FSMA heralds change to Singapore regulation

The MAS has now kicked off the first phase of its new Financial Services and Markets Act following the Bill being passed in Parliament. Although this initial phase may not have day-to-day impact on most financial institutions, subsequent phases in the months to come will. It’s therefore worth keeping abreast of the key provisions of the Act to be prepared for the changes on the horizon.

Up until now, the MAS has regulated the financial sector through various acts, including the MAS Act. The latter includes supervisory powers over anti-money laundering and countering the financing of terrorism, control of financial institutions (FIs), and oversight of financial sector dispute resolution schemes. As the need for a financial sector-wide regulatory approach to complement existing regulations increases, and to address the rapid changes in technological advances in financial services (e.g. rise in virtual assets and digitalisation), the MAS introduced the new Act to enhance its agility and effectiveness in addressing such financial sector-wide risks.

Phase one

The implementation of the new Act will be carried out over a few phases. The first phase, which commenced on 28th April 2023, involves migrating the provisions in relation to the MAS’ supervisory powers in the existing MAS Act to the new Act. This will lay the groundwork for implementing the remaining parts in subsequent phases and at this point has minimal day-to-day impact on FIs. These provisions include the following:

  • General supervision powers over financial instruments (FIs), including inspection powers and offences.
  • Supervision power relating to the prevention of money laundering and terrorism financing.
  • Control and resolution of FIs, and the oversight of financial sector dispute resolution schemes.

Subsequent phases

Following phases will involve implementing the remaining parts of the Act over the second half of 2023 and 2024.

The key aspects of these provisions are:

  • harmonising and expanding the powers of the MAS to issue prohibition orders (POs)
  • harmonising power for the MAS to impose requirements on technology risk management (TRM)
  • providing mediators, adjudicators and employees of an operator of an approved dispute resolution scheme with statutory protection from liability
  • new licencing and regulation of virtual asset service providers for money laundering and terrorism financing risks.

The implementation of the above provisions in subsequent phases is of direct relevance and has more impact on FIs. For instance, the expanded power of the MAS over the issuance of POs, based on the “fit and proper” principle and imposing requirements on TRM, will likely increase individual and business conduct risk (particularly for functions such as risk management, compliance and control that are critical to the integrity and functioning of FIs) and TRM compliance risk of FIs.

The MAS is due to announce the details of the implementation of the remaining provisions, which might involve issuing new notices, guidelines, and further public consultations. Our team are keeping a close eye on developments and will provide further updates when we know more.

How we can help

We help firms who offer digital capital markets products and cryptocurrencies with their MAS licence applications. We also provide regulatory and compliance support, including internal audit services. If you are keen to expand your business footprint in Singapore, particularly in the digital assets space, we’ll be happy to take you through the MAS’ regulatory landscape and partner you in your business expansion journey.

We are also able to assist with the fall-out from the expansion of the MAS’ power to issue POs, which we think may come hand-in-hand with implementation of the proposed changes to the Reporting of Misconduct framework.