Is there any legislation or proposed legislation in your jurisdiction under which financial institutions are prohibited from dealing in investments as a principal?

Banks in Singapore carry out the traditional areas of banking, namely, deposit taking, lending, and the issuance of cheques. They may also provide investment services and, subject to certain restrictions imposed by the Banking Act (Cap. 19) and the Securities and Futures Act (Cap. 289), proprietary trading activities.

Section 31 of the Banking Act, for example, provides that no bank in Singapore shall acquire or hold any equity investment in a single company, the value of which exceeds in the aggregate 2% of the capital funds of the bank or such other percentage as the Monetary Authority of Singapore may prescribe, subject to certain exceptions.

A person dealing in securities, whether as principal or agent, is required to be licensed under the Securities and Futures Act (Cap. 289) (SFA). Section 47B of the Securities and Futures (Licensing and Conduct of Business) Regulations (LCB) provides that where any transaction is carried out as principal (Principal), the Principal shall first inform the counterparty to the transaction that it is acting in the transaction as principal and not as agent.

To which financial institutions do the prohibitions relate?

Banks licensed in Singapore under the Banking Act (including foreign bank branches).

What exceptions to the ban on proprietary trading are contemplated by the legislation?

There are no exceptions as proprietary trading is not prohibited in Singapore.

Can any other entity within the relevant financial institution’s group of companies carry on the prohibited activity?

There are no exceptions as proprietary trading is not prohibited in Singapore.

When will the proposed legislation come into effect?

The legislation is already in effect.

Links to the proposed legislation and any other relevant material