Implementation of Financial Services and Markets Act 2022 in phases with new provisions on technology risk management in force

27 May 2024

The Financial Services and Markets Act 2022 (“FSMA”) is an omnibus Act for the sector-wide regulation of financial services and markets.

The financial sector has transformed significantly in recent years, in terms of the types of transactions, and the persons, institutions, and technology conducting these transactions. The FSMA ensures that the Monetary Authority of Singapore (“MAS”) keeps abreast of these developments and is equipped with the tools to facilitate the development of these new products and services while managing the risks involved. Some of MAS’ powers on similar issues which were previously spread across various Acts are consolidated into one single Act, e.g. the proper management of technology risk and measures to instil proper conduct among professionals in the financial sector. The FSMA also addresses regulatory challenges presented by the digitalisation and transformation of the financial market.

The FSMA is being implemented in phases, as set out below.

Background

The powers of MAS to regulate the financial sector by entity and activity are set out in various Acts administered by MAS. Over the years, the Monetary Authority of Singapore Act 1970 (“MAS Act”) was amended to include new legislative provisions that applied to financial institutions (“FIs”) across the financial sector. Recognising the increasing need for a financial sector-wide regulatory approach to complement MAS’ entity and activity based regulation in addressing the emerging risks and challenges that impact the financial sector, MAS issued a consultation paper on 21 July 2020 on a proposed new omnibus Act for the financial sector. With the introduction of the new omnibus Act, the provisions in the MAS Act that related to MAS’ regulatory oversight of different FI classes would be moved to the new omnibus Act. These provisions included those relating to the prevention of money laundering and terrorism financing (“ML/TF”), the control and resolution of FIs, and the oversight of financial sector dispute resolution schemes.

In addition, MAS sought to introduce new provisions in the following areas:

  • A harmonised and expanded power for MAS to issue prohibition orders;
  • Enhanced regulation of digital token (“DT”) service providers for ML/TF risks;
  • A harmonised power for MAS to impose requirements on technology risk management (“TRM”); and
  • Statutory protection from liability for mediators, adjudicators, and employees of an operator of an approved dispute resolution scheme.

The consultation closed on 20 August 2020. On 14 February 2022, MAS issued its Response to feedback received from the public consultation. The Financial Services and Markets Bill was tabled in Parliament on 14 February 2022 and passed on 5 April 2022.

Commencement of Phase 1 on 28 April 2023

As mentioned above, the FSMA is being implemented in phases. Phase 1 commenced on 28 April 2023 and saw the migration of the following provisions from the MAS Act to the FSMA:

  • General powers over FIs, including inspection powers, offences, and other miscellaneous provisions.
  • Provisions on anti-money laundering / countering the financing of terrorism (“AML/CFT”).
  • Provisions on financial dispute resolution schemes. Notably, the FSMA provides statutory protection from personal liability for mediators, adjudicators, and employees of an operator of an approved dispute resolution scheme, for doing or omitting to do any act, if the act is done or omitted to be done with reasonable care and in good faith in the course of, or in connection with, any mediation or adjudication of a dispute under the approved dispute resolution scheme. This will strengthen the confidence and autonomy of these individuals when they carry out their duties and align the level of protection for them more closely with that of other public dispute resolution bodies in Singapore and internationally.

Commencement of Phase 2A on 10 May 2024

Phase 2A commenced on 10 May 2024 and relates to the following:

  • New provisions on TRM: The FSMA consolidates existing TRM requirements made under various MAS-administered Acts by introducing powers within the FSMA that apply to any FI or class of FIs. The powers will enable MAS to impose requirements for the management of technology risks (including cyber security risks) and the safe and sound use of technology to deliver financial services and protect data.

To supplement the provisions of the FSMA that come into operation on 10 May 2024, MAS has issued a number of Notices and Guidelines relating to TRM and cyber hygiene. These can be accessed from the MAS website.

  • Provisions relating to the control and resolution of FIs: These provisions are migrated from the MAS Act to the FSMA. The Financial Services and Markets (Resolution of Financial Institutions) Regulations 2024 and the Financial Services and Markets (Prescribed Financial Institutions under Section 49) Regulations 2024 were also issued on 10 May 2024.

Remaining phases

The remaining phases are targeted to be implemented in the second half of 2024. Provisions in the FSMA which have not come into force yet include those relating to the following:

  • Prohibition orders: The FSMA provides MAS with broader powers to impose prohibition orders against persons who have shown themselves to be unfit to perform key roles, activities, and functions in the financial industry. The FSMA broadens the categories of persons who may be subject to POs, rationalises the grounds for issuing POs to a single fit and proper test, and widens the scope of prohibition to cover functions critical to the integrity and functioning of FIs.
  • DT services providers: The FSMA will introduce licensing requirements and general powers over DT services providers, including powers for MAS to conduct AML/CFT inspections and render assistance to domestic authorities and MAS’ foreign AML/CFT supervisory counterparts. MAS will also impose ongoing requirements on DT service providers such that they have a meaningful presence in Singapore and that MAS has adequate supervisory oversight over them, e.g. having a permanent place of business in Singapore and satisfying financial requirements that may be prescribed or specified by MAS by notice in writing. AML/CFT requirements imposed on DT service providers will be aligned with the requirements imposed on digital payment token service providers regulated under the Payment Services Act 2019.

Reference materials

The following materials are available from Singapore Statutes Online sso.agc.gov.sg and the MAS website www.mas.gov.sg: 

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