55V(1)(e) of the Act;

the business is not any of the following types of business:

property development;

provision of hotel and resort facilities;

property management;

owning, operating or investing in facilities for the extraction, transportation, storage or distribution of commodities;

owning, operating or investing in facilities for processing, refining or otherwise altering commodities.

the merchant bank puts in place risk management and governance policies and procedures that are commensurate with the risks posed by the business;

the policies and procedures mentioned in sub‑paragraph (a) have been approved by —

in the case of a merchant bank incorporated in Singapore — the board of directors of the merchant bank;

in the case of the branches and offices located in Singapore of a merchant bank incorporated outside Singapore, the head office of which has never carried on a materially similar business before — the board of directors of the merchant bank; or

in the case of the branches and offices located in Singapore of a merchant bank incorporated outside Singapore, the head office of which has carried on or is carrying on a materially similar business — by an authorised person of the merchant bank;

the merchant bank notifies the Authority, in accordance with paragraph (3), of the following matters:

a description of the business;

any regulation or licensing requirement that the business is or will be subject to, whether in Singapore or elsewhere;

the nature of the merchant bank’s investment in the business and the amount of such investment;

the date on which the merchant bank intends to start carrying on the business;

any partnership, joint venture or other arrangement into which the merchant bank has entered to carry on the business;

the merchant bank notifies the Authority of any change to the matters in relation to which information had been provided in the notification mentioned in sub‑paragraph (c), before making the change or as soon as the merchant bank becomes aware of the change; and

the merchant bank obtains prior approval from the Authority for the issuance of any guarantee, indemnity, letter of comfort or any other letter that imposes similar obligations on the merchant bank as a guarantee or indemnity, or similar expectations on the bank as a letter of comfort, in respect of the business.

any public announcement that the merchant bank intends to carry on, or enter into any partnership, joint venture or other arrangement with any person to carry on, the business;

the entry of the merchant bank into any partnership, joint venture or arrangement with any person to carry on the business;

the date on which the merchant bank starts carrying on the business, or the date on which any partnership, joint venture or other arrangement entered into by the merchant bank to carry on the business comes into effect.

in the case of a merchant bank incorporated in Singapore —

30% of its capital funds; and

30% of the capital funds of its merchant bank group; or

in the case of the branches and offices located in Singapore of a merchant bank incorporated outside Singapore — 4% of the assets that are reflected as assets in the balance‑sheet of the branches and offices located in Singapore (less net inter‑bank lending).

submit a report to the Authority within 30 days after the end of every quarter or any other time as may be approved in writing by the Authority, containing the information specified in the First Schedule; and

provide any other information that the Authority may require in relation to any business prescribed in paragraph (1) that is carried on by the merchant bank.

the business is one from which the merchant bank in Singapore does not receive or intend to receive any revenue;

the business is one that has no asset value recorded on the balance-sheet of the merchant bank in Singapore; and

the business is one that does not result in any exposure for the merchant bank in Singapore.

that carries on a business prescribed in regulation 14(1), whether or not as its principal business; or

whose principal business is that of investing in any entity mentioned in sub‑paragraph (a).

the business of engaging in any property‑related activity;

the business of factoring, leasing equipment or otherwise purchasing debt obligations from another person.

a business prescribed in regulation 15(1) or 16(1); or

a business of investing in any entity that carries on a business prescribed in regulation 15(1) or 16(1).

in a case where the entity carries on a business mentioned in paragraph (1)(a) and other businesses — each of such other businesses is a business mentioned in section 55V(1)(a), (b) or (c) of the Act, or a business prescribed for the purposes of section 55V(1)(d) of the Act that is similar in economic substance and risk to a business mentioned in section 55V(1)(a), (b) or (c) of the Act; or

in a case where the entity carries on a business mentioned in paragraph (1)(b) and other businesses —

at least one of such other businesses is a business prescribed in regulation 15(1) or 16(1); and

each of such other businesses is a business mentioned in sub‑paragraph (a).

the aggregate non‑financial business size of the merchant bank concerned, after acquiring or holding a major stake in the entity, does not exceed —

in the case of a merchant bank incorporated in Singapore —

30% of its capital funds; and

30% of the capital funds of its merchant bank group; or

in the case of the branches and offices located in Singapore of a merchant bank incorporated outside Singapore — 4% of the assets that are reflected as assets in the balance‑sheet of the branches and offices located in Singapore (less net inter‑bank lending);

the merchant bank puts in place risk management and governance policies and procedures that are commensurate with the risks posed by all the businesses carried on by the entity;

the policies and procedures mentioned in sub‑paragraph (b) have been approved by —

in the case of a merchant bank incorporated in Singapore — the board of directors of the merchant bank;

in the case of the branches and offices located in Singapore of a merchant bank incorporated outside Singapore, the head office of which has never carried on a materially similar business before — the board of directors of the merchant bank; or

in the case of the branches and offices located in Singapore of a merchant bank incorporated outside Singapore, the head office of which has carried on or is carrying on a materially similar business — by an authorised person of the merchant bank;

the merchant bank notifies the Authority of the following matters:

a description of all the businesses carried on by the entity;

any regulation or licensing requirement that the entity is or will be subject to, whether in Singapore or elsewhere;

the nature and extent of the major stake in the entity acquired or held by the merchant bank;

the date on which the major stake in the entity is acquired by the merchant bank, or (if applicable) the date on which the entity is incorporated, formed or established by the merchant bank,at least 14 days before the earliest of the following:

any public announcement that the merchant bank intends to acquire the major stake in the entity, or (if applicable) incorporate, form or establish the entity;

the entry of the merchant bank into any agreement to acquire the major stake in the entity, or (if applicable) incorporate, form or establish the entity;

the date on which the major stake in the entity is acquired by the merchant bank, or (if applicable) the date on which the entity is incorporated, formed or established by the merchant bank;

the merchant bank notifies the Authority of any change to the matters in relation to which information had been provided in the notification mentioned in sub‑paragraph (d), before making the change or as soon as the merchant bank becomes aware of the change;

the merchant bank obtains prior approval from the Authority for the issuance by the merchant bank of any guarantee, indemnity, letter of comfort or any other letter that imposes similar obligations on the merchant bank as a guarantee or indemnity, or similar expectations on the merchant bank as a letter of comfort, in respect of any business carried on by the entity; and

where the entity is or is to be a subsidiary of the merchant bank —

the merchant bank has an agreement with the entity to allow the Authority and any person appointed by the Authority, at any time, to obtain any information from the entity and to inspect the books of the entity; and

where the entity is regulated by a regulatory authority in a foreign country or territory, the merchant bank is satisfied, from its own due diligence or based on professional advice, that the Authority and any person appointed by the Authority are not prohibited from obtaining any information from, or inspecting the books of, the entity.

submit a report to the Authority within 30 days after the last day of every quarter, or a later date approved by the Authority in writing, containing the information specified in the First Schedule; and

provide any other information that the Authority may require, in relation to any entity in which the merchant bank acquired or holds a major stake under this regulation.

having regard to the specific circumstances of a merchant bank in Singapore, including whether the risk management and governance policies and procedures of the merchant bank in Singapore are sufficiently robust to effectively monitor and manage the risks of the entity; or

if any condition or requirement imposed on a merchant bank in Singapore is not satisfied by the merchant bank at any time,issue to the merchant bank a written declaration that paragraph (1) does not apply to the merchant bank in relation to any entity specified in the declaration on or after a specified date.

the merchant bank has an agreement with the subsidiary to allow the Authority and any person appointed by the Authority, at any time —

to obtain any information from the subsidiary; and

to inspect the books of the subsidiary;

where the subsidiary is a financial institution regulated by a regulatory authority in a foreign country or territory — the merchant bank is satisfied, from its own due diligence or based on professional advice, that the Authority and any person appointed by the Authority are not prohibited from obtaining any information from, or inspecting the books of, the subsidiary; and

the merchant bank ensures that the subsidiary carries on its business in a manner that satisfies any condition relating to the operations or activities of the subsidiary that the Authority may impose, from time to time, by written notice.

any subsidiary of the merchant bank;

any entity in which the merchant bank and its subsidiaries hold in the aggregate a beneficial interest in at least 20% of the share capital, accumulated funds or contributed capital;

any entity in which the merchant bank and its subsidiaries control in the aggregate at least 20% of the voting power;

any other entity where the management of the entity is accustomed or under an obligation, whether formal or informal, to act in accordance with the merchant bank’s directions, instructions or wishes, or where the merchant bank is in a position to determine the policy of the entity; or

any subsidiary of any entity mentioned in sub‑paragraph (b), (c) or (d).

acquired or controlled by a merchant bank or any entity mentioned in paragraph (1) under an arrangement with a person that has a trading account with the merchant bank or entity, and transferred to the trading account of that person within 2 market days after the date of acquisition; or

acquired or held, or controlled, by the merchant bank or the entity mentioned in sub‑paragraph (a) in the course of satisfaction of debts due to it and disposed of at the earliest suitable opportunity,is excluded for the purpose of determining whether the entity is an affiliated entity of the merchant bank.

for the benefit of any person other than the merchant bank or its subsidiary, or any other affiliated entity of the merchant bank (called in this paragraph the beneficiary) under an obligation imposed under any written law, rule of law, contract or order of court; and

used or exercised by the merchant bank or its subsidiary primarily for the benefit of the beneficiary,is excluded for the purpose of determining whether the entity is an affiliated entity of the merchant bank.

the voting power in the entity is controlled by the merchant bank, or a subsidiary of the merchant bank that is a licensed insurer under the Insurance Act (Cap. 142), through —

any insurance fund established and maintained under the Insurance Act for its general business;

any insurance fund established and maintained under the Insurance Act for its non‑participating policies;

any insurance fund established and maintained under the Insurance Act for its participating policies, and that relates to assets held other than for the purpose of meeting the liabilities in respect of the policies of the insurance fund; or

any insurance fund established and maintained under the Insurance Act for its investment‑linked policies, and that relates to assets held other than for the purpose of meeting those liabilities in respect of the policies of the insurance fund, the values of which are dependent on the value of the underlying assets; or

the Authority —

is of the opinion, having regard to the specific circumstances of the case including whether the merchant bank or its subsidiary has investment and voting policies that comply with guidelines issued by the Authority, that the control of voting power in the entity is in fact not being used or exercised primarily for the benefit of the beneficiary; and

issues a declaration mentioned in paragraph (5).

any beneficial interest in the share capital, accumulated funds or contributed capital of an entity held by an affiliated entity of the merchant bank is treated as held by that merchant bank;

any voting power in an entity controlled by an affiliated entity of the merchant bank is treated as controlled by that merchant bank; and

any interest in an entity (where the management of the entity is accustomed or under an obligation, whether formal or informal, to act in accordance with the merchant bank’s directions, instructions or wishes, or where the merchant bank is in a position to determine the policy of the entity) held by an affiliated entity of the merchant bank is treated as held by that merchant bank.

any beneficial interest in the share capital, accumulated funds or contributed capital of an entity; or

any voting power in an entity,that is acquired or held, or controlled, by an affiliated entity and transferred or disposed of by the affiliated entity in the manner mentioned in regulation 20(2)(a) or (b).

for the benefit of any person other than the affiliated entity, the merchant bank or any other affiliated entity of the merchant bank (called in this paragraph the beneficiary), under an obligation imposed under any written law, rule of law, contract or order of court; and

used or exercised by that affiliated entity primarily for the benefit of the beneficiary.

the affiliated entity is an insurer licensed under the Insurance Act, and the voting power or interest is controlled or held by it through any of the insurance funds specified in regulation 20(4)(a); or

the Authority —

is of the opinion, having regard to the specific circumstances of the case including whether the affiliated entity has investment and voting policies that comply with guidelines issued by the Authority, that the voting power or interest in the entity is in fact not being used or exercised primarily for the benefit of the beneficiary; and

issues a declaration under paragraph (5) by written notice to the merchant bank.

the affiliated entity is not under the effective control of the merchant bank; and

the merchant bank is not exposed to any material risk because of —

the affiliated entity’s beneficial interest in the share capital, accumulated funds or contributed capital of any other entity;

the affiliated entity’s control of voting power in any other entity; or

the affiliated entity’s interest in any other entity,the Authority may issue a declaration by written notice to the merchant bank that regulation 21(1) does not apply to any beneficial interest in the share capital, accumulated funds or contributed capital of any entity, any control of voting power in any entity, or any interest in any entity, held by the affiliated entity.

the affiliated entity has come under the effective control of the merchant bank; or

the merchant bank has become exposed to any material risk because of —

the affiliated entity’s beneficial interest in the share capital, accumulated funds or contributed capital of any other entity;

that affiliated entity’s control of voting power in any other entity; or

that affiliated entity’s interest in any other entity,and in such event, regulation 21(1) applies to that affiliated entity accordingly starting on the date specified in the notice of revocation.

any percentage of the voting power in the merchant bank; and

any percentage of the voting power in any holding company of the merchant bank,such that the aggregate of the percentages mentioned in sub‑paragraphs (a) and (b) (even if they are percentages of voting powers in different companies) exceeds 2.

for the benefit of any person other than the qualified major stake entity or any other qualified major stake entity of that merchant bank (called in this paragraph and paragraph (6) the beneficiary), under an obligation imposed under any written law, rule of law, contract or order of court; and

used or exercised by the qualified major stake entity for the benefit of the beneficiary,is disregarded.

the qualified major stake entity is an insurer licensed under the Insurance Act, and the voting power is controlled by it through any of the insurance funds specified in regulation 20(4)(a); or

the Authority —

is of the opinion, having regard to the specific circumstances of the case including whether the qualified major stake entity has investment and voting policies that comply with guidelines issued by the Authority, that the control of voting power in the merchant bank or holding company of the merchant bank is in fact not being used or exercised primarily for the benefit of the beneficiary; and

issues a declaration under paragraph (7) by written notice to the qualified major stake entity.

the qualified major stake entity is not under the effective control of the merchant bank; and

the merchant bank is not exposed to any material risk because of —

the qualified major stake entity’s beneficial interest in the share capital, accumulated funds or contributed capital of other entities;

the qualified major stake entity’s control of voting power in other entities; or

the qualified major stake entity’s interest in other entities,the Authority may, by written notice to the merchant bank, declare that any shares held by the qualified major stake entity in the merchant bank or any holding company of the merchant bank, must be excluded in determining whether there is a contravention of regulation 24(1), (2), (3) or (4) and in such event, the exclusion takes effect starting on the date specified in the declaration until such time as the declaration is revoked.

the qualified major stake entity has come under the effective control of the merchant bank; or

the merchant bank has become exposed to material risk because of —

the qualified major stake entity’s beneficial interest in the share capital, accumulated funds or contributed capital of other entities;

the qualified major stake entity’s control of voting power in other entities; or

the qualified major stake entity’s interest in other entities,and in such event, any shares held by the qualified major stake entity in the merchant bank or any holding company of the merchant bank must, starting on the date specified in the notice of revocation, be included in determining whether there is a contravention of regulation 24(1), (2), (3) or (4).

it became a qualified major stake entity of the merchant bank because of, or the contravention resulted from, circumstances beyond its control; or

it had, at the time of its acquisition or holding of shares in the merchant bank or any holding company of the merchant bank, reasonable grounds for believing that the acquisition or holding would not result in a contravention of regulation 24(1), (2) or (3), as the case may be,and it had, within 14 days of becoming aware of the contravention, notified the Authority in writing of the contravention and taken any action directed by the Authority within the time determined by the Authority.

the contravention resulted from circumstances beyond its control; or

it did not know and had no reason to suspect that there was an acquisition or holding of shares in itself or any of its holding companies by its qualified major stake entity or entities that would result in the merchant bank being in contravention of regulation 24(4),and the merchant bank had, within 14 days of becoming aware of the contravention, notified the Authority in writing of that contravention, and taken any action directed by the Authority within the time determined by the Authority.

amounts outstanding to the merchant bank under credit facilities granted to any property corporation or to any related corporation of a property corporation for use by the property corporation;

amounts outstanding to the merchant bank under credit facilities granted to any person other than a property corporation —

in the case where the person is a corporation — for the purpose of financing or facilitating any property‑related activity of the person or a related corporation of the person; and

in any other case — for the purpose of financing or facilitating the property‑related activities of the person;

amounts of debentures beneficially held by the merchant bank and issued by any property corporation;

amounts of debentures beneficially held by the merchant bank and issued by any person other than a property corporation, where the payment of principal or interest is contingent (whether wholly or in part) on the turnover, profits or cashflow from any property‑related activity;

amounts paid by the merchant bank for securities transferred to it arising from a repurchase transaction between the merchant bank and a property corporation, on terms that require the future transfer of equivalent securities by the merchant bank to the property corporation;

amounts of contingent liabilities incurred by the merchant bank —

in respect of any obligation of a property corporation; or

in respect of any obligation of any other person, where the obligation is undertaken in connection with any property‑related activity;

where the merchant bank has entered into any agreement (including a credit derivative agreement) with any other party under which the other party would secure a benefit or avoid a loss where there is —

a failure by a property corporation to perform its obligations;

a decline in the creditworthiness of a property corporation; or

a failure by any person other than a property corporation to perform its obligations where such obligations are undertaken in connection with any property‑related activity,the highest amount of the benefit or loss that may be secured or avoided (as the case may be) except to the extent that such amount constitutes part of any amounts under sub‑paragraph (f);

amounts payable to the merchant bank by any property corporation under a bill of exchange or promissory note.

credit facilities granted to the Government or to any statutory board;

securities issued by the Government under any written law or bonds issued by any statutory board;

debentures held under an agreement entered into by the merchant bank for the underwriting of an issue of such debentures, for a period not exceeding 8 weeks after the date of the launch of the issue;

loans, debentures or other assets forming the subject matter of a securitisation transaction where the criteria determined by the Authority for effecting a clean sale of assets by the merchant bank have been complied with; or

any instrument or transaction described in paragraph (1) to the extent that the merchant bank would be indemnified or otherwise protected from losses that may be incurred by it under that instrument or transaction pursuant to a guarantee issued by any other bank or merchant bank, or any credit derivative entered into by the merchant bank with any person other than a property corporation.

A —

controls the composition of the board of directors of S; or

controls more than half of the voting power in S; or

S is a subsidiary of an entity that is a subsidiary of A.

the directors of S; or

the equivalent of the directors of S.

any power exercisable by A in a fiduciary capacity is disregarded;

subject to sub‑paragraphs (c) and (d), any power exercisable —

by a nominee for A (except where A is concerned only in a fiduciary capacity); or

by a subsidiary of A or a nominee for the subsidiary (except where the subsidiary is concerned only in a fiduciary capacity),is to be treated as exercisable by A;

any power exercisable by any person by virtue of the provisions of any debentures of S or of a trust deed for securing any issue of any debentures of S is to be disregarded; and

any power exercisable by, or by a nominee for, A or its subsidiary (not being a power exercisable as mentioned in sub‑paragraph (c)) is not to be treated as exercisable by A if —

the ordinary business of A or its subsidiary (as the case may be) includes the lending of money; and

the power is exercisable by way of security only for the purpose of a transaction entered into in the ordinary course of that business.

is in the direct employment of, or acting for or by arrangement with, the merchant bank; and

is principally responsible for the management and conduct of the treasury operations of the merchant bank.

is in the direct employment of, or acting for or by arrangement with, those branches and offices; and

is principally responsible for the management and conduct of the treasury operations of those branches and offices.

implement effective internal controls to regularly identify, measure, evaluate, monitor, report and control risks associated with the business activities of the merchant bank;

ensure that compliance of the merchant bank with the internal controls mentioned in sub‑paragraph (a) is audited by an internal audit process of the merchant bank;

where any officer, committee, sub‑committee or group of persons has a discretionary power to commit the merchant bank to any financial undertaking or to expose the merchant bank to any business risk —

establish limits on the discretionary power that are appropriate, having regard to the business activities of the merchant bank; and

set out the limits mentioned in sub‑paragraph (i) in writing; and

keep documentation sufficient to demonstrate —

compliance by the merchant bank with the internal controls mentioned in sub‑paragraph (a); and

compliance by each officer, committee, sub‑committee or group of persons who has a discretionary power with the limits mentioned in sub‑paragraph (c)(i).