The new Exemption Frameworks in place for Singapore’s foreign related corporations – or FRCs – mean that prior approval for cross-border arrangements is no longer required. Financial institutions must now assess whether they need to notify the MAS and meet a number of other requirements. Those with a ‘Paragraph 9’ arrangement in place have a transitional period of 12 months to comply. 

The MAS issued the Response to its Consultation on Proposed Exemption Framework for Cross-Border Business Arrangements of Capital Markets Intermediaries Involving Foreign Offices on 8 October 2021. It has also issued an FAQ on The Exemption Framework for Cross-Border Business Arrangements of Capital Markets Intermediaries Involving Foreign Related Corporations and Foreign Office (Exemption Frameworks). 

The main difference between the Exemption Frameworks and the existing Paragraph 9 arrangement in relation to FRC is that prior approval is no longer required. New cross-border arrangements must be notified to MAS within 14 calendar days after commencement. Paragraph 9 applications are no longer approved by the MAS from 9 October 2021 onwards. 

Instead of seeking the MAS’ approval, Financial Institutions (FIs) are now required to assess whether there is a need to notify the MAS about their cross-border business arrangements, especially whether the extra-territoriality of the Securities and Futures Act / Financial Advisers Act applies.   

The MAS also expects the Singapore FIs to have substantive business operations in Singapore, and to play a meaningful role in the cross-border arrangement. The Singapore FIs should not be:

For example, the Singapore FI should not be only conducting marketing activities under the cross-border business arrangements. If the Singapore FIs are involved in client servicing under the cross-border arrangement, the MAS expects the Singapore FIs to carry out a substantial portion of the client servicing activities. 

For cross-border business arrangements that require notification to the MAS, FIs should assess that all boundary conditions are met prior to the commencement of such arrangements. Boundary conditions are similar to the assessment criteria and conditions imposed in relation to Paragraph 9 arrangement, including the regulatory status of the Singapore FI and FRC, permissible clientele (ie. non-retail customers only), and internal controls over the cross-border business arrangements (including record keeping, Foreign Representative register, customer due diligence and complaints handling).  

Singapore FIs are also required to assess and declare in the notification to the MAS whether there is any conflicts of interest arising from the cross-border arrangement, and implement mitigation for conflicts of interest on an ongoing basis.  

Once the notification has been made to the MAS, FIs should notify the MAS if there are any material changes to the cross-border business arrangements, including changes relating to the FRC regulatory status, as well as the jurisdiction where the FRC operates from. A declaration and audit certification are required to be filed to the MAS annually. 

For FIs that currently have a Paragraph 9 arrangement in place, the MAS has offered a 12-month transitional period from 8 October 2021 for notification of the cross-border business arrangements. 

Prior to 9 October 2023 (two years after the effective date of the Exemption Frameworks, Singapore FIs are required to obtain the Accredited Investors opt-in from their customers.  

We can help 

The team at Bovill can help with assessing whether MAS notification is required for your cross-border business arrangements, preparing the notification to the MAS, and drafting of the internal controls to comply with the MAS requirements. 

We can also assist you in assessing whether your cross-border business arrangements are notifiable under the Exemption Frameworks, filing the notification to the MAS about your existing Paragraph 9 arrangement, and ensure your policies and controls comply with the MAS requirements. 

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