Commodity Futures Act
(CHAPTER 48A, Sections 15, 16, 22, 27, 30, 32(1) and 63)
Commodity Futures Regulations
Rg 1
G.N. No. S 240/1992

REVISED EDITION 1993
(1st April 1993)
[27th May 1992]
Citation
1.  These Regulations may be cited as the Commodity Futures Regulations.
Definitions
2.  In these Regulations, unless the context otherwise requires —
“accounts” means profit and loss accounts and balance-sheets and includes notes (other than auditor’s reports) attached to or intended to be read with those profit and loss accounts or balance-sheets;
“connected persons”, in relation to a director, includes —
(a)his spouse, son, adopted son, step-son, daughter, adopted daughter, step-daughter, father, mother, brother or sister; and
(b)a firm, corporation or company in which any of the persons mentioned in paragraph (a) or the director is in a position to control not less than 20% of the voting power in the firm, corporation or company, whether such control is exercised individually or jointly;
“contract confirmation note” means a statement sent by a futures broker to a customer when there is a change in the customer’s futures positions, showing the number of contracts involved, the price at which the contracts were transacted, commission charges and the net profits or losses on the transactions;
“customer’s account” means a current or deposit account at a bank, merchant bank, clearing house, another commodity futures broken or any other person approved by the Board, in the name of the commodity futures broker or commodity futures pool operator in the title of which the word “customer” appears;
“bank” means any body corporate licensed to carry on banking business under the Banking Act;
[Cap. 19.]
“business day” means any day which the respective Commodity Futures Exchange or market is open for trading or deliveries;
“long” means one who has purchased a futures contract to establish a position;
“margin” means an amount of money or collateral deposited by the buyer or the seller of a commodity futures contract to ensure performance of the terms of the commodity futures contract;
“margin call” means a request from a Commodity Futures Exchange, clearing house or commodity futures broker to a customer to deposit additional margins to meet a required minimum margin level;
“mark-to-market” means the process whereby daily closing price of the commodity futures contract is used to value all outstanding positions of that particular futures contract at the end of the day and to establish the resulting gains and losses;
“merchant bank” means a merchant bank that is approved under the Monetary Authority of Singapore Act;
[Cap. 186.]
“net asset value” means the total assets minus total liabilities determined in accordance with generally accepted accounting principles with each commodity futures position valued at the prevailing market price;
“participant” means a person who has a direct financial interest in a commodity futures pool;
“position” means a commodity futures contract which is still outstanding and has not been liquidated by an offsetting transaction or by delivery of the commodity underlying the commodity futures contract or through settlement of the commodity futures contract in accordance with the rules of a Commodity Futures Exchange or the practices of a commodity futures market;
“property” includes movable and immovable property, and any estate, share and interest in any property, movable or immovable, and any debt, and anything in action, and any other right or interest, whether in possession or not;
“short” means one who has sold a commodity futures contract to establish a position;
“securities” has the same meaning as in the Securities Industry Act;
[Cap. 289.]
“senior creditor” means those creditors who for the time being hold or are entitled to the senior debt;
“senior debt” means the unpaid claims of all the creditors for the time being of the commodity futures broker however incurred;
“stock market” has the same meaning as in the Securities Industry Act;
“trading programme” means a system, method or programme pursuant to which a commodity futures trading adviser intends to use to direct or guide a customer’s commodity futures contract account.
Forms
3.  The Board may, for the purposes of the Act and any regulations made thereunder, determine and design such forms as it may think fit and the Board may specify in such forms the particulars and any other matter in respect of which insertion or attachment is required and directions for the completion of the forms.
Particulars and directions in forms
4.—(1)  Where a form determined or designed by the Board under regulation 3 requires completion by the insertion of or the attachment to the form of a document containing particulars or other matters referred to in the form, those particulars or other matters shall be regarded as the particulars or other matters required under the provisions of the Act or of these Regulations for the purposes of which the form or document is determined.
(2)  A form determined or designed by the Board under these Regulations shall be completed in accordance with such directions as are specified in the form.
Manner of application for licence or approval
5.—(1)  An application for a licence or renewal thereof shall be in such form as the Board may determine together with any relevant annexures and shall be enclosed in a sealed envelope and lodged with the Board. Each application for a licence shall be accompanied by a detailed statement of the applicant’s assets and liabilities signed by the applicant, or, in the case of an applicant which is a corporation, a copy certified by a director or the secretary of the corporation to be true copies of the last balance-sheet and of the last profit and loss account, incorporating the results of the last financial year, which have respectively been audited by the corporation’s auditors (including every document required by law to be annexed or attached thereto) together with a copy of the report of the auditors thereon (certified as aforesaid).
(2)  An application for a licence or renewal of a licence shall be accompanied by a self-addressed envelope (of the applicant) of such minimum size as the Board may require and affixed with a postage stamp of a value sufficient for registered mail.
(3)  An application for approval as a Commodity Futures Exchange shall be lodged with the Board in such form as the Board may determine and shall be accompanied by a copy of the rules and Memorandum and Articles of Association of the Exchange, certified to be the true copies thereof by the person signing the application.
Change of address
6.—(1)  Every holder of a commodity futures broker’s licence, commodity futures trading adviser’s licence or commodity futures pool operator’s licence shall, upon any change in the address of the principal place of business at which he carries on the business in respect of which the licence is held, forthwith notify the Board of the new address in such form as may be determined by the Board and, upon ceasing to carry on the business, shall forthwith so notify the Board in writing.
(2)  Every holder of a representative’s licence who ceases to be a representative of a commodity futures broker, commodity futures trading adviser or commodity futures pool operator in relation to whom the representative’s licence was issued shall forthwith so notify the Board in writing.
Register of licence holders
7.—(1)  The Board shall keep in such form as it thinks fit a register of the holders of current licences specifying —
(a)in relation to each holder of a commodity futures broker’s licence, commodity trading adviser’s licence or commodity futures pool operator’s licence —
(i)his name;
(ii)the address of the principal place of business at which he carries on the business in respect of which the licence is held; and
(iii)where the business is carried on under a name or style other than the name of the holder of the licence, the name or style under which the business is carried on; and
(b)in relation to each holder of a representative’s licence —
(i)his name;
(ii)the name of the commodity futures broker, commodity futures trading adviser or commodity futures pool operator in relation to whom the licence was issued; and
(iii)where the business of that broker, trading adviser or pool operator is carried on under a name or style other than the name of the broker, trading adviser or pool operator, the name or style under which that business is carried on.
(2)  Any person may, upon payment of the fee specified in the First Schedule, inspect and take extracts from the register kept under paragraph (1) and any such extract, purporting to be signed by an officer authorised by the Board, shall be admissible as prima facie evidence in any legal proceedings under the Act or these Regulations.
Fees
8.  The fees specified in the First Schedule shall be payable to the Board.
Accounts to be kept by commodity futures brokers
9.—(1)  A commodity futures broker shall —
(a)cause to be kept such accounting and other records as will sufficiently explain the transactions and reflect the financial position of the business of trading in commodity futures contracts carried on by him and as will enable true and fair profit and loss accounts and balance-sheets to be prepared from time to time; and
(b)cause those records to be kept in such a manner as will enable them to be conveniently and properly audited.
(2)  Without prejudice to the generality of paragraph (1), a commodity futures broker shall cause records to be kept —
(a)in sufficient detail to show particulars of —
(i)all amounts received and paid by him the commodity futures broker, including amounts paid to and disbursed from a segregated trust account kept under regulation 22; and
(ii)all purchases and sales of commodity futures contracts made by him the commodity futures broker, and the charges and credits arising from them; and
(b)in sufficient detail to show separately particulars of all transactions by the commodity futures broker with, or for the account of —
(i)his customer; and
(ii)himself.
(3)  A commodity futures broker shall retain for a period of not less than 6 years —
(a)the records kept in accordance with this regulation;
(b)a copy of each commodity futures contract made out by him as agent of a customer; and
(c)a copy of each commodity futures contract received by him or made out to himself as principal.
(4)  Records required to be kept by a commodity futures broker by this regulation shall be kept either by making entries in a bound book, or by recording or storing the relevant matters in any other manner as may be approved by the Board, and anything so entered, recorded or stored shall be deemed to have been effected by, or with the authority of, the commodity futures broker.
(5)  The commodity futures broker shall take reasonable precautions for guarding against falsification and damage or loss and for facilitating discovery of any falsification.
(6)  Any commodity futures broker who, without reasonable excuse, contravenes any provision of this regulation shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $5,000 or to imprisonment for a term not exceeding one year or to both.
Commodity futures brokers to appoint auditors
10.  A commodity futures broker shall appoint an auditor to audit his accounts (including all segregated trust accounts required to be kept by the commodity futures broker under regulation 22) and, where for any reason the auditor ceases to act for the commodity futures broker, the commodity futures broker shall, as soon as practicable thereafter, appoint another auditor to replace him.
Commodity futures brokers to lodge annual accounts, etc.
11.—(1)  A commodity futures broker shall —
(a)in respect of the financial year beginning before and ending after 27th May 1992 or the day on which the commodity futures broker commences to carry on business as a commodity futures broker, whichever is later; and
(b)in respect of each subsequent financial year,
prepare a true and fair profit and loss account and a balance-sheet made up to the last day of the financial year and lodge the account and balance-sheet with the Board within 3 months (or such extension thereof permitted by the Board under paragraph (2)) after the end of the financial year together with an auditor’s report on the accounts and balance-sheet.
(2)  Where an application for the extension of the period of 3 months specified in paragraph (1) is made by a commodity futures broker to the Board and the Board is satisfied that there are special reasons for requiring the extension, the Board may extend that period by 3 months, subject to such conditions as the Board thinks fit to impose.
(3)  Any commodity futures broker who fails to comply with paragraph (1), or with any condition imposed under paragraph (2), shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $10,000.
Reports by auditor to Board
12.  If, during the performance of his duties as auditor for a commodity futures broker, an auditor —
(a)becomes aware of any matter which in his opinion adversely affects or may adversely affect the financial position of the commodity futures broker to a material extent; or
(b)discovers evidence of a contravention by the commodity futures broker of regulation 9, 22 or 23,
he shall, as soon as practicable thereafter, send to the Board a report in writing of the matter or the contravention.
Profit and loss account and balance-sheet
13.—(1)  A commodity futures trading adviser who is a natural person shall cause accounts in the form determined by the Board in respect of each financial year to be prepared in relation to his business as a commodity futures trading adviser.
(2)  The assets and liabilities of the business shall be brought into account in the balance-sheet at such amounts to be classified and described therein in such manner that the balance-sheet gives a true and fair view of the state of affairs of the business as at the date to which it is made up.
(3)  Each account prepared pursuant to paragraph (1) shall be signed by the commodity futures trading adviser.
(4)  A commodity futures broker, commodity futures trading adviser or commodity futures pool operator that is a corporation shall prepare accounts in accordance with the provisions of the Companies Act in respect of each financial year and shall attach to such accounts a statement in the form required by the Board. The statement shall be signed by a director or the secretary in the corporation appointed for that purpose by all the directors.
[Cap. 50.]
Form of auditor’s report
14.  The auditor’s report required to be lodged under section 27(6) of the Act and regulation 11(1) shall be in or to the effect of the form determined by the Board and shall contain the documents necessary for due completion of the form.
Condition of licence: Control of take-overs of licensees
15.—(1)  No person shall enter into an agreement to acquire shares of a licensee by virtue of which he would, if the agreement is carried out, obtain effective control of that licensee without first notifying the Board of his intention to enter into the agreement and obtaining the approval of the Board to his entering into the agreement.
(2)  For the purposes of this regulation —
(a)a “licensee” means a commodity futures broker, a commodity futures pool operator or a commodity futures trading adviser. A person shall be regarded as entering into an agreement by virtue of which he would obtain effective control of a licensee if the person alone or acting together with any connected person would be in a position to control not less than 20% of the voting power in the licensee or would hold interests in not less than 20% of the issued shares of the licensee;
(b)a reference to an agreement by which a person would obtain effective control of a licensee that is incorporated in Singapore includes a reference to an agreement by which the person would acquire any interest in shares in the licensee where, upon the acquisition of those interests and of any other interests in other shares of the licensee that he has offered to acquire, he would have effective control of the licensee; and
(c)a reference to the voting power in a licensee is a reference to the total number of votes that might be cast in the general meeting of the licensee.
Minimum financial requirements for commodity futures brokers
16.—(1)  Subject to this regulation, every commodity futures broker shall not allow its adjusted net capital to fall below for 4 consecutive weeks the amount equal to or in excess of the higher of —
(a)$250,000; or
(b)10% of the amount of customer funds required to be segregated pursuant to these Regulations.
(2)  A commodity futures broker shall immediately inform the Commodity Futures Exchange or if he is not a member of a Commodity Futures Exchange shall immediately inform the Board if its adjusted net capital —
(a)falls below $400,000; or
(b)is less than 12.5% of the amount of customer funds required to be segregated pursuant to these Regulations,
whichever is higher.
(3)  If the adjusted net capital of a commodity futures broker —
(a)being a member of a Commodity Futures Exchange, falls below the minimum financial requirements specified by the Exchange, it shall immediately operate its business in such manner and on such conditions as the Commodity Futures Exchange may decide. The Commodity Futures Exchange shall notify the Board, which may review, affirm, modify or set aside the conditions stipulated by the Commodity Futures Exchange and may in addition issue such directions to the commodity futures broker as it thinks fit and that futures broker shall comply with the direction; or
(b)not being a member of a Commodity Futures Exchange, falls below $250,000 or 10% of the amount of customer funds required to be segregated, whichever is higher, it shall immediately operate its business in such manner and on such conditions as the Board may decide.
(4)  The Board may, after assessing the financial condition of a commodity futures broker, including a member of a Commodity Futures Exchange, direct the commodity futures broker to meet such other financial requirements as the Board may determine.
Net capital
17.—(1)  For the purposes of these Regulations —
“net capital” means the amount by which current assets exceed liabilities and in determining “net capital” —
(a)unrealised profits shall be added and unrealised losses shall be deducted in the accounts of the commodity futures broker including unrealised profits and losses on fixed price commitments and forward contracts; and
(b)all long and all short commodity futures contract positions shall be marked to their market value;
“current assets” means cash and other assets which are reasonably expected to be realised in cash or sold during the next 12 months and shall —
(a)exclude any unsecured commodity futures contract account containing a debit balance which has remained unpaid for more than one business day;
(b)exclude all unsecured advances, loans and other receivables except for dividends, interest and commissions due within 30 days and receivables from merchandising incurred in the normal course of business due within 90 days;
(c)exclude all assets doubtful of collection or realisation except for any reserves established therefor; and
(d)include receivables from clearing houses and from commodity futures brokers arising out of commodity futures contract transactions and shares and securities which are listed on a stock market and have not been suspended.
(2)  A loan or advance or any other form of receivable shall not be considered “secured” unless the following conditions exist:
(a)the receivable is secured by collateral which is otherwise unencumbered and which can be readily converted into cash:
Provided that such receivable will be considered only to the extent of the market value of such collateral after publication of such percentage deductions as are prescribed in regulation 18; and
(b)
(i)the collateral is in the possession or control of the commodity futures broker; or
(ii)the commodity futures broker has a legally enforceable written security agreement executed by the debtor in its favour under which the commodity futures broker shall have the power to readily sell or otherwise convert the collateral into cash.
(3)  For the purposes of computing “net capital”, the term “liabilities” —
(a)excludes liabilities of a commodity futures broker which are subordinated to the claims of all general creditors of the futures broker pursuant to a satisfactory subordination agreement, as defined in paragraph (4);
(b)excludes the amount of money, securities and property due to customers which are held in segregated accounts in accordance with regulations 22 and 23:
Provided that such exclusion may be made only if such money, securities and property held in segregated accounts have been excluded from current assets in computing net capital; and
(c)excludes liabilities which would be classified as longterm liabilities in accordance with generally accepted accounting principles to the extent of the net book value of plant, property and equipment which are used in the ordinary course of the futures broker’s business, provided that such plant, property and equipment are not included in current assets.
(4)  For the purpose of paragraph (3)(a), a “satisfactory subordination agreement” means an agreement between the futures broker and its lender (referred to in these Regulations as the subordinated creditor) which agreement shall be in such form and shall contain such terms as the Board may from time to time require but shall at a minimum contain the following terms:
(a)the subordinated creditor will not claim or receive from the commodity futures broker by set-off or in any other manner, any subordinated debt unless and until all senior debt has been paid or except with the prior written approval of the Board, or in the case of a commodity futures broker which is a member of a Commodity Futures Exchange, with the prior written approval of the Commodity Futures Exchange;
(b)in the event of any payment or distribution of assets of the commodity futures broker, in cash, in kind or in securities (referred to in these Regulations as a distribution), upon any dissolution, winding-up, liquidation or re-organisation of the commodity futures broker —
(i)the senior creditors shall first be entitled to receive payment in full of the senior debt before the subordinated creditor receives any payment in respect of the subordinated debt;
(ii)any distribution to which the subordinated creditor would be entitled but for the provisions of this Agreement shall be paid or delivered by the liquidator, Official Assignee in bankruptcy or any other person making the distribution directly to the senior creditors rateably according to their senior debt until they have been paid in full (taking into account other distributions to the senior creditors); and
(c)if, notwithstanding paragraphs (a) and (b), any distribution is received by the subordinated creditor in respect of the subordinated debt, such distribution shall be paid over to the senior creditors for application rateably against their senior debt until the senior debt has been paid in full (taking into account other distributions to the senior creditors) and until such payment in full shall be held in trust for the senior creditors.
Adjusted net capital
18.  For the purposes of these Regulations, “adjusted net capital” means net capital less the following:
(a)the amount by which any advances paid by the commodity futures broker on cash commodity contracts and used in computing net capital exceeds 95% of the market value of the commodities covered by such contracts;
(b)in the case of all inventories which are hedged by hedging positions in any market, the amount by which the value of such inventories used in computing the net capital exceeds 95% of the market value of such inventories;
(c)in the case of all inventories which are not hedged by any hedging positions in any market, the amount by which the value of such inventories in computing the net capital exceed 80% of the market value of such inventories;
(d)in the case of any government security used by the commodity futures broker in computing the net capital, the amount by which the value of such security exceeds 100% of the market value of such security;
(e)in the case of shares and other securities used by the commodity futures broker in computing the net capital, the amount by which the value of such shares or securities exceeds 90% of the market value of such shares or securities;
(f)for under-margined commodity futures contracts accounts belonging to customers, the amount of money required for each account to meet the relevant maintenance margin requirements, if such amount shall have been outstanding (after call) for more than 3 business days. If there are no such relevant maintenance margin requirements then, when the original margin has been depleted by 50% or more, the amount of money required to restore the original margin if such amount shall have been outstanding (after call) for more than 3 business days.
Provided that to the extent a deficit is excluded from current assets in accordance with this paragraph, such amount shall not also be deducted. In the event that a customer shall have deposited any asset other than cash into his account, the value attributable to such asset for purposes of this paragraph shall be the value attributable to the asset pursuant to the relevant margin rules of a Commodity Futures Exchange or commodity futures market; and
(g)the relevant margin requirement on open commodity futures contracts held in the proprietary accounts of the commodity futures broker which are hedged.
Statements of financial condition, computation of adjusted net capital, etc.
19.—(1)  A commodity futures broker shall cause statements in the form determined by the Board in respect of each quarter to be prepared in relation to its business as a commodity futures broker.
(2)  The assets and liabilities of the business shall be brought into account in the statements at such amounts to be classified and described therein in such manner that the statements give a true and fair view of the state of affairs.
(3)  Each statement prepared pursuant to paragraph (1) shall be signed by a director and shall be lodged with the Board not later than 30 calendar days after the end of each quarter.
(4)  If the adjusted net capital of a commodity futures broker, not being a member of a Commodity Futures Exchange, falls below $400,000 or is less than 12.5% of the amount of customer funds required to be segregated, whichever is higher for 5 consecutive business days, it shall forthwith submit the statements prescribed in this paragraph to the Board on a weekly basis until the adjusted net capital of the commodity futures broker exceeds $400,000 and is greater than 12.5% of the customer funds required to be segregated, for 8 consecutive weeks, following which the commodity futures broker can submit the prescribed statements quarterly.
(5)  The weekly statements required to be submitted under paragraph (4) shall be signed by a director and shall be lodged with the Board not later than 3 business days after the end of each week.
(6)  Notwithstanding anything contained in regulation 16 and this regulation, a commodity futures broker who only trades in commodity futures contracts for itself or for customers which are related corporations may, with the approval of the Board, maintain an adjusted net capital of not less than $25,000 in addition to an irrevocable letter of credit issued on its behalf by a bank acceptable to the Board for an amount of not less than $1 million made in favour of the Board or, with the approval of the Board, in favour of the Commodity Futures Exchange of which the commodity futures broker is a member.
Books and records to be kept by commodity futures trading adviser and commodity futures pool operator
20.—(1)  A commodity futures trading adviser or commodity futures pool operator shall keep or cause to be kept such accounting and other records as will sufficiently explain the transactions and financial position of his business and enable true and fair profit and loss accounts and balance-sheets to be prepared from time to time and shall cause these records to be kept in such a manner as to enable them to be conveniently and properly audited.
(2)  A commodity futures trading adviser shall be deemed not to have complied with paragraph (1) in relation to records unless those records are kept in sufficient detail to show —
(a)the particulars of all the clients (including their names and addresses);
(b)a list or other record of all clients’ accounts directed by the commodity futures trading adviser and of all transactions effected therefor;
(c)copies of each confirmation of the transaction mentioned in sub-paragraph (b), each contract confirmation note and each monthly statement received from a commodity futures broker;
(d)all powers of attorney and other documents, or signed copies thereof, authorising the commodity futures trading adviser to operate that client’s account on a discretionary basis;
(e)a signed and dated acknowledgment from the client that he has received and understood the contents of the disclosure statement as prescribed in the Second Schedule for the trading programme pursuant to which the commodity futures trading adviser will direct his account or will guide his trading;
(f)all other written agreements, or copies thereof including risk disclosure documents entered into by the commodity futures trading adviser with any of his client or subscribers;
(g)the original or a copy of each report, letter, circular, memorandum, publication, writing, advertisement or other literature or advice distributed or caused to be distributed by the commodity futures trading adviser to any existing or prospective client or subscriber, showing the first date of distribution if not otherwise shown on the document;
(h)an itemised record of every commodity futures contract transaction for the personal account of the commodity futures trading adviser or that of a director of the commodity futures trading adviser, showing the transaction date, quantity, type of commodity futures contract and price, delivery month, the futures broker carrying the account, whether the commodity futures contract was purchased or sold, and the gain or loss realised;
(i)each confirmation of a commodity futures contract transaction and each monthly statement furnished by a commodity futures broker to the commodity futures trading adviser relating to the personal account of the commodity futures trading adviser, or to a director of the commodity futures trading adviser relating to a personal account of such director; and
(j)books and records of all other transactions in all other business dealings in trading futures contracts and of all cash market transactions in which the futures trading adviser or any of its director thereof engages.
(3)  A commodity futures pool operator shall be deemed not to have complied with paragraph (1) in relation to records unless those records are kept in sufficient detail to show —
(a)an itemised daily record of each commodity futures contract transaction date, quantity, type of commodity futures contract and price, delivery month, whether purchase or sale, the commodity futures broker carrying the account and the commodity futures trading adviser, if any, and the gain or loss realised;
(b)a journal or other equivalent record showing all receipts and disbursements of money, securities and other property;
(c)a signed and dated acknowledgment from the participant that he has received and understood the contents of the disclosure document as prescribed in the Second Schedule;
(d)a subsidiary ledger or other equivalent record for each participant’s name and address and all funds, securities and other property that the pool received from or distributed to the participant;
(e)copies of each confirmation of a commodity futures contract transaction of the pool and each monthly statement for the pool received from a commodity futures broker;
(f)cancelled cheques, bank statements, journals, ledgers, invoices, computer generated records, data and memoranda prepared or received in connection with the operation of the pool;
(g)the original or a copy of each report, letter, circular, memorandum, publication, writing, advertisement or other literature or advice distributed or caused to be distributed by the commodity futures pool operator from any commodity futures trading adviser of the pool, showing the first date of distribution or receipt if not otherwise shown on the document;
(h)an itemised daily record of each commodity futures contract transaction of the commodity futures pool operator for its own account and any of the directors thereof, showing the transaction date, quantity, type of commodity futures contract and price, delivery month, the commodity futures broker carrying the account, whether the commodity futures contract was purchased, sold, and the gain or loss realised;
(i)each confirmation of a commodity futures contract transaction and each monthly statement furnished by a commodity futures broker to the commodity futures pool operator relating to a personal account of the pool operator or any of the directors of the pool operator relating to a personal account of such director; and
(j)books and records of all other transactions in all other activities in which the pool operator engages. Those books and records must include cancelled cheques, bank statements, journals, ledgers, invoices, computer generated records and all other records, data and memoranda which have been prepared in the course of engaging in those activities.
Reports by commodity futures pool operator
21.—(1)  Each commodity futures pool operator shall periodically distribute to each participant in each pool that it operates, within 30 calendar days after the last date of the reporting period prescribed in paragraph (5), a profit and loss statement and a statement of changes in net asset value, for the prescribed period. These financial statements shall be presented and computed in accordance with generally accepted accounting principles. The statements must be signed by two directors of the commodity futures pool operator.
(2)  The profit and loss statement shall itemise —
(a)the total amount of realised net gain or loss on futures contract positions liquidated during the reporting period;
(b)the change in unrealised net gain or loss on commodity futures contract positions during the reporting period;
(c)the total amount of net gain or loss from all other transactions in which the pool engaged during the reporting period including interest and dividends earned;
(d)the total amount of all management fees and advisory fees during the reporting period;
(e)the total amount of all brokerage commissions during the reporting period; and
(f)the total amount of all other expenses incurred or accrued by the pool during the reporting period.
(3)  The statement of changes in net asset value shall separately itemise —
(a)the net asset value of the pool as of the beginning of the reporting period;
(b)the total amount of additions to the pool made during the reporting period;
(c)the total amount of withdrawals from and redemption of participation units in the pool for the reporting period;
(d)the total net income or loss of the pool during the reporting period;
(e)the net asset value of the pool as of the end of the reporting period; and
(f)
(i)the net asset value per outstanding participation unit in the pool as of the end of the reporting period; or
(ii)the total value of the participant’s interest or share in the pool as of the end of the reporting period.
(4)  The statement of changes in net asset value shall also disclose any material dealings between the pool, the pool operator, commodity futures trading adviser, commodity futures broker, or the director thereof that previously have not been disclosed in the pool’s disclosure document or any amendment thereto, other statements or annual reports.
(5)  The statement of changes in net asset value must be distributed at least monthly in the case of pools with net assets of more than $500,000 at the beginning of the pool’s financial year, and otherwise at least quarterly.
(6)  Each commodity futures pool operator shall distribute an annual report to each participant in each pool that it operates, and must file a copy of the report with the Board within 3 months after the end of the pool’s financial year or such extension thereof permitted by the Board subject to such conditions as the Board thinks fit to impose. The annual report shall contain the following:
(a)the net asset value of the pool as of the end of each of the pool’s two preceding financial years;
(b)
(i)the net asset value per outstanding participation unit in the pool as of the end of each of the pool’s two preceding financial years; and
(ii)the total value of the participant’s interest or share in the pool as of the end of each of the pool’s two preceding financial years; and
(c)appropriate footnote disclosure and such further material information as may be necessary to make the required statements not misleading.
(7)  The financial statements in the annual report shall be presented and computed in accordance with generally accepted accounting principles consistently applied and shall be certified by an auditor.
(8)  The profit and loss statement required by this regulation shall itemise brokerage commissions, management fees, advisory fees, incentive fees, interest income and expense, total realised net gain or loss from commodity futures contracts and change in unrealised net gain or loss on futures contract positions during the pool’s financial year.
Segregation of customer’s funds by commodity futures brokers
22.—(1)  Subject to this regulation, every commodity futures broker shall —
(a)treat and deal with all money, securities or property received by him from a customer to margin, guarantee or secure contracts in commodity futures trading, or accruing to a customer as a result of such trading, as belonging to that customer; and
(b)account in a separate trust account, designated or evidenced as such, for all the money, securities or property received from the customer or accruing to the customer pursuant to sub-paragraph (a),
and shall not commingle that money, security or property with the funds of the commodity futures broker or use them to margin, guarantee or to secure the contracts or extend the credit of any customer or person other than the person for whom they are held.
(2)  Notwithstanding paragraph (1), the money, securities or property received by a commodity futures broker from his customers may, for convenience and for the benefit of his customers, be commingled and deposited in the same account or accounts with —
(a)any bank;
(b)a clearing house, whether in or outside Singapore;
(c)another commodity futures broker; or
(d)any person who may be approved by the Board for the purpose.
(3)  Subject to regulation 23, a commodity futures broker shall not withdraw money received by him and deposited in a separate trust account pursuant to paragraph (1), otherwise than for the purpose of —
(a)making a payment to, or in accordance with the instructions of, a person entitled to the money;
(b)purchasing, margining, guaranteeing, securing, transferring, adjusting or settling dealings in futures contracts effected by the broker on the instructions of a customer of the commodity futures broker;
(c)defraying brokerage and other proper charges incurred in respect of dealings in commodity futures contracts effected by the commodity futures broker on the instructions of a customer of the broker;
(d)reimbursing himself to the extent of any residual financial interest that he may have in the account as is mentioned in paragraph (4);
(e)investing the money in such manner as may be prescribed; or
(f)making a payment that is otherwise authorised by law.
(4)  Notwithstanding paragraph (1), a commodity futures broker may have a residual financial interest in a customer’s trust account and from time to time may advance from his own funds sufficient money to prevent any or all customers’ trust accounts from becoming under-margined.
(5)  The Board may exempt a commodity futures broker or any class of brokers or any transaction or class of transactions relating to trading in futures contracts from the requirements paragraph (1) subject to such terms and conditions as in the opinion of the Board provides reasonable protection for customers.
Segregated accounts
23.—(1)  All customer’s moneys shall be segregated and separately accounted for. Such moneys received shall be paid without delay into its customer’s account unless authorised otherwise by the customer concerned. Every commodity futures broker or commodity futures pool operator shall itself maintain accounts in such a way that the outstanding balance can be easily and readily identified with each specific transaction (whether for contracts or investments) and with the dates on which each of such transactions occurred.
(2)  Every commodity futures broker or commodity futures pool operator shall at all times keep such books and accounts as may be necessary —
(a)to show all its dealings with all its customer’s moneys held, received or paid by it, and any other money dealt by the futures broker or futures pool operator through the customer’s account; and
(b)distinguish such money held, received or paid by it on account of each separate customer and to distinguish such money from its own money or other money held, received or paid by it on any other account.
(3)  Such customer’s moneys when deposited with any bank, merchant bank, another commodity futures broker or any other person approved by the Board shall be deposited under an account name which clearly identifies them as customer’s moneys and shows that they are segregated as required by regulation 22. Each futures broker or futures pool operator shall obtain and retain in its files acknowledgment from such bank, merchant bank, another futures broker or any other person approved by the Board, that it was informed that the customer’s moneys deposited therein are those of customers and are being held in accordance with the provisions of these Regulations.
(4)  A commodity futures broker may hold any of its customer’s moneys in any of the following forms:
(a)in any of the securities of the Government in Singapore;
(b)in any debt instruments of the government of the country in which the markets or Commodity Futures Exchange, where the commodity futures broker normally transacts its business, is situated; and
(c)in any other securities or instruments as shall be prescribed by the Board from time to time.
(5)  A commodity futures broker holding any of its customer’s moneys other than in a form of deposit with a bank or merchant bank shall keep a record of such transactions. The record shall include particulars on the following:
(a)the date on which such transaction was made;
(b)the name of the person through whom such transaction was made;
(c)the amount of money so transacted;
(d)a description of such transaction;
(e)the place, if any, where a customer’s moneys, securities and properties are being kept;
(f)the date on which the subject-matter of such transaction was released or otherwise disposed of and the amount of money received from such realisation or disposition, if any; and
(g)the name of the person to whom (and through whom, if any) the subject-matter of such transaction was disposed of.
(6)  All securities and properties held or received by a commodity futures broker or commodity futures pool operator on account of a customer in connection with any commodity futures contracts concluded or to be concluded or cleared or to be cleared on a Commodity Futures Exchange or any other futures markets shall be segregated and separately accounted for. Every commodity futures broker or commodity futures pool operator shall at all time keep such books as may be necessary —
(a)to show all its dealings with a customer’s securities and properties held or received by it; and
(b)distinguish such securities and properties held or received by it on account of each separate customer and to distinguish such securities and properties from its own securities and properties and other securities and properties held or received by the commodity futures broker or commodity futures pool operator.
(7)  Each commodity futures broker must compute as of the close of each business day —
(a)the total amount of customer funds on deposit in segregated accounts on behalf of customers;
(b)the total amount of such customer funds required by the Act and these Regulations to be on deposit in segregated accounts on behalf of such customers; and
(c)the amount of the commodity futures broker’s residual interest in such customer funds,
and such computation must be completed prior to noon on the next business day and must be kept, together with all supporting data.
Position limits
24.  The position limits for the futures contracts listed on a Commodity Futures Exchange shall be the quantity determined by that Exchange and approved by the Board.
Issues of contract confirmation
25.—(1)  A commodity futures broker shall not later than two business days after any commodity futures transaction, furnish to his customers a written confirmation of each commodity futures contract executed by the commodity futures broker on behalf of that customer. The confirmation should include the following information:
(a)the name or style under which the commodity futures broker carries on his business as a commodity futures broker and the address of the principal place at which he so carries on business;
(b)where the commodity futures broker is dealing as principal, a statement that he is so acting;
(c)the name and address of the person to whom the futures broker gives the confirmation;
(d)the day on which the transaction took place and the name of the Commodity Futures Exchange or market in which the transaction took place;
(e)an itemised list of the quantity or amount and the types of commodity futures contracts that are the subject of the confirmation;
(f)the price per unit of the particular commodity futures contract;
(g)the amount of the consideration; and
(h)the rate and amount of commission (if any) charged.
(2)  The requirements of paragraph (1) shall not apply if the customer is a commodity futures broker.
Monthly confirmation statements
26.—(1)  A commodity futures broker shall furnish in writing to each customer, as of the close of the last business day of each month or as of any regular monthly date selected, except for accounts in which there are neither positions at the end of the statement period nor any changes to the account balance since the prior statement period, but in any event not less frequently than once every 3 months, a statement which clearly shows for each customer —
(a)the positions with prices at which acquired;
(b)the net unrealised profits or losses in all positions marked to the market;
(c)the amount of funds belonging to the customer carried with the commodity futures broker; and
(d)a detailed accounting of all financial charges and credits to the customer’s account during the monthly reporting period, including all funds received from or disbursed to the customer and realised profits and losses belonging to the customer.
(2)  The requirements of paragraph (1) shall not apply if the customer is a commodity futures broker.
Conduct of business of commodity futures pool operator
27.—(1)  No commodity futures pool operator shall, directly or indirectly, solicit, accept or receive funds, securities or other property from a prospective participant in a pool that it operates or that it intends to operate unless, on or before that date it engages in that activity, the commodity futures pool operator delivers or causes to be delivered to the prospective participant a disclosure document containing the following information:
(a)
(i)the name, address of the main business office, main business telephone number and form of organisation of the commodity futures pool operator;
(ii)the name of the person who will make the trading decisions for the pool including the commodity futures trading adviser, if any;
(iii)if known, the name of the commodity futures broker through which the pool will execute its trades;
(iv)the types of commodity futures contracts the commodity futures pool operator intends that the pool will trade, with a description of any restriction or limitations on such trading established by the pool operator; and
(v)a risk disclosure statement as prescribed in the Second Schedule;
(b)any actual or potential conflict of interest regarding any aspect of the pool on the part of —
(i)the commodity futures pool operator or any of its directors;
(ii)the pool’s commodity futures trading adviser or any director of the commodity futures trading adviser, if the commodity futures trading adviser is a corporation; or
(iii)any commodity futures broker through which the pool’s trades will be executed or any of the commodity futures broker’s directors,
and including in the description of such conflict shall be any arrangement whereby the commodity futures pool operator, commodity futures trading adviser or the directors thereof may benefit, directly or indirectly, from the maintenance of the pool’s account with the commodity futures broker;
(c)the actual performance record of the futures pool operator, as specified below —
(i)the presentation of actual performance must be displayed in a table showing at least quarterly the following information, current as of a date not more than 3 months preceding the date of the document:
(A)the beginning net asset value for the period, which shall represent the previous period’s ending net asset value;
(B)all additions, whether voluntary or involuntary, during the period;
(C)all withdrawals and redemptions, whether voluntary or involuntary, during the period;
(D)the net performance for the period, which shall represent the change in the net asset value, net of additions, withdrawals and redemptions;
(E)the ending net asset value for the period, which shall represent the beginning net asset value plus or minus additions, withdrawals and redemptions and net performance;
(F)the rate of return for the period, which shall be calculated by dividing the net performance by the beginning net asset value; and
(G)the number of units outstanding at the end of the period; and
(ii)the commodity futures pool operator must describe the material differences among the pools for which past performance is disclosed;
(d)the actual performance record of the pool’s commodity futures trading adviser;
(e)a complete description of each kind of expense which the commodity futures pool operator knows or should know has been incurred by the pool for its preceding financial year or is expected to be incurred by the pool in its current financial year, including, but not limited to, fees for management, trading advice, brokerage commissions, legal advice, accounting services and organisational service and, in particular —
(i)the commodity futures pool operator shall specify the actual dollar amount of each such expense for the pool’s preceding financial year and, wherever possible, the estimated dollars amount of each such expense for the pool’s current financial year;
(ii)where any expense is determined by reference to a base amount term including, but not limited to, “net assets”, “gross profits”, “net profits” or “net gains”, the commodity futures pool operator shall specifically define each such term;
(iii)where any fee is based on an increase in the value of the pool, the commodity futures pool operator shall specify how the increase is calculated, the period of time during which the increase is calculated, the fee to be charged at the end of that period and the value of the pool at which payment of the fee commences;
(f)
(i)the minimum aggregate amount of funds that will be necessary for the pool to commence trading commodity futures contracts, or if there is no such minimum amount, the commodity futures pool operator shall make a statement to that effect;
(ii)the maximum aggregate amount of funds that may be contributed to the pool, or if there is no such maximum amount, the commodity futures pool operator shall make a statement to that effect;
(iii)the maximum period of time for which the pool will hold funds prior to the commencement of trading, or if there is no such period of time, the commodity futures pool operator shall make a statement to that effect;
(iv)the disposition of those funds if the pool does not receive the necessary amount to commence trading, including the period of time within which the disposition will be made;
(v)where the commodity futures pool operator deposits or invests funds received prior to the commencement of trading by the pool and if the commodity futures pool operator intends to place those funds in an income-generating account or obligation, it shall disclose the person to whom that income will be paid;
(g)
(i)The manner in which the pool will fulfil its margin requirements. If the pool will fulfil its margin requirements otherwise than by cash, the futures pool operator shall disclose —
(A)the nature of such non-cash items; and
(B)if those items generate income, the person to whom that income will be paid;
(ii)the form in which pool funds not deposited as margin will be held after the commencement of trading by the pool. If those funds will be held in assets other than cash, the commodity futures pool operator shall so disclose;
(h)a complete description of any restrictions upon the transferability of a participant’s interest in the pool. If there are no such restrictions, the futures pool operator shall make a statement to that effect;
(i)a complete description of the manner in which a participant may redeem its interest in the pool. That description must specify —
(j)how the redemption value of a participant’s interest will be calculated, including the cost associated therewith;
(i)the conditions under which a participant may redeem his interest including the terms of any notification required; and
(ii)any restrictions on the redemption of a participant’s interest, or if there are no such restrictions, the commodity futures pool operator shall make a statement to that effect;
(k)the extent to which a participant may be held liable for obligations of the pool in excess of the funds contributed by the participant for the purchase of an interest in the pool;
(l)the pool’s policies with respect to the payment of distributions from profits or capital and the pool’s policies with respect to the frequency of such payments;
(m)
(i)a statement whether trading in commodity futures contracts will be done or is intended to be done for the proprietary account of —
(A)the commodity futures pool operator or any of its directors; or
(B)the pool’s commodity futures trading adviser or any of its directors;
(ii)if any of the persons mentioned in this paragraph will not trade or does not intend to trade for their own account, the commodity futures pool operator shall make a statement to that effect with respect to each such person; and
(n)a statement that the commodity futures pool operator shall provide all participants with monthly or quarterly (whichever applies) statements of account and with a certified annual report.
(2)  No commodity futures pool operator shall use any disclosure document which is dated more than 6 months preceding the date of its use.
Conduct of business of commodity futures trading adviser
28.—(1)  No commodity futures trading adviser shall solicit, accept or receive from an existing or prospective client, funds, securities or other property in the commodity futures trading adviser’s name (or extend credit in lieu thereof) to purchase, margin, guarantee or secure any commodity futures contract of the client unless he is holding a commodity futures broker’s licence or commodity futures pool operator’s licence under Part III of the Act.
(2)  No commodity futures trading adviser shall solicit or enter into an agreement with a prospective client unless, at or before the time he engages in the solicitation or enters into the agreement (whichever is earlier) he delivers or causes to be delivered to the prospective client, a disclosure document containing the following information:
(a)
(i)the name, address of the main business office, main business telephone number and form of organisation of the commodity futures trading adviser;
(ii)a description of the trading programme;
(iii)the name of the commodity futures broker, bank or merchant bank with which the futures trading adviser will require the client to maintain his account; and
(iv)the types of commodity futures contracts the commodity futures trading adviser intends to trade, with a description of any restrictions or limitations on such trading established by the commodity futures trading adviser;
(b)the actual performance record of the commodity futures trading adviser over the past 3 years. The futures trading adviser shall describe the material differences among those accounts to which the performance record relates;
(c)a complete description of each fee which the commodity futures trading adviser will charge the client —
(i)wherever possible, the commodity futures trading adviser shall specify the dollar amount of each such fee;
(ii)where any fee is determined by reference to a base amount term including, but not limited to, “net assets”, “gross profits”, “net profits” or “net gains”, the commodity futures trading adviser shall specifically define each such term; and
(iii)where any fee is based on an increase in the value of the client’s commodity futures trading account, the commodity futures trading adviser shall specify how that increase is calculated, the period of time during which the increase is calculated, the fee to be charged at the end of that period and the value of the account at which payment of the fee commences;
(d)
(i)any actual or potential conflict of interest on the part of the commodity futures trading adviser or any of the directors thereof; or on the part of any commodity futures broker with which the client will be required to maintain his account and any directors of the commodity futures broker;
(ii)if there is any such actual or conflict of interest, the commodity futures trading adviser shall fully describe the nature of the conflict; and
(iii)if any of the abovementioned persons does not have any such actual or potential conflict of interest, the commodity futures trading adviser shall make a statement to that effect with respect to each such person; and
(e)
(i)a statement whether trading in commodity futures contracts will be done or is intended to be done by the commodity futures trading adviser or any of its directors for its or their own account; and
(ii)if any of the abovementioned persons will not trade or does not intend to trade in commodity futures contracts for his own account, the commodity futures trading adviser shall make a statement to that effect with respect to each such person.
(3)  No commodity futures trading adviser shall use a disclosure document dated more than 6 months preceding the date of its use.
Trading standards for commodity futures brokers
29.—(1)  A commodity futures broker shall not withhold or withdraw from the market any order or any part of an order from a client for its benefit, the benefit of connected persons, or for the convenience of another person.
(2)  A commodity futures broker shall not buy for its own account, accounts belonging to connected persons, or for an account in which it has an interest (including any account over which it has discretion) when it has in hand orders to buy for others at the prevailing market price or at the same price.
(3)  A commodity futures broker shall not sell for its account, accounts being to connected persons or for an account in which it has an interest (including any account over which it has discretion) when it has in hand orders to sell for others at the prevailing market price or at the same price.
(4)  A commodity futures broker shall not knowingly take, directly or indirectly, the other side of an order from its client for its own account or for the accounts of connected persons, except with the client’s prior consent and in accordance with such rules of a Commodity Futures Exchange as have been approved by the Board.
(5)  A commodity futures broker, shall not divulge information relating to an order held by the commodity futures broker, unless such disclosure is necessary for the effective execution of such order or in compliance with such rules of the Commodity Futures Exchange as have been approved by the Board or at the request of the Board.
(6)  Commodity futures brokers and their representatives shall not accept or agree to accept any power or authority from any person or any third party acting on behalf of such person to deal in any commodity futures market for the account of such person, at the discretion of the futures broker or its representative, except in circumstances and upon the following terms and conditions:
(a)a discretionary account may be accepted and operated only in circumstances when it is necessary to do so and at the request of the customer;
(b)the agreement for the operation of a discretionary account shall be duly executed by the customer, the representative, if any, and the commodity futures broker;
(c)the agreement shall contain the following statements which shall be printed in bold type and prominently displayed at the beginning of the agreement —
“(1) This is a most important document, particularly because it attaches personal liabilities to the customer. The customer is strongly advised to consult his accountant, bank manager, solicitor or other professional adviser prior to the customer’s execution of this document.
(2) The RAS Commodity Exchange Limited (or the name of the Exchange in the case of another Exchange) has introduced certain guidelines for the operation of discretionary accounts, a copy of which will be made available to you upon request.”;
(d)the commodity futures broker shall explain fully to the customer before the agreement is executed, the statements contained in the agreement and the customer’s risks and liabilities thereunder;
(e)the commodity futures broker shall furnish to the customer in writing at such times as are requested by the customer full details of the transactions executed on his behalf and the positions and equity in the customer’s account; and
(f)discretionary account orders shall be transmitted to the dealing room or trading floor in writing with the account designation clearly indicated.
Exemption for associated persons
30.—(1)  An employee of a bank or a merchant bank who is registered as an associated person of a Commodity Futures Exchange pursuant to the rules of that Exchange shall be exempted from the requirement to hold a futures broker’s representative licence in relation only to his performing the functions of or acting for a commodity futures broker, which is a related corporation of the bank, or merchant bank in the trading of commodity futures contracts.
(2)  An employee of a bank or a merchant bank who performs the functions of or acts for a commodity futures broker, which is a related corporation of the bank, or merchant bank in the trading of commodity futures contracts and who on 27th May 1992 is not registered as an associated person, shall not be liable for any penalty under Part II of the Act for not being licensed as a futures broker’s representative if he registers as an associated person of the Commodity Futures Exchange within 3 months of that date.
(3)  In this regulation and regulation 19(6), “related corporation” shall have the meaning assigned to that expression in section 6 of the Companies Act.
[Cap. 50.]
Change of principal
31.  A commodity futures broker’s representative, commodity futures adviser’s representative or commodity futures pool operator’s representative shall not change his principal in relation to which his licence was issued unless he has lodged a notice with the Board in such form as the Board may require.
Time for document to be lodged
32.  Where a document is required by the Act or these Regulations to be lodged with the Board but a period of time within which the document is to be lodged is not prescribed, the document shall be lodged within 14 days after the happening of the event to which the document relates.
Offences
33.  Any person who contravenes or fails to comply with any provision of these Regulations shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $5,000.
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