Corporate Governance Requirements Enhanced for Approved Exchanges, Approved Clearing Houses and Approved Holding Companies, Extended to Licensed Trade Repositories

8 May 2024

On 26 April 2024, the Securities and Futures (Corporate Governance of Approved Exchanges, Approved Clearing Houses, Licensed Trade Repositories and Approved Holding Companies) Regulations 2024 (“CG Regs 2024“) were issued. The CG Regs 2024 will come into force on 15 July 2024 and revoke the current Securities and Futures (Corporate Governance of Approved Exchanges, Approved Clearing Houses and Approved Holding Companies) Regulations 2005.

Scope of Application

The CG Regs 2024 will apply to:

(a) an approved exchange;
(b) an approved clearing house;
(c) a licensed trade repository; and
(d) an approved holding company (namely, the holding company of any approved exchange, licensed trade repository, approved clearing house or corporation which is an approved holding company),

(collectively, “Regulated Institutions“).

Key Changes

The CG Regs 2024 aim to strengthen the corporate governance standards for Regulated Institutions in the following key aspects:

(a) Extending the corporate governance requirements in the CG Regs 2024, with some exceptions, to licensed trade repositories in view of their status as systemically important financial market infrastructure. Trade repositories are regulated under the Securities and Futures Act 2001 with the objective of improving the regulation and supervision of over-the-counter (OTC) derivatives markets in Singapore.

(b) Introducing a new requirement for a director of a Regulated Institution to be deemed non-independent after he/she has served a continuous period of nine years or longer on the board of directors (“Board“) of the Regulated Institution.

(c) Requiring that a Regulated Institution’s Board comprise at least one-third of directors who are Singapore citizens or permanent residents.

(d) Raising the proportion of independent directors on the Board, Nominating Committee and Remuneration Committee (“RC“) from one-third to a majority.

(e) Prescribing the responsibilities for the RC in line with best practices for compensation.

(f) Formalising the requirement for a Regulated Institution to have a Risk Management Committee comprising (i) at least directors; and (ii) a majority of directors (including the chairperson of the Risk Management Committee) who are non-executive directors.

(g) Formalising the requirement for a Regulated Institution to have a Conflicts Committee (except for a licensed trade repository and an approved holding company of a licensed trade repository which does not carry on any business other than being a holding company a licensed trade repository).

(h) Prohibiting the appointment of a person who is a member of the immediate family of the chief executive officer of a Regulated Institution as the chairperson of the Board of the Regulated Institution.

(i) Prohibiting a Regulated Institution from appointing a person as its executive officer if he/she is concurrently employed by, among other things, a substantial shareholder of the Regulated Institution (except when the substantial shareholder is: (i) the holding company of the Regulated Institution and also a Regulated Institution; or (ii) the approved holding company of the Regulated Institution).

Implementation Timeline

The CG Regs 2024 will take effect on 15 July 2024. However, the CG Regs 2024 will not apply to a Regulated Institution in the period commencing on 15 July 2024 and ending on the date of the first annual general meeting of the Regulated Institution held after 15 July 2024.

Background Information

The amendments introduced by the CG Regs 2024 were the subject of the Monetary Authority of Singapore’s (“MAS“) consultation paper in 2013 titled “Consultation Paper on Amendments to Corporate Governance Regulations“. The consultation exercise ran from 20 September 2013 to 21 October 2013.

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