Futures Trading Act
(Chapter 116, Sections 38(4) and 70)
Futures Trading Regulations
Rg 1
REVISED EDITION 1998
(15th September 1998)
[15th August 1986]
Citation
1.  These Regulations may be cited as the Futures Trading Regulations.
Definitions
2.—(1)  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;
“adjusted net capital”, in relation to a futures broker, has the same meaning as in regulation 12(8)(f);
“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 Exchange or market is open for trading or deliveries;
“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 or leveraged foreign exchange trading 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 futures broker, futures trading adviser or any other person approved by the Authority, in the name of the futures broker or futures pool operator in the title of which the word “customer” appears;
“foreign company” has the same meaning as in the Companies Act (Cap. 50);
“long” means one who has purchased a futures contract or a leveraged foreign exchange transaction to establish a position;
“margin” means an amount of money, securities or any other collateral, representing a part of the value of the contract or agreement to be entered into, which is deposited by the buyer or the seller of a futures contract or leveraged foreign exchange transaction to ensure performance of the terms of the futures contract or leveraged foreign exchange transaction;
“margin call” means a request from an Exchange, a clearing house or a futures broker to a customer to deposit additional margins to meet a required minimum margin level;
“mark-to-market” means the method or procedure of adjusting the valuation of open positions to reflect current market values;
“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 futures position or leveraged foreign exchange position valued at the prevailing market price;
“net head office funds” means the net liability of the Singapore branch to its head office and any other branches outside of Singapore;
“paid-up capital” means ordinary shares and non-redeemable preference shares that have been fully paid for;
“participant” means a person who has a direct financial interest in a pool operated by a futures pool operator;
“position” means a futures contract or a leveraged foreign exchange transaction which is still outstanding and which has not been liquidated —
(a)by an off-setting transaction;
(b)by delivery of the commodity underlying the futures contract or leveraged foreign exchange transaction;
(c)through settlement of the futures contract or leveraged foreign exchange transaction in accordance with the rules of an Exchange or the practices of a futures market or foreign exchange market, as the case may be;
(d)in the case of a futures contract, by substituting the futures contract for cash commodity or in connection with cash commodity transactions; or
(e)in the case of a leveraged foreign exchange transaction, by substituting the leveraged foreign exchange transaction for a futures contract;
“properties” 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;
“securities” has the same meaning as is assigned to that expression 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 futures broker howsoever incurred;
“shareholders’ funds” means the paid-up capital and reserves after deduction of any debit balance appearing in the profit and loss account of the corporation;
“short” means one who has sold a futures contract or a leveraged foreign exchange transaction to establish a position;
“SIMEX” means the Singapore International Monetary Exchange Limited;
“stock market” has the same meaning as is assigned to that expression in the Securities Industry Act (Cap. 289);
“trading programme” means a system, method or programme pursuant to which a futures trading adviser intends to direct or guide a customer’s futures trading account or leveraged foreign exchange trading account.
(2)  Where the name of a body corporate referred to in these Regulations is changed pursuant to the Companies Act (Cap. 50), the change of name shall not affect the identity of that body corporate or the application of the relevant provisions of these Regulations to that body corporate.
[S 105/2000 wef 06/03/2000]
Particulars prescribed by forms
3.  Where a form prescribed by these Regulations 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 are prescribed as the particulars or other matters required under the provisions of the Act or these Regulations for the purposes of which the form or document is prescribed.
Directions in forms
4.  A form prescribed by these Regulations shall be completed in accordance with such directions as are specified in the form as so prescribed.
Manner of application for licence or approval
5.—(1)  An application for a licence or renewal of a licence in the form prescribed together with any relevant annexures shall be enclosed in a sealed envelope and lodged with the Authority.
(2)  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 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).
(3)  An application for a licence or renewal of a licence shall be accompanied by a self-addressed envelope (of the applicant) affixed with a postage stamp of a value for registered mail.
(4)  The self-addressed envelope shall be of a size not less than 229 mm x 324 mm.
(5)  An application for approval as a Futures Exchange shall be made in the prescribed form and shall be accompanied by a copy of the rules and Memorandum and Articles of Association, certified to be the true copies thereof, by the person signing the application and shall be lodged with the Authority.
Fees
6. The following fees shall be payable to the Authority:
(a) on every application for a licence as a futures trading adviser, whether for a new licence or for the renewal thereof
$1,200
(b) on every application for a licence as a futures pool operator, whether for a new licence or for the renewal thereof
$1,200
(c) on every application for a licence as a futures broker, whether or not the applicant is a member of a Futures Exchange and whether for a new licence or for the renewal thereof
$1,200
(d) on every application for a licence as a representative of a futures broker, futures trading adviser or futures pool operator, whether for a new licence or for the renewal thereof
$100
(e) for perusal of the register kept under section 19 of the Act
$20
(f) on lodging an application for approval as a Futures Exchange
$2,000
Forms
7.  Unless otherwise provided, the forms to be used for the purposes of the provisions set out in the first column of the First Schedule shall be in accordance with the forms set out in the Second Schedule, the numbers of which are specified in the third column of the First Schedule.
Preparation of accounts
8.—(1)  A futures broker, futures trading adviser or futures pool operator shall prepare accounts in accordance with the provisions of the Companies Act (Cap. 50), where applicable, in respect of each financial year and shall attach to such accounts a statement in the prescribed form.
(2)  The statement shall be signed by a director or the secretary of the corporation appointed for that purpose by the board of directors.
Offences
9.  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.
Form of auditor’s report
10.  The auditor’s report required to be lodged under sections 27(1) and 34(6) of the Act shall be in or to the effect of the appropriate prescribed form and shall contain the documents necessary for due completion of the form.
Appointment of chief executive officer
10A.—(1)  No licensee shall on or after 16th February 1996 appoint a chief executive officer before submitting to the Authority an application in the prescribed form containing a declaration by the appointee verifying that the information relating to him in the application form is correct.
(2)  The appointment of a chief executive officer on or after 16th February 1996 is subject to the Authority’s approval.
Duties of chief executive officer
10B.—(1)  The chief executive officer of a licensee shall —
(a)be a person of high integrity;
(b)observe high standards and professionalism in all his dealings;
(c)be suitably qualified and possess the necessary expertise to manage the licensee’s operations; and
(d)be responsible for the soundness and performance of the licensee and for ensuring its compliance with the Act and these Regulations, the Companies Act (Cap. 50), the business rules of any relevant Exchange and clearing house and any other relevant laws.
(2)  The chief executive officer of a licensee shall —
(a)lay down, and ensure compliance with, sound written policies on all operational areas of the licensee, including the licensee’s financial policies, accounting and internal controls, internal auditing and compliance with all laws and rules governing the licensee’s operations;
(b)be fully aware of and understand the risks associated with the trading or business activities of the licensee;
(c)ensure that the business activities of the licensee are subject to adequate and proper internal audit;
(d)set out in writing the limits of the discretionary powers of each officer, committee, sub-committee and other group of the licensee to commit the licensee to any financial undertaking or to expose the licensee to risk of any nature; and
(e)ensure —
(i)that the licensee keeps a written record of the steps taken by it to monitor compliance with its policies, the limits on discretionary powers and the accounting and operating procedures;
(ii)that the work of the internal audit unit of the licensee or the licensee’s parent corporation covers the licensee’s compliance with all laws and business rules of the relevant Exchanges and clearing houses; and
(iii)the accuracy, correctness and completeness of any report, return or statement submitted by the licensee to its Head Office (if any) and to the Authority.
(3)  For the purposes of this regulation and regulation 10A —
“chief executive officer” includes any person occupying the position of chief executive;
“licensee” means a futures broker, a futures trading adviser or a futures pool operator.
Take-over of licensees
11.—(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 Authority of his intention to enter into the agreement and obtaining the approval of the Authority to his entering into the agreement.
(2)  The Authority may grant approval for the acquisition of the shares of a licensee pursuant to paragraph (1) subject to such conditions or restrictions as the Authority thinks fit.
(3)  For the purpose of this regulation —
(a)“licensee” means a futures broker, a futures pool operator or a futures trading adviser;
(b)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;
(c)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
(d)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 capital requirements of futures brokers
11A.—(1)  Subject to this regulation, a person shall not on or after 2nd January 1998 be granted or permitted to hold a futures broker’s licence unless —
(a)in the case of a futures broker granted a futures broker’s licence before 6th January 1995 —
(i)where the futures broker is incorporated in Singapore, its shareholders funds are not less than $5 million; or
(ii)where the futures broker is a foreign company, its net head office funds are not less than $5 million;
(b)in the case of a futures broker granted a futures broker’s licence on or after 6th January 1995 that is a member of an Exchange —
(i)where the futures broker is incorporated in Singapore, its paid-up capital and shareholders funds are each not less than $5 million; or
(ii)where the futures broker is a foreign company, its net head office funds are not less than $5 million;
(c)in the case of a futures broker granted a futures broker’s licence on or after 6th January 1995 that is not a member of an Exchange —
(i)where the futures broker is incorporated in Singapore, its paid-up capital and shareholders funds are each not less than $8 million; or
(ii)where the futures broker is a foreign company, its net head office funds are not less than $8 million;
(d)in the case of a futures broker to which this sub-paragraph applies —
(i)where the futures broker is incorporated in Singapore, its paid-up capital and shareholders funds are each not less than $500,000; or
(ii)where the futures broker is a foreign company, its net head office funds are not less than $500,000; and
(e)in the case of a futures broker to which this sub-paragraph applies, and which is granted a futures broker’s licence on or after 10th July 1998 —
(i)where the futures broker is incorporated in Singapore, its paid-up capital and shareholders’ funds are each not less than $1 million; or
(ii)where the futures broker is a foreign company, its net head office funds are not less than $1 million.
(2)  Paragraph (1)(d) applies to a futures broker who is a member of an Exchange and who, in relation to such futures contracts as may be traded by him —
(a)trades only in futures contracts in respect of which the underlying commodity is any class of oil;
(b)trades only with accredited investors;
(c)does not accept money, securities or property from a customer as a margin for, or to guarantee or secure, the futures contracts of that customer; and
(d)does not carry customer’s positions, margins or accounts in its own books.
(2A)  Paragraph (1)(e) applies to a futures broker, who is a member of an Exchange and who —
(a)carries on the business only of soliciting or accepting orders for the purchase or sale of any futures contract traded on the Exchange;
(b)does not accept money, securities or property from a customer as a margin for, or to guarantee or secure, the futures contracts of that customer; and
(c)does not carry customer’s positions, margins or accounts in its own books.
(3)  Notwithstanding paragraph (1)(a), the Authority may by notice in writing require that the paid-up capital of any futures broker referred to in paragraph (1)(a) be a sum not less than $5 million within the time specified in the notice.
(4)  The Authority may, by notice in writing, extend the time for the futures broker to comply with paragraph (3).
(5)  A futures broker who fails to comply with a notice issued under paragraph (3) within the time allowed for compliance under this regulation shall not be permitted to hold a futures broker’s licence.
(6)  A futures broker shall not reduce its paid-up capital without the approval of the Authority.
Minimum financial requirements for futures trading advisers
11B.—(1)  Subject to this regulation, a person shall not be granted or permitted to hold a futures trading adviser’s licence unless —
(a)in the case of a futures trading adviser which does not manage its customers’ funds but carries on a business of —
(i)advising other persons concerning futures contracts, foreign exchange trading or leveraged foreign exchange trading; or
(ii)promulgating analyses or reports concerning futures markets or foreign exchange markets,
its paid-up capital and its shareholders’ funds are each not less than $1 million or where the futures trading adviser is a foreign company, its net head office funds are not less than $1 million;
(b)in the case of a futures trading adviser which carries on a business of undertaking on behalf of a customer, pursuant to a contract or an arrangement with the customer (whether on a discretionary authority granted by the customer or otherwise), trading in futures contracts, foreign exchange trading or leveraged foreign exchange trading for the purposes of managing the customer’s funds, whether or not the futures trading adviser is, in addition, in the business of —
(i)advising other persons concerning futures contracts, foreign exchange trading or leveraged foreign exchange trading; or
(ii)promulgating analyses or reports concerning futures markets or foreign exchange markets,
its paid-up capital and its shareholders’ funds are each not less than $3 million.
(2)  A futures trading adviser to which paragraph (1)(a) applies which has a paid-up capital, shareholders’ funds or net head office funds, as the case may be, of less than $1 million on 16th February 1996 shall be exempt from the requirement of that paragraph for 2 years from that date.
(3)  Notwithstanding paragraphs (1) and (2), no futures trading adviser shall, after 16th February 1996, be permitted to hold a futures trading adviser’s licence unless its paid-up capital (or where the person is a foreign company, its net head office funds) is not less than $1 million if the aggregate of the interests of all new shareholders of the futures trading adviser registered at any time after 16th February 1996 is equal to or exceeds 20% of the paid-up capital of the futures trading adviser.
(4)  A futures trading adviser shall not reduce its paid-up capital without the prior approval of the Authority.
Minimum financial requirements for futures pool operators
11C.—(1)  A person shall not be granted or permitted to hold a futures pool operator’s licence unless its paid-up capital and shareholders’ funds are each not less than $3 million.
(2)  A futures pool operator shall not reduce its paid-up capital without the prior approval of the Authority.
Minimum financial requirements for futures brokers
12.—(1)  Subject to this regulation, every futures broker, other than a futures broker to which regulation 11A(1)(d) or (e) applies, shall not allow its adjusted net capital to fall for 4 consecutive weeks below the higher of $2 million or the sum of —
(a)2% of every amount of funds that a customer of the futures broker deposits with the futures broker that is in excess of the maintenance margins of that customer; and
(b)4% of the maintenance margins of customers and non-customers relating to all futures contracts and leveraged foreign exchange trading transactions.
(1A)  Every futures broker to which regulation 11A(1)(d) or (e) applies shall not allow its adjusted net capital to fall for 4 consecutive weeks below $300,000.
(2)  If the adjusted net capital of a futures broker falls below the amount specified in paragraph (1) or (1A), the futures broker shall immediately notify the Authority and, in the case of a futures broker which is a member of an Exchange, notify the Authority and the Exchange, that the futures broker does not comply with the financial requirements under paragraph (1) or (1A).
(3)  Subject to this regulation, every futures broker that is a member of an Exchange, other than a futures broker to which regulation 11A(1)(d) or (e) applies, shall notify the Exchange immediately if its adjusted net capital falls below the higher of $3 million or the sum of —
(a)2% of every amount of funds that a customer of the futures broker deposits with the futures broker that is in excess of the maintenance margins of that customer; and
(b)6% of the maintenance margins of customers and non-customers relating to all futures contracts and leveraged foreign exchange trading transactions.
(3A)  Where the Authority becomes aware of or is notified by a futures broker that —
(a)the futures broker does not comply with the financial requirements under paragraph (1) or (1A); or
(b)the futures broker is unable to demonstrate compliance with the financial requirements under paragraph (1) or (1A),
the Authority may direct the futures broker to immediately do any one or more of the following:
(i)transfer all or any part of a customer’s futures trading and leveraged foreign exchange trading positions, margins and accounts to one or more futures brokers;
(ii)cease carrying on business as a futures broker until such time as it is able to demonstrate to the Authority that it complies with the financial requirements under paragraph (1) or (1A), except that the futures broker may continue trading for the purposes of liquidation only or unless otherwise directed by the Authority; or
(iii)operate its business in such manner and on such conditions as the Authority may determine.
(3B)  If a futures broker other than a futures broker to which regulation 11A(1)(d) or (e) applies does not comply with the financial requirements in paragraph (3), or is unable to demonstrate compliance with such financial requirements, it shall immediately notify the Authority of that fact and if such a state of affairs continues for 5 consecutive business days or more, the Authority may issue directions requiring the futures broker to do any one or more of the following:
(a)forthwith submit the statements prescribed in paragraph (5) to the Authority on a weekly basis, or at such regular intervals as may be determined by the Authority, until the adjusted net capital of the futures broker exceeds the amount required under paragraph (3) for 8 consecutive weeks, and thereafter the futures broker may submit the prescribed statements monthly;
(b)immediately cease any further increase in positions for any account carried by the futures broker; or
(c)transfer all or any part of a customer’s futures trading and leveraged foreign exchange trading positions, margins and accounts to one or more futures brokers if the futures broker is unable to demonstrate compliance with the minimum financial requirements in paragraph (3) within one week from the date the futures broker failed to comply, or is unable to demonstrate compliance, with the financial requirements in paragraph (3).
(3C)  A futures broker shall comply with any direction issued by the Authority under paragraphs (3A) and (3B).
(3D)  If a futures broker has failed to comply with the financial requirements in paragraph (1), but immediately demonstrates to the satisfaction of the Authority that it is able to achieve compliance with such financial requirements, the Authority may, in its discretion, allow the futures broker up to a maximum of 5 business days within which to achieve compliance before the Authority issues any direction under paragraph (3A).
(3E)  The statements required to be submitted in paragraph (3B)(a) shall be signed by a director of the futures broker and shall be lodged with the Authority not later than one business day after the end of the weekly or other interval determined by the Authority under that paragraph.
(4)  The Authority may, after assessing the financial condition of a futures broker, direct the futures broker to meet such additional financial or other requirements as the Authority may determine.
(4A)  Subject to such conditions as the Authority may impose, or from time to time vary or revoke, a futures broker may meet up to 50% of the adjusted net capital requirements under paragraph (1) or (3) or both, or under paragraph (1A) in the case of a futures broker to which regulation 11A(1)(e) applies, by providing SIMEX with one or more qualifying letters of credit for the appropriate amount that the futures broker wishes to meet in that manner.
(4B)  Where the aggregate amount payable under the qualifying letter or letters of credit exceeds 50% of the respective adjusted net capital requirements of the futures broker under paragraph (1) or (3), or under paragraph (1A) in the case of a futures broker to which regulation 11A(1)(e) applies, that amount may not be used to meet more than 50% of the respective adjusted net capital requirements of that futures broker.
(5)  A futures broker shall cause statements in the prescribed form in respect of each month to be prepared in relation to its business as a futures broker.
(6)  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.
(7)  Each statement prepared pursuant to paragraph (5) shall be signed by a director and shall be lodged with the Authority not later than 14 calendar days after the end of each month.
(8)  For the purposes of these Regulations —
(a)“net capital” means the amount by which current assets exceed liabilities, and in determining “net capital” —
(i)unrealised profits shall be added and unrealised losses shall be deducted in the accounts of the futures broker including unrealised profits and losses on fixed price commitments and forward contracts; and
(ii)all long and all short futures trading and leveraged foreign exchange trading positions shall be marked to their market value;
(b)“current assets” means cash and other assets which are reasonably expected to be realised in cash or sold during the next 12 months but shall —
(i)exclude any unsecured futures trading account and leveraged foreign exchange trading account containing a debit balance which has remained unpaid for more than one business day;
(ii)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;
(iii)exclude all assets doubtful of collection or realisation except for any reserves established therefor;
(iv)exclude exchange memberships;
(v)include receivables from clearing houses and from futures brokers arising out of trading in futures contracts and shares and securities which are listed on a stock market, and have not been suspended;
(vi)include receivables from futures brokers arising out of leveraged foreign exchange trading and from other parties; and
(vii)include or exclude such other items as the Authority may from time to time prescribe;
(c)a loan or advance or any other form of receivable shall not be considered “secured” unless the following conditions exist:
(i)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 application of such percentage deductions as prescribed in sub-paragraph (f); and
(ii)
(A)the collateral is in the possession or control of the futures broker; or
(B)the futures broker has a legally enforceable written security agreement executed by the debtor in its favour under which the futures broker shall have the power to readily sell or otherwise convert the collateral into cash;
(d)for the purposes of computing “net capital”, the term “liabilities” —
(i)excludes liabilities of a 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 sub-paragraph (e);
(ii)excludes the amount of money, securities and property due to customers which are held in segregated accounts in accordance with section 37 of the Act:
Provided that such exclusion may be made only if the money, securities and property held in segregated accounts have been excluded from current assets in computing net capital; and
(iii)excludes liabilities which would be classified as long-term 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 the plant, property and equipment are not included in current assets;
(e)for the purpose of sub-paragraph (d)(i), 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 Authority may from time to time require but shall at a minimum contain the following terms:
(i)the subordinated creditor will not claim or receive from the futures broker by set-off or in any other manner, any subordinated debt until all senior debt has been paid or except with the prior written approval of the Authority, or in the case of a futures broker which is a member of an Exchange, with the prior written approval of the Exchange;
(ii)the subordination agreement shall ensure that claims of the subordinated creditor are fully subordinated to the claims of all unsubordinated creditors;
(iii)the subordination agreement shall have not less than 2 years to maturity at the time of adjusted net capital computation;
(iv)the subordinated debt shall not be redeemed before the maturity of the subordination agreement without the prior written approval of the Authority, or in the case of a futures broker which is a member of an Exchange, without the prior written approval of the Authority and the Exchange, and for this purpose, interest payments on the subordinated debt shall not be construed as early redemption of the subordinated debt;
(v)the subordination agreement shall not be subject to cross-default or negative pledges or contain any clause which would enable the subordinated creditor to demand early or accelerated repayment of the subordinated debt;
(vi)the subordination agreement shall have the option for the futures broker to defer interest payment on the subordinated debt;
(vii)the subordinated debt shall automatically be converted into capital as a provision for losses arising from bad and doubtful debts if an appropriate reconstruction of the capital of the futures broker, which is acceptable to the Authority, has not been under taken;
(viii)in the event of any payment or distribution of assets of the futures broker, in cash, in kind or in securities (referred to in these Regulations as a distribution), upon any dissolution, winding-up, liquidation or reorganisation of the futures broker —
(A)the senior creditor 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;
(B)any distribution to which the subordinated creditor would be entitled but for the provisions of the 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
(ix)if, notwithstanding sub-paragraphs (i) to (viii), any distribution is received by the subordinated creditor in respect of the subordinated debt, the 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;
(f)“adjusted net capital” means net capital less the following:
(i)the amount by which any advances paid by the 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;
(ii)in the case of all inventories which are hedged by hedging positions in any market, the amount by which the value of the inventories used in computing the net capital exceeds 95% of the market value of such inventories;
(iii)in the case of all inventories which are not hedged by any hedging positions in any market, the amount by which the value of the inventories in computing the net capital exceeds 80% of the market value of such inventories;
(iv)in the case of any Government security used by the 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;
(v)in the case of shares and other securities used by the futures broker in computing the net capital, the amount by which the value of the shares or securities exceeds 90% of the market value of such shares or securities;
(vi)for under-margined futures trading or leveraged foreign exchange trading accounts, the amount of money required for each account to meet the relevant maintenance margin requirements, if that amount shall have been outstanding after the trade date for more than 3 business days; and 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 that amount shall have been outstanding after the trade date for more than 3 business days:
Provided that to the extent a deficit is excluded from current assets in accordance with this sub-paragraph, such amount shall not also be deducted; and if a customer shall have deposited any asset other than cash into his account, the value attributable to the asset for purposes of this sub-paragraph shall be the value attributable to the asset pursuant to the relevant margin rules of an Exchange, futures market or foreign exchange market;
(vii)the maintenance margin requirement on open futures contracts or open leveraged foreign exchange transactions held in the proprietary accounts of the futures broker which are not hedged; and
(viii)the total amount of money for which the futures broker is contingently liable under any security, guarantee or indemnity granted, other than a security, guarantee or indemnity granted by the futures broker for the purpose of securing, guaranteeing or indemnifying any obligation of the futures broker to —
(A)an Exchange or a clearing house; or
(B)another futures broker as margin for, or to guarantee or secure, futures contracts;
(g)“customer” has the same meaning as in section 37(9) of the Act;
(h)“maintenance margin” means the amount of margin required to be deposited with —
(i)an Exchange or a clearing house; or
(ii)another futures broker or person,
as a margin for, or to guarantee or secure, futures contracts or leveraged foreign exchange transactions, as the case may be;
(i)“non-customer” means any person, other than a customer, for whom a futures broker carries an account for trading in futures contracts or leveraged foreign exchange transactions;
(j)“qualifying letter of credit” means an irrevocable letter of credit made in favour of SIMEX issued by a bank approved by, and in a form acceptable to, SIMEX, which is to be used solely for the purpose of meeting part of the adjusted net capital requirements of the futures broker under this regulation.
Reporting of financial requirements by futures brokers
12A.—(1)  A futures broker shall immediately notify the Authority and, in the case of a futures broker which is a member of an Exchange, notify the Authority and the Exchange, where the futures broker determines that any account which it is carrying for any person is under-margined by an amount which exceeds 100% of the adjusted net capital of the futures broker or, where applicable, of the sum of the adjusted net capital of the futures broker and the aggregate amount payable under the qualifying letter or letters of credits that may be used by the futures broker under regulation 12(4A) to meet his adjusted net capital requirements under regulation 12(1) and (3).
(2)  Paragraph (1) shall apply to any account carried by a futures broker whether for customers or otherwise.
(3)  Where a futures broker which is a member of an Exchange has, within one business day, failed to meet a margin call or to make other deposits as required by an Exchange or a clearing house, the Exchange or clearing house shall, at its sole discretion, be entitled to —
(a)immediately liquidate the positions carried by the futures broker for any account;
(b)immediately transfer all or any part of the futures trading and leveraged foreign exchange trading positions, margins and accounts belonging to customers of such futures broker to one or more futures brokers; or
(c)subject the trading of any account of the futures broker to such conditions and restrictions as it deems fit, including but not limited to, restricting trading of that account to only liquidating positions.
(4)  An Exchange may, in consultation with the Authority, exempt a futures broker which is a member of its Exchange from the provisions of paragraph (3) with respect to any particular account on a continuous basis but the Exchange shall continue to monitor that account.
Books and records to be kept by futures trading adviser and futures pool operator
13.—(1)  A futures trading adviser or futures pool operator shall —
(a)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
(b)cause these records to be kept in such a manner as to enable them to be conveniently and properly audited.
(2)  A futures trading adviser or futures pool operator shall be deemed not to have complied with paragraph (1) in relation to records unless those records —
(a)in the case of a futures trading adviser — are kept in sufficient detail to show —
(i)the particulars of all the customers (including their names and addresses);
(ii)a list or other record of all customers’ accounts directed by the futures trading adviser and of all transactions effected therefor;
(iii)copies of each confirmation of the transaction mentioned in sub-paragraph (ii), each contract confirmation note and each monthly statement received from a futures broker;
(iv)all powers of attorney and other documents, or signed copies thereof, authorising the futures trading adviser to operate that customer’s account on a discretionary basis;
(v)a signed and dated acknowledgment from the customer that he has received and understood the contents of the disclosure statement as prescribed in regulation 20 for the trading programme pursuant to which the futures trading adviser will direct his account or will guide his trading;
(vi)all other written agreements or copies thereof including risk disclosure documents entered into by the futures trading adviser with any of his customers or subscribers;
(vii)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 futures trading adviser to any existing or prospective customer or subscriber, showing the first date of distribution if not otherwise shown on the document;
(viii)an itemised record of each futures contract and transaction arising from foreign exchange trading or leveraged foreign exchange trading for the account of the futures trading adviser and for the account of any director of the futures trading adviser, showing the transaction date, quantity, type of transaction and price, the delivery month, whether the transaction was purchased or sold, the broker carrying the account, if any, and the gain or loss realised;
(ix)each confirmation of a futures contract and transaction arising from foreign exchange trading or leveraged foreign exchange trading and each monthly statement furnished by a futures broker to the futures trading adviser relating to the account of the futures trading adviser, or to a director of the futures trading adviser relating to a personal account of such director; and
(x)books and records of all other transactions in all other business dealings relating to trading in futures contracts, foreign exchange trading and leveraged foreign exchange trading and of all cash market transactions in which the futures trading adviser or any of its director thereof engages; and
(b)in the case of a futures pool operator — are kept in sufficient detail to show —
(i)an itemised daily record of each futures contract and transaction arising from foreign exchange trading or leveraged foreign exchange trading of the pool, showing the transaction date, quantity, type of transaction and price, the delivery month, whether the transaction was purchased or sold, the futures broker carrying the account and the futures trading adviser, if any, and the gain or loss realised;
(ii)a journal or other equivalent record showing all receipts and disbursements of money, securities and other property;
(iii)a signed and dated acknowledgment from the participant that he has received and understood the contents of the disclosure document as prescribed in regulation 19;
(iv)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;
(v)each confirmation of a futures contract transaction of the pool and transaction of the pool arising from foreign exchange trading or leveraged foreign exchange trading and each monthly statement for the pool received from a futures broker;
(vi)cancelled cheques, bank statements, journals, ledgers, invoices, computer generated records, data and memoranda prepared or received in connection with the operation of the pool;
(vii)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 futures pool operator to any existing or prospective pool participant or received by the futures pool operator from any futures trading adviser of the pool, showing the first date of distribution or receipt if not otherwise shown on the document;
(viii)an itemised daily record of each futures contract and transaction arising from foreign exchange trading or leveraged foreign exchange trading of the futures pool operator for its own account and for any of the directors thereof, showing the transaction date, quantity, type of transaction and price, the delivery month, the futures broker carrying the account, whether the transaction was purchased or sold, and the gain or loss realised;
(ix)each confirmation of a futures contract and transaction arising from foreign exchange trading or leveraged foreign exchange trading and each monthly statement furnished by a futures broker to the futures pool operator relating to the account of the futures pool operator and to the account of any of the directors of the futures pool operator; and
(x)books and records of all other transactions in all other activities in which the futures pool operator engages, including cancelled cheques, bank statements, journals, ledgers, invoices and all other records, data and memoranda which have been prepared in the course of engaging in those activities.
Reports by futures pool operator
14.—(1)  Each 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.
(1A)  These financial statements shall be presented and computed in accordance with generally accepted accounting principles.
(1B)  The statements mentioned in paragraph (1) must be signed by 2 directors of the futures pool operator.
(2)  The profit and loss statement shall itemise —
(a)the total amount of realised net gain or loss arising from futures trading positions, foreign exchange trading positions and leveraged foreign exchange trading positions liquidated during the reporting period;
(b)the change in unrealised net gain or loss arising from futures trading positions, foreign exchange trading positions and leveraged foreign exchange trading 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 futures pool operator, futures trading advisor, 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 shall be distributed at least monthly in the case of pools with net assets of more than $1 million at the beginning of the pool’s financial year, and otherwise at least quarterly.
(6)  Each 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 Authority within 3 months after the end of the pool’s financial year or such extension thereof permitted by the Authority subject to such conditions as the Authority thinks fit to impose.
(6A)  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 2 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 2 preceding financial years; or
(ii)the total value of the participant’s interest or share in the pool as of the end of each of the pool’s 2 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 trading in futures contracts, foreign exchange trading and leveraged foreign exchange trading, and change in unrealised net gain or loss on futures trading positions, foreign exchange trading positions and leveraged foreign exchange trading positions during the pool’s financial year.
Segregation of customers’ funds
15.—(1)  All customers’ funds shall be separately accounted for and segregated as belonging to customers and shall not be commingled with the funds of the futures broker, futures trading adviser or futures pool operator.
(2)  Any customers’ funds received shall be paid without delay into a customer’s account unless otherwise authorised by the customer concerned.
(3)  All customers’ funds when deposited with a bank, merchant bank, another futures broker or any other person approved by the Authority shall be deposited under an account name which clearly identifies the funds as customers’ funds and shows that the funds are segregated as required by the Act.
(4)  A futures broker, futures trading adviser or futures pool operator shall obtain and retain in its files acknowledgment from the bank, merchant bank, futures broker or other person approved by the Authority referred to in paragraph (3) that it was informed that the customers’ funds deposited therein are those of customers and are held in accordance with the provisions of the Act.
(5)  A futures broker, futures trading adviser or futures pool operator shall —
(a)maintain accounts for each of its customers, and each such account shall be maintained 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 such transactions occurred; and
(b)maintain a record of all securities and properties received from customers in lieu of money as a margin for, or to purchase, guarantee or secure, any futures contract or transaction involving foreign exchange trading or leveraged foreign exchange trading for such customer.
(6)  The records referred to in paragraph (5)(b) shall show separately for each customer —
(a)a description of the securities or properties received;
(b)the name and address of the customer;
(c)the dates when the securities or properties were received; and
(d)the dates when the securities or properties were returned to such customer or otherwise disposed of, together with the facts and circumstances of such disposal.
(7)  Each futures broker, futures trading adviser or futures pool operator shall at all times keep such books and accounts as may be necessary —
(a)to show all its dealings with a customer’s moneys held, received or paid by it, and any other money dealt by it through a customer’s account; and
(b)to distinguish the moneys held, received or paid by it on account of each separate customer and to distinguish such moneys from its own moneys and from other moneys held, received or paid by it on any other account.
(8)  All securities and properties held or received by a futures broker, futures trading adviser or futures pool operator on account of a customer in connection with any futures contract or transaction arising from foreign exchange trading or leveraged foreign exchange trading concluded or to be concluded, or cleared or to be cleared, on an Exchange or any other futures markets or foreign exchange markets, as the case may be, shall be segregated and separately accounted for.
(9)  Every futures broker, futures trading adviser or futures pool operator shall at all times keep such books as may be necessary —
(a)to show all its dealings with each of its customer’s securities and properties held or received by it; and
(b)to distinguish the 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 from other securities and properties held or received by it on any other account.
Investment of customers’ funds
15A.—(1)  A futures broker may hold any of its customer’s moneys in the following forms:
(a)in any securities of the Government;
(b)in any debt instrument of the government of the country in which is situated the market or Exchange where the futures broker normally transacts its business; and
(c)in any other security or instrument as the Authority may determine from time to time.
(2)  A 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 all transactions relating to such moneys including —
(a)the date on which the transaction was made;
(b)the name of the person through whom the transaction was made;
(c)the amount of money transacted;
(d)a description of the transaction;
(e)the place, if any, where the customer’s moneys, securities and properties are kept;
(f)the date on which the subject-matter of the transaction was realised or otherwise disposed of and the amount of money received from the realisation or disposal, if any; and
(g)the name of the person to whom (and through whom, if any) the subject-matter of the transaction was disposed of.
Daily computation for segregated account
15B.—(1)  Each futures broker shall at the close of each business day compute —
(a)the total amount of customer funds on deposit in segregated accounts on behalf of customers;
(b)the total amount of its customer funds required by the Act and these Regulations to be deposited in segregated accounts on account of its customers; and
(c)the amount of the futures broker’s residual interest in the customer accounts.
(2)  The computation shall be completed before noon the next business day and shall be kept by the futures broker together with all supporting data.
Records to be kept by futures broker
15C.—(1)  A futures broker shall keep full, complete and systematic records, together with all pertinent data and memoranda, of all transactions relating to its business.
(2)  The records to be kept shall include all orders (filled, unfilled or cancelled), trading cards, signature cards, journals, ledgers, cancelled cheques, copies of confirmations, copies of statements of purchase and sale, and all other records, data and memoranda, which have been prepared in the course of its business.
(3)  A futures broker receiving a customer’s order shall immediately upon receipt thereof prepare a written record of such order, including the account identification and order number, and shall record thereon, by time-stamping or other timing device, the date and time the order is received and the time the order is transmitted for execution.
(4)  A futures broker shall immediately upon execution of a customer’s order prepare a written record of the transaction, including the account identification and order number, and shall record thereon, by time-stamping or other timing device, the date and time the order is executed.
(5)  Upon request by the Exchange of which the futures broker is a member or by the Authority, a futures broker shall request from its customers and, upon receipt thereof, provide the Exchange or Authority, as the case may be, with documentation of the cash transactions underlying the exchanges of futures for cash commodities or exchanges of futures in connection with cash commodity transactions.
(6)  A futures broker shall prepare regularly and promptly, and keep systematically the following:
(a)a financial ledger record showing separately for each customer, all charges against and credits to a customer’s account, including but not limited to the customer’s funds deposited, withdrawn or transferred, and the charges and credits resulting from losses or gains on closed transactions;
(b)a record of transactions showing separately for each account —
(i)all futures contracts and leveraged foreign exchange transactions executed for such account, including the date, price, quantity, market and commodity; and
(ii)all futures options transactions executed for such account, including the date, whether the transaction involved a put or call, the expiration date, underlying contract for futures delivery, strike price, and details of the purchase price of the option, including the premium, mark-up commission and fees; and
(c)a daily record or journal showing separately for each business day complete details of —
(i)all futures contracts and leveraged foreign exchange transactions executed on that day, including the date, price, quantity, market, commodity and the person for whom the transaction was made; and
(ii)all futures options transactions executed on that day, including the date, whether the transaction involved a put or call, the expiration date, underlying contract for future delivery, strike price, and details of the purchase price of the option, including the premium, mark-up commission and fees, and the person for whom the transaction was made.
(7)  For the avoidance of doubt, the requirement to prepare and keep a written record upon receipt or execution of an order referred to in this regulation does not apply to a transaction entered into by an arbitrageur, an options market-maker or a member of an Exchange trading in futures contracts for his own account.
(8)  All records and documents required to be kept or prepared under this regulation shall be kept for a period of not less than 6 years from the date of the record or document.
(9)  For the purposes of paragraph (7) —
“arbitrageur” means a person who —
(a)is recognised as such by an Exchange; and
(b)purchases or sells a futures contract in a futures market together with an offsetting sale or purchase of the same or equivalent contract in a different market at as nearly the same time as practicable for the purpose of taking advantage of a difference in prices in the 2 markets;
“options market-maker” means a person who —
(a)is recognised as such by an Exchange;
(b)enters into futures options transactions for his own account;
(c)regularly publishes bona fide competitive bid and offer quotations in respect of futures options transactions; and
(d)is ready, willing and able to effect transactions in his quoted prices with other persons in respect of those futures options transactions.
Essential particulars of customers
15D.—(1)  A futures broker shall keep a record which shall show for each of its customer’s futures trading accounts or leveraged foreign exchange trading accounts carried by it —
(a)the true name and address of the person for whom such account is carried;
(b)the principal occupation or business of such person; and
(c)the name of any other person guaranteeing such account or exercising any trading control with respect to such account.
(2)  Notwithstanding paragraph (1), where an account carried by a futures broker for a carrying broker is designated in the books of the futures broker as an omnibus account, it is sufficient for the record referred to in that paragraph to show in respect of the information required for that account the particulars as they pertain to the carrying broker, unless the Exchange to which the futures broker is a member otherwise requires.
(3)  A futures trading adviser shall keep a record which shall show for each of its customers —
(a)the true name and address of the customer;
(b)the principal occupation or business of such customer; and
(c)the name of any other person guaranteeing the customer’s account or exercising any trading control with respect to the customer’s account.
(4)  A futures pool operator shall keep a record which shall show the true name and address of each participant of the pool operated by it.
Position limits
16.—(1)  The position limit in respect of —
(a)any futures contract listed on an Exchange; and
(b)any other contract traded by, through or with a futures broker which is a member of an Exchange,
shall be determined from time to time by the Exchange based on such criteria or methodology as may be established by the Exchange with the approval of the Authority.
(2)  The position limit in respect of any futures contract, and any transaction involving leveraged foreign exchange, traded by, through or with a futures broker which is not a member of an Exchange shall be determined by the Authority.
(3)  The position limits under paragraphs (1) and (2) may include limits on a person holding or controlling positions, separately or in combination, net long or net short, for —
(a)the purchase or sale of a futures contract, or on a futures equivalent basis, options thereon; or
(b)a transaction involving leveraged foreign exchange.
(4)  The Authority or the Exchange may require a person (or any person acting for him pursuant to an express or implied agreement or understanding) who holds or controls net long or net short positions in any futures contract or leveraged foreign exchange transaction in excess of the position limit set under paragraph (1) or (2), as the case may be, to trade under such conditions and restrictions as the Authority or the Exchange considers fit to ensure compliance with the position limits set under paragraphs (1) and (2) and may require such person or persons to do any one or more of the following:
(a)to cease any further increase in his or their positions;
(b)to liquidate his or their positions to the position limit set under paragraph (1) or (2) within such time as may be determined by the Authority or the Exchange, as the case may be; or
(c)to be subject to higher margin requirements in respect of his or their positions.
(5)  For the purposes of this regulation, “futures equivalent” means an option contract which has been adjusted by the previous day’s risk factor, or delta coefficient, for that option which had been calculated at the close of trading.
Issue of contract confirmation notes
17.—(1)  A futures broker shall, not later than 2 business days after any futures transaction or leveraged foreign exchange transaction, furnish to his customers a written confirmation of each futures contract or transaction arising from leveraged foreign exchange trading, as the case may be, executed by the futures broker on behalf of that customer.
(2)  The confirmation should include the following information:
(a)the name or style under which the futures broker carries on his business as a futures broker and the address of the principal place at which he so carries on business;
(b)where the 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 Futures Exchange or market in which the transaction took place;
(e)an itemised list of the quantity or amount and the types of futures contracts and transactions arising from leveraged foreign exchange trading that are the subject of the confirmation;
(f)the price per unit of the particular futures contract or leveraged foreign exchange transaction;
(g)the amount of the consideration; and
(h)the rate and amount of commission (if any) charged.
(3)  The requirements of paragraphs (1) and (2) shall not apply if the customer is another futures broker.
Monthly confirmation statements
18.—(1)  A 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 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 another futures broker.
Conduct of business of futures pool operator
19.—(1)  No 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 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 futures pool operator;
(ii)the name of the person who will make the trading decisions for the pool including the futures trading adviser, if any;
(iii)if known, the name of the futures broker through which the pool will execute its trades;
(iv)the types of futures contracts, foreign exchange transactions or leveraged foreign exchange transactions the futures pool operator intends that the pool will trade, with a description of any restrictions or limitations on the trading established by the pool operator; and
(v)a risk disclosure statement as prescribed;
(b)any actual or potential conflict of interest regarding any aspect of the pool on the part of —
(i)the futures pool operator or any of its directors;
(ii)the pool’s futures trading adviser or any director of the futures trading adviser; or
(iii)any futures broker through which the pool’s trades will be executed or any of the futures broker’s directors,
which shall include any arrangement whereby the futures pool operator, futures trading adviser, or the directors thereof may benefit, directly or indirectly, from the maintenance of the pool’s account with the futures broker;
(c)the actual performance record of the futures pool operator, as specified below —
(i)the presentation of actual performance shall 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 futures pool operator shall describe the material differences among the pools for which past performance is disclosed;
(d)the actual performance record of the pool’s futures trading adviser;
(e)a complete description of each kind of expense which the 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 services and in particular —
(i)the 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 dollar 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 futures pool operator shall specifically define each such term; and
(iii)where any fee is based on an increase in the value of the pool, the 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 futures contracts, foreign exchange trading or leveraged foreign exchange trading, as the case may be, or if there is no such minimum amount, the 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 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 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 futures pool operator deposits or invests funds received prior to the commencement of trading by the pool and if the 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, and if the pool will fulfil its margin requirements otherwise than by cash, the futures pool operator shall disclose —
(A)the nature of the 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, and if those funds will be held in assets other than cash, the futures pool operator shall so disclose;
(h)a complete description of any restrictions upon the transferability of a participant’s interest in the pool, and 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 specifying —
(i)how the redemption value of a participant’s interest will be calculated, including the cost associated therewith;
(ii)the conditions under which a participant may redeem his interest including the terms of any notification required; and
(iii)any restrictions on the redemption of a participant’s interest, or if there are no such restrictions, the futures pool operator shall make a statement to that effect;
(j)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;
(k)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;
(l)
(i)a statement whether trading in futures contracts, foreign exchange trading or leveraged foreign exchange trading will be done or is intended to be done for the proprietary account of —
(A)the futures pool operator or any of its directors; or
(B)the pool’s 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 his own account, the futures pool operator shall make a statement to that effect with respect to each such person; and
(m)a statement that the futures pool operator shall provide all participants with monthly or quarterly (whichever applies) statements of account and with a certified annual report.
(2)  No futures pool operator shall use a disclosure document dated more than 6 months preceding the date of its use.
Conduct of business of futures trading adviser
20.—(1)  No futures trading adviser shall solicit, accept or receive from an existing or prospective customer, moneys, securities or other property in the futures trading adviser’s name (or extend credit in lieu thereof) to purchase, margin, guarantee or secure any futures contract, foreign exchange transaction or leveraged foreign exchange transaction of the customer unless he is holding a futures broker’s licence or futures pool operator’s licence under Part III of the Act.
(2)  No futures trading adviser shall solicit or enter into an agreement with a prospective customer unless, at or before the time he engages in the solicitation or enters into the agreement (whichever is the earlier) he delivers or causes to be delivered to the prospective customer, 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 futures trading adviser;
(ii)a description of the trading programme;
(iii)the name of the futures broker, bank or merchant bank with which the futures trading adviser will require the customer to maintain his account;
(iv)the types of futures contracts, foreign exchange transactions or leveraged foreign exchange transactions the futures trading adviser intends to trade, with a description of any restrictions or limitations on such trading established by the futures trading adviser;
(b)the actual performance record of the futures trading adviser over the previous 3 years which shall describe the material differences among those accounts to which the performance record relates;
(c)a complete description of each fee which the futures trading adviser will charge the customer —
(i)wherever possible, the 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 futures trading adviser shall specifically define each such term;
(iii)where any fee is based on an increase in the value of the customer’s futures trading account, foreign exchange trading account or leveraged foreign exchange trading account, the 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 futures trading adviser or any of the directors thereof; or on the part of any futures broker with which the customer will be required to maintain his account and any directors of the futures broker;
(ii)if there is any such actual or potential conflict of interest, the futures trading adviser shall fully describe the nature of the conflict;
(iii)if any of the abovementioned persons does not have any such actual or potential conflict of interest, the futures trading adviser shall make a statement to that effect with respect to each such person; and
(e)
(i)a statement whether trading in futures contracts, foreign exchange trading or leveraged foreign exchange trading will be done or is intended to be done by the futures trading adviser or any of its directors for its or their own account;
(ii)if any of the abovementioned persons will not trade or does not intend to trade in futures contracts for his own account, the futures trading adviser shall make a statement to that effect with respect to each such person.
(3)  No futures trading adviser shall use a disclosure document dated more than 6 months preceding the date of its use.
(4)  A futures trading adviser which carries on a business of undertaking on behalf of a customer, pursuant to a contract or an arrangement with the customer (whether on a discretionary authority granted by the customer or otherwise), trading in futures contracts, foreign exchange trading or leveraged foreign exchange trading for the purposes of managing the customer’s funds, shall —
(a)ensure that customers’ funds are segregated and not commingled with funds belonging to the futures trading adviser, its staff or their connected persons; and
(b)make arrangements for a custodian to maintain a trust account for the futures trading adviser’s customers.
(5)  For the purposes of paragraph (4) —
“custodian” means a financial institution licensed, regulated or supervised by —
(a)the Authority; or
(b)where the financial institution has its principal place of business outside Singapore, a supervisory authority which is recognised by the Authority,
and the financial institution is appointed by the customer or by the futures trading adviser with the prior written consent of the customer;
“trust account” means a current, deposit or property account which —
(a)is kept with a custodian; and
(b)contains the words “Trust Account/Customers” in its title.
Trading standards for futures brokers
21.—(1)  A futures broker shall not withhold or withdraw from the market any order or any part of an order from a customer for its own benefit, the benefit of its connected persons, or for the convenience of another person.
(2)  A futures broker, shall not divulge information relating to an order held by the futures broker, unless the disclosure is necessary for the effective execution of the order or in compliance with such rules of the Exchange or at the request of the Authority.
(3)  A futures broker shall, at a minimum, establish and enforce internal rules, procedures and controls to —
(a)ensure, to the extent that is possible, that each order received from a customer which is capable of being executed at or near the market price is transmitted —
(i)to the floor; or
(ii)to an electronic system provided by an Exchange through which trading in futures contracts is carried out,
before any order for the same futures contract for an account of the futures broker, an account belonging to a connected person or an account in which it has an interest (including any account over which it has discretion), unless the prior specific consent of the customer has been obtained; and
(b)prevent a connected person, or a person controlling an account in which the futures broker has an interest (including any account over which it has discretion), from placing orders, directly or indirectly, with another futures broker in a manner that will circumvent the provisions of sub-paragraph (a).
(4)  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 that person to engage in trading in futures contracts or leveraged foreign exchange trading for the account of that person, at the discretion of the futures broker or its representative, except in circumstances and upon terms and conditions set out in the following sub-paragraphs:
(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 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 —
(i)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.
(ii)The Singapore International Monetary Exchange Limited has introduced certain guidelines for the operation of discretionary accounts, a copy of which will be made available to you upon request.”;
(d)the 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 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.
(5)  For the purposes of paragraph (4), a futures broker and its representative shall not be deemed to be exercising discretion in respect of a customer’s order if the customer specifies the commodity, the quantity of the commodity, year and delivery month of the contract, and whether the transaction is for the purchase or sale of the commodity.
Exemption from section 12 of Act for associated persons
22.  An employee of a bank or a merchant bank who is registered as an associated person of an Exchange pursuant to the rules of that Exchange shall be exempted from the requirement to hold a futures broker’s representative licence under section 12(1) of the Act in relation only to his performing the functions of or acting for a futures broker, which is a related corporation of the bank, or merchant bank in the trading of futures contracts.
Exemption for approved Fund Manager, approved headquarters company, approved Finance and Treasury Centre and specified persons
22A.—(1)  Except as provided for in this regulation, section 12 (1)(b) and (c) and Parts IV and V of the Act shall not have effect in relation to —
(a)an approved Fund Manager which carries on a class of business involving the giving of advice concerning trading in futures contracts, foreign exchange trading or leveraged foreign exchange trading to, or the management of funds for trading in futures contracts, foreign exchange trading or leveraged foreign exchange trading on behalf of, customers for investment purposes but only to the extent that such provision of advice or management of customers’ funds is made in respect of designated investments for foreign investors within the meaning of the Income Tax (Concessionary Rate of Tax for Approved Fund Managers) Regulations (Cap. 134, Rg 7);
(b)an approved headquarters company or an approved Finance and Treasury Centre which carries on a class of business involving the giving of advice concerning trading in futures contracts, foreign exchange trading or leveraged foreign exchange trading or the management of funds for trading in futures contracts, foreign exchange trading or leveraged foreign exchange trading but only to the extent that the provision of investment advice or the management of the funds has been approved as a qualifying service in relation to that headquarters company or Finance and Treasury Centre under section 43E (2)(a) or 43G(2)(a) of the Income Tax Act (Cap. 134), as the case may be; or
(c)a person resident in Singapore who acts, directly or indirectly, as a futures trading adviser to not more than 30 accredited investors.
(2)  A person shall not be exempted or shall cease to be exempted under paragraph (1)(a), (b) or (c), as the case may be, from section 12 (1)(b) and (c), Parts IV and V of the Act, if he acts as a futures trading adviser to persons other than those persons in respect of whom he is granted exemption under paragraph (1)(a), (b) or (c), as the case may be.
(3)  An individual shall not be exempted, or shall cease to be exempted, from section 12 (1)(c) and Parts IV and V of the Act, if —
(a)he is or becomes an employee of a holder of a futures trading adviser’s licence;
(b)he has been adjudged a bankrupt whether in Singapore or elsewhere;
(c)he has been convicted —
(i)whether in Singapore or elsewhere, of any offence in connection with the promotion, formation or management of a corporation, or involving fraud or dishonesty;
(ii)of any offence under the Companies Act (Cap. 50) involving lack of diligence in the discharge of his duties as a director of a corporation;
(iii)of any offence under the Act or any regulations made thereunder; or
(iv)of any offence under the Banking Act (Cap. 19), the Finance Companies Act (Cap. 108), the Securities Industry Act (Cap. 289), the Commodity Futures Act (Cap. 48A), the Money-changing and Remittance Businesses Act (Cap. 187), the Insurance Act (Cap. 142) or the Penal Code (Cap. 224), or any subsidiary legislation made under any of those Acts; or
(d)he fails to comply with paragraph (5).
(4)  A corporation shall not be exempted, or shall cease to be exempted, from section 12 (1)(b) and Parts IV and V of the Act, if —
(a)it is being or will be wound up;
(b)a levy of execution in respect of it has not been satisfied;
(c)a receiver or manager has been appointed, whether by a court or creditors in Singapore or elsewhere, in respect of its property;
(d)it has entered into any composition or arrangement with its creditors;
(e)any of its directors, officers or members has been convicted —
(i)whether in Singapore or elsewhere, of any offence in connection with the promotion, formation or management of a corporation, or involving fraud or dishonesty;
(ii)of any offence under the Companies Act (Cap. 50) involving lack of diligence in the discharge of his duties as a director of a corporation;
(iii)of any offence under the Act or any regulations made thereunder; or
(iv)of any offence under the Banking Act (Cap. 19), the Finance Companies Act (Cap. 108), the Securities Industry Act (Cap. 289), the Commodity Futures Act (Cap. 48A), the Money-changing and Remittance Businesses Act (Cap. 187), the Insurance Act (Cap. 142) or the Penal Code (Cap. 224), or any subsidiary legislation made under any of those Acts; or
(f)it fails to comply with paragraph (5).
(5)  Every person who carries on such business as a futures trading adviser as is referred to in paragraph (1)(c) shall —
(a)lodge with the Authority —
(i)a prescribed notice of commencement of business not later than 14 business days after the commencement of his business as a futures trading adviser; and
(ii)a prescribed notice of cessation of business not later than 14 business days after the cessation of his business as a futures trading adviser; and
(b)furnish to the Authority at such time and in such manner as the Authority may direct, all such information concerning the affairs of its business (other than the identity of, and information relating to, the affairs of specific customers) as the Authority may reasonably require.
(6)  In this regulation —
“approved Fund Manager” means a Fund Manager approved under section 43A(1)(b) of the Income Tax Act (Cap. 134);
“Finance and Treasury Centre” means a Finance and Treasury Centre approved under section 43G(2)(a) of the Income Tax Act (Cap. 134);
“headquarters company” means a headquarters company approved under section 43E(2)(a) of the Income Tax Act.
Exemption for order-fillers and persons engaging in leveraged foreign exchange trading only with accredited investors
22B.—(1)  Except as provided for in this regulation, sections 11 and 12(1)(a) and Parts IV and V of the Act shall not have effect in relation to —
(a)a person who carries on the business of leveraged foreign exchange trading only with accredited investors but not with any other person; or
(b)an order-filler.
(2)  An individual shall not be exempted or shall cease to be exempted from section 12 (1)(a) and Parts IV and V of the Act, if —
(a)he is or becomes an employee of a holder of a futures broker’s licence;
(b)he has been adjudged a bankrupt whether in Singapore or elsewhere;
(c)he has been convicted —
(i)whether in Singapore or elsewhere, of any offence in connection with the promotion, formation or management of a corporation, or involving fraud or dishonesty;
(ii)of any offence under the Companies Act (Cap. 50) involving lack of diligence in the discharge of his duties as a director of a corporation;
(iii)of any offence under the Act or any regulations made thereunder; or
(iv)of any offence under the Banking Act (Cap. 19), the Finance Companies Act (Cap. 108), the Securities Industry Act (Cap. 289), the Commodity Futures Act (Cap. 48A), the Money-changing and Remittance Businesses Act (Cap. 187), the Insurance Act (Cap. 142) or the Penal Code (Cap. 224), or any subsidiary legislation made under any of those Acts; or
(d)he fails to comply with paragraph (4) or (5), as the case may be.
(3)  A corporation shall not be exempted, or shall cease to be exempted, from section 11 and Parts IV and V of the Act, if —
(a)it is being or will be wound up;
(b)a levy of execution in respect of it has not been satisfied;
(c)a receiver or manager has been appointed, whether by a court or creditors in Singapore or elsewhere, in respect of its property;
(d)it has entered into any composition or arrangement with its creditors;
(e)any of its directors, officers or members has been convicted —
(i)whether in Singapore or elsewhere, of any offence in connection with the promotion, formation or management of a corporation, or involving fraud or dishonesty;
(ii)of any offence under the Companies Act (Cap. 50) involving lack of diligence in the discharge of his duties as a director of a corporation;
(iii)of any offence under the Act or any regulations made thereunder;
(iv)of any offence under the Banking Act (Cap. 19), the Finance Companies Act (Cap. 108), the Securities Industry Act (Cap. 289), the Commodity Futures Act (Cap. 48A), the Money-changing and Remittance Businesses Act (Cap. 187), the Insurance Act (Cap. 142) or the Penal Code (Cap. 224), or any subsidiary legislation made under any of those Acts; or
(f)it fails to comply with paragraph (4) or (5), as the case may be.
(4)  Every person who carries on such business as a futures broker as is referred to in paragraph (1)(a) shall —
(a)lodge with the Authority —
(i)a prescribed notice of commencement of business not later than 14 business days after the commencement of his business as a futures broker; and
(ii)a prescribed notice of cessation of business not later than 14 business days after the cessation of his business as a futures broker; and
(b)furnish to the Authority, at such time and in such manner as the Authority may direct, all such information concerning the affairs of its business (other than the identity of, and information relating to, the affairs of specific customers) as the Authority may reasonably require.
(5)  Every person who carries on such business as a futures broker as is referred to in paragraph (1)(b) shall lodge with the Authority —
(a)a prescribed notice of commencement of business not later than 14 business days after the commencement of his business as an order-filler; and
(b)a prescribed notice of cessation of business not later than 14 business days after the cessation of his business as an order-filler.
(6)  In this regulation, an “order-filler” means an individual who is registered as a member of an Exchange for the purpose of entering into contracts on the floor of that Exchange only on behalf of members thereof which are licensed as futures brokers under section 11(1) of the Act.
Change of principal
23.  A futures broker’s representative, futures trading adviser’s representative or futures pool operator’s representative shall not change his principal in relation to which his licence was issued unless he has lodged a notice in Form 31 with the Authority.
Time for document to be lodged
24.  Where a document is by the Act or these Regulations required to be lodged with the Authority 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.
Segregated customers’ funds kept by Exchange or clearing house
25.—(1)  A futures broker shall, in the manner determined by the Exchange, inform the Exchange —
(a)whether a futures contract that is being established on the Exchange is a futures broker’s customer’s contract; and
(b)whether any moneys, securities or properties being deposited with or paid to the Exchange are deposited or paid in respect of or in relation to a futures broker’s customer’s contract.
(2)  The Exchange or a clearing house on receiving moneys, securities and properties which have been notified under paragraph (1) as deposited or paid in respect of or in relation to a futures broker’s customer’s contract shall —
(a)account for such moneys, securities and properties on an aggregated basis, separate from other moneys, securities and properties received by the Exchange or a clearing house from the member; and
(b)ensure that such moneys, securities and properties are deposited in a trust account to be held for the benefit of the member who deposited the moneys, securities and properties and disposed of or used only in respect of or in relation to the futures broker’s customer’s contracts.
(3)  In this regulation —
“customer” has the same meaning as in section 37(9) of the Act;
“futures broker’s customer’s contract” means a futures contract established for the account of a customer of the futures broker.
Winding down and transfer of positions, margins and accounts of defaulting futures broker
26.—(1)  In the event of a default by a futures broker, an Exchange or a clearing house may, with the approval of the Authority —
(a)manage, deal with or liquidate all or any part of the positions belonging to customers and non-customers of the futures broker in default; and
(b)order the transfer of all or any part of the positions, margins and accounts belonging to customers and non-customers of the futures broker in default to one or more futures brokers willing to assume such positions or obligated to do so.
(2)  In this regulation —
“customer” has the same meaning as in section 37(9) of the Act;
“default” means a breach of the minimum financial requirements prescribed in these Regulations, or provided in the business rules of an Exchange or a clearing house, as approved by the Authority.
Requirement for Exchange to register trading personnel
27.  An Exchange shall not allow any person —
(a)in or surrounding any pit, or other place provided by the Exchange for trading of futures contracts, to purchase or sell for another person or for his own account any futures contracts; or
(b)to purchase or sell for another person or for his own account using any electronic system provided by the Exchange through which trading in futures contracts is carried out,
unless that person is registered with the Exchange and such registration has not expired, nor been suspended or revoked by the Exchange.
Large trader reports
28.—(1)  An Exchange shall submit to the Authority on a weekly basis, or at any time upon request by the Authority, a report showing for each type of futures contract listed on that Exchange the aggregate position carried in any futures trading account beneficially held by the same person that exceeds such quantity of futures contracts or futures equivalent option contracts or both as the Authority may, from time to time, determine.
(2)  The report to be submitted by an Exchange to the Authority under paragraph (1) shall be in a format approved by the Authority.
(3)  For the purposes of this regulation, “futures equivalent” has the same meaning as in regulation 16.
Verification of margin funds placed with Exchange or clearing house
29.—(1)  An Exchange or a clearing house shall cause its auditors to submit a report to the Authority bi-annually, or at such other times as requested by the Authority —
(a)certifying that the moneys, securities and properties deposited by a member with the Exchange or a clearing house as margins in respect of or in relation to a futures broker’s customer’s contract are —
(i)segregated from the other moneys, securities and properties deposited by a member with the Exchange or clearing house as margins; and
(ii)deposited in a trust account as required by regulation 25(2)(b) and are not commingled with the funds of the Exchange or a clearing house; and
(b)showing the amount (on an aggregated basis) of all moneys, securities and properties deposited by a member as margins with the Exchange or clearing house —
(i)in respect of or in relation to a futures broker’s customer’s contract; and
(ii)in respect of or in relation to a futures contract other than that referred to in sub-paragraph (i).
(2)  In this regulation, “futures broker’s customer’s contract” means a futures contract established for the account of a customer of the futures broker and which has been notified as such under regulation 25.
Amounts to be paid out of fidelity funds
30.—(1)  For the purposes of section 49I(2H) of the Act, the prescribed amount shall be the sum of $2 million.
(2)  For the purposes of section 49I(2I) of the Act, the prescribed amount shall be the sum of $50,000.
[S 105/2000 wef 06/03/2000]