Part of a comprehensive analysis of the Financial Services and Markets Act 2022
All Parts in This Series
- PART 1
- PART 2
- PART 3
- PART 4
- PART 4
- PART 5
- PART 6
- PART 7
- PART 8 (this article)
- PART 9
- PART 10
- PART 11
- PART 12
- PART 13
- Part 7
- PART 14
- Part 1
- Part 2
- Part 3
- Part 1
- Part 3
Resolution of Financial Institutions under Part 8: Key Provisions and Their Purpose
Part 8 of the Financial Services and Markets Act 2022 establishes a comprehensive framework for the resolution of financial institutions in Singapore. The primary objective of these provisions is to maintain financial stability, protect affected persons, and ensure the orderly resolution of financial institutions that face distress or failure. The Authority is empowered with a range of resolution measures, including moratoriums, compulsory transfer of business or shares, winding up, and court actions against directors or officers.
"In determining whether to exercise its powers under Divisions 2, 4, 5 and 6 of this Part in relation to a pertinent financial institution, the Authority may have regard to one or more of the following matters: (a) whether a failure of the pertinent financial institution would have a widespread adverse effect on the financial system in Singapore or the economy of Singapore... (b) whether it is in the public interest to do so; (c) any other matter that the Authority considers relevant." — Section 59
Verify Section 59 in source document →
This provision exists to guide the Authority’s discretion in exercising resolution powers, ensuring that actions are taken only when necessary to prevent systemic risk or protect the public interest. It balances the need for intervention with the potential impact on the financial system and economy.
"The Authority may, if the Authority considers it to be in the interests of the affected persons of a specified financial institution, make an order prohibiting that specified financial institution from carrying on its significant business or from doing or performing any act or function connected with its significant business..." — Section 62(1)
Verify Section 62 in source document →
This provision empowers the Authority to impose moratoriums or restrictions on a financial institution’s operations to prevent further deterioration and protect stakeholders. It exists to provide a mechanism for immediate containment of risks during resolution.
"The Authority may make a determination that the whole or any part of the business of a transferor must be transferred to a transferee..." — Section 66(1)
Verify Section 66 in source document →
This compulsory transfer power facilitates the orderly transfer of business or assets from a failing institution to a stable entity, preserving critical functions and minimizing disruption. It exists to maintain continuity of essential financial services.
"On the application of the Authority, the Court may... order under that Act the winding up of a company incorporated in Singapore which is carrying on or has carried on the significant business of a specified financial institution in Singapore..." — Section 63(1)
Verify Section 63 in source document →
This provision allows the Authority to seek judicial winding up of a financial institution when resolution measures require liquidation. It exists to provide a legal avenue for the formal dissolution of insolvent institutions in an orderly manner.
"Without affecting any provision of this Act or any other MAS scheduled Act, if... it appears to the Authority that any past or present director or executive officer of a specified financial institution has failed to discharge the duties of his or her office... the Authority may apply to the Court for, and the Court may make..." — Section 64(1)
Verify Section 64 in source document →
This provision enables the Authority to hold directors or officers accountable for misconduct or failure in their duties, ensuring governance standards are upheld. It exists to protect the integrity of financial institutions and deter managerial negligence or malfeasance.
Definitions in Part 8: Clarifying Scope and Application
Part 8 contains detailed definitions to clarify the scope of its application and ensure precise interpretation of key terms. These definitions are critical for identifying the entities, persons, and concepts to which the resolution powers apply.
"In this Part, unless the context otherwise requires — 'affected person', in relation to a specified financial institution, means any person prescribed by regulations made under section 135 as an affected person for that specified financial institution; 'business' includes affairs and property; 'co-operative society' means a co-operative society registered under the Co-operative Societies Act 1979; 'Court' means the General Division of the High Court; 'director', in relation to a specified financial institution or a significant associated entity referred to in section 130, includes — (a) any person, by whatever name called, occupying the position of director of the specified financial institution or significant associated entity, as the case may be; (b) a person in accordance with whose directions or instructions the directors of the specified financial institution or significant associated entity (as the case may be) are accustomed to act; and (c) an alternate director, or a substitute director, of the specified financial institution or significant associated entity, as the case may be; 'excluded financial institution' means any person who is approved, authorised, designated, recognised, registered, licensed or otherwise regulated by the Authority under this Act or any other MAS scheduled Act, and is prescribed by regulations made under section 135 as an excluded financial institution; 'executive officer', in relation to a specified financial institution or a significant associated entity referred to in section 130, means any person, by whatever name called, who — (a) is in the direct employment of, or acting for or by arrangement with, the specified financial institution or significant associated entity, as the case may be; and (b) is concerned with or takes part in the management of the specified financial institution or significant associated entity (as the case may be) on a day‑to‑day basis; 'office-holder', in relation to a specified financial institution, means any person acting as the liquidator, the provisional liquidator, the receiver or the receiver and manager of the specified financial institution, or acting in an equivalent capacity in relation to the specified financial institution; 'pertinent financial institution' means any person who is approved, authorised, designated, recognised, registered, licensed or otherwise regulated by the Authority under this Act or any other MAS scheduled Act, and is prescribed by regulations made under section 135 as a pertinent financial institution; 'PPF Agency' means the company designated as the deposit insurance and policy owners’ protection fund agency under section 56 of the Deposit Insurance and Policy Owners’ Protection Schemes Act 2011; 'PPF Funds' means the Policy Owners’ Protection Life Fund and the Policy Owners’ Protection General Fund established under section 34 of the Deposit Insurance and Policy Owners’ Protection Schemes Act 2011; 'Registrar of Companies' means the Registrar of Companies appointed under the Companies Act 1967 and includes any Deputy or Assistant Registrar of Companies appointed under that Act; 'Registrar of Co-operative Societies' means the Registrar of Co‑operative Societies appointed under the Co‑operative Societies Act 1979 and includes any Assistant Registrar of Co‑operative Societies appointed under that Act; 'relevant Act', in relation to a specified financial institution, means the Act under which that specified financial institution is approved, authorised, designated, recognised, registered, licensed or otherwise regulated by the Authority; 'relevant provisions', in relation to any specified financial institution, or any person who is carrying on or has carried on the significant business of a specified financial institution, means such provisions of this Act or any other MAS scheduled Act as may be prescribed by regulations made under section 135 as relevant provisions for that specified financial institution or person, as the case may be; 'significant business', in relation to a specified financial institution, means the usual business of a financial institution belonging to the same class of financial institutions as that specified financial institution; 'specified financial institution' means a pertinent financial institution or an excluded financial institution; 'Take-over Code' means the Singapore Code on Take‑overs and Mergers which is referred to in section 139 of the Securities and Futures Act 2001 and is issued by the Authority under section 321(1) of that Act." — Section 58
Verify Section 58 in source document →
The purpose of these definitions is to provide legal certainty and precision. For example, defining "affected person" ensures clarity on who is entitled to protection or compensation during resolution. Defining "specified financial institution" distinguishes between institutions subject to different regulatory regimes. The inclusion of terms such as "director" and "executive officer" clarifies the scope of accountability under the Act.
Penalties for Non-Compliance: Enforcement and Deterrence
Part 8 prescribes a range of penalties to enforce compliance with its provisions and deter misconduct or obstruction during resolution processes. These penalties vary depending on the nature and severity of the offence, including fines, daily penalties for continuing offences, and imprisonment for serious breaches.
"A person who — (a) fails to comply with a direction issued to him or her under subsection (1); (b) contravenes any regulations mentioned in subsection (1); or (c) contravenes subsection (5), shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $125,000 and, in the case of a continuing offence, to a further fine not exceeding $12,500 for every day or part of a day during which the offence continues after conviction." — Section 60(6)
This provision ensures that individuals or entities comply with directions issued by the Authority, which are critical for effective resolution. The daily fines for continuing offences emphasize the importance of timely compliance.
"A person referred to in subsection (1) who, after ceasing to be a specified financial institution, fails to comply with a direction or notice referred to in that subsection shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $1 million and, in the case of a continuing offence, to a further fine not exceeding $100,000 for every day or part of a day during which the offence continues after conviction." — Section 61(3)
Verify Section 61 in source document →
This higher penalty reflects the seriousness of non-compliance by former financial institutions, recognizing the potential risks to the financial system even after cessation of operations.
"A specified financial institution that contravenes an order under subsection (1) shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $250,000 and, in the case of a continuing offence, to a further fine not exceeding $25,000 for every day or part of a day during which the offence continues after conviction." — Section 62(6)
Verify Section 62 in source document →
This provision targets institutions that violate prohibitory orders, reinforcing the Authority’s control during resolution and protecting affected persons.
"A liquidator who — (a) without reasonable excuse, fails to comply with subsection (7) or (9); or (b) in purported compliance with subsection (9), knowingly or recklessly provides any information or document that is false or misleading in a material particular, shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $125,000 or to imprisonment for a term not exceeding 3 years or to both and, in the case of a continuing offence, to a further fine not exceeding $12,500 for every day or part of a day during which the offence continues after conviction." — Section 63(10)
This provision holds liquidators to high standards of honesty and diligence, recognizing their critical role in the resolution process. The possibility of imprisonment underscores the gravity of false or misleading conduct.
"A person that contravenes subsection (15) shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $250,000 and, in the case of a continuing offence, to a further fine not exceeding $25,000 for every day or part of a day during which the offence continues after conviction." — Section 66(16)
Verify Section 66 in source document →
This penalty provision applies to breaches related to transfer orders, ensuring compliance with compulsory transfer mechanisms essential for orderly resolution.
"A person that contravenes subsection (6) shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $250,000 and, in the case of a continuing offence, to a further fine not exceeding $25,000 for every day or part of a day during which the offence continues after conviction." — Section 70(7)
Verify Section 70 in source document →
This provision further reinforces the enforcement regime, covering additional offences under the Part.
Cross-References to Other Legislation: Integrated Regulatory Framework
Part 8 of the Act is closely integrated with other key statutes governing financial institutions and insolvency in Singapore. These cross-references ensure consistency and coherence across the regulatory framework.
"‘co-operative society’ means a co-operative society registered under the Co-operative Societies Act 1979;" — Section 58
Verify Section 58 in source document →
"‘PPF Agency’ means the company designated as the deposit insurance and policy owners’ protection fund agency under section 56 of the Deposit Insurance and Policy Owners’ Protection Schemes Act 2011;" — Section 58
Verify Section 58 in source document →
"‘PPF Funds’ means the Policy Owners’ Protection Life Fund and the Policy Owners’ Protection General Fund established under section 34 of the Deposit Insurance and Policy Owners’ Protection Schemes Act 2011;" — Section 58
Verify Section 58 in source document →
"‘Registrar of Companies’ means the Registrar of Companies appointed under the Companies Act 1967 and includes any Deputy or Assistant Registrar of Companies appointed under that Act;" — Section 58
Verify Section 58 in source document →
"‘Registrar of Co-operative Societies’ means the Registrar of Co‑operative Societies appointed under the Co‑operative Societies Act 1979 and includes any Assistant Registrar of Co‑operative Societies appointed under that Act;" — Section 58
Verify Section 58 in source document →
"‘Take-over Code’ means the Singapore Code on Take‑overs and Mergers which is referred to in section 139 of the Securities and Futures Act 2001 and is issued by the Authority under section 321(1) of that Act." — Section 58
Verify Section 58 in source document →
These definitions link Part 8 to other regulatory regimes, such as deposit insurance, company registration, and take-over rules, ensuring that resolution actions are consistent with broader financial and corporate law.
"On the application of the Authority, the Court may, in addition to the grounds specified in section 125(1) of the Insolvency, Restructuring and Dissolution Act 2018, order under that Act the winding up of a company..." — Section 63(1)
Verify Section 63 in source document →
This cross-reference allows the Authority to invoke insolvency procedures under the Insolvency, Restructuring and Dissolution Act 2018, providing a legal basis for winding up financial institutions in distress.
"that no judicial manager may be appointed under Part 7 of the Insolvency, Restructuring and Dissolution Act 2018 in relation to the specified financial institution..." — Section 62(2)(b)
Verify Section 62 in source document →
This provision restricts the appointment of judicial managers for specified financial institutions, reflecting the specialized resolution regime under Part 8 and avoiding conflicting insolvency processes.
"To avoid doubt, this section does not affect the operation of section 18A of the Employment Act 1968." — Section 67(10)
Verify Section 67 in source document →
This ensures that employment protections under the Employment Act 1968 remain intact during resolution, safeguarding employees’ rights.
Conclusion
Part 8 of the Financial Services and Markets Act 2022 provides a robust legal framework for the resolution of financial institutions in Singapore. Its key provisions empower the Authority to take decisive action to maintain financial stability and protect affected persons, while clearly defining the scope of application and imposing stringent penalties for non-compliance. The integration with other legislation ensures a coherent and effective regulatory environment. This framework is essential for managing financial distress in a manner that minimizes systemic risk and preserves public confidence in Singapore’s financial system.
Sections Covered in This Analysis
- Section 58 – Definitions
- Section 59 – Authority’s considerations in exercising powers
- Section 60(6) – Penalties for non-compliance with directions
- Section 61(3) – Penalties for former financial institutions
- Section 62(1), (2)(b), (6) – Moratorium orders and restrictions
- Section 63(1), (10) – Court-ordered winding up and penalties for liquidators
- Section 64(1) – Court actions against directors and officers
- Section 66(1), (16) – Compulsory transfer of business and penalties
- Section 67(10) – Employment Act preservation
- Section 70(7) – Additional penalties
Source Documents
For the authoritative text, consult SSO.