Statute Details
- Title: Securities Industry (Exempt Dealers) (No. 2) Notification
- Act Code: SIA1986-N3
- Legislative Type: Subsidiary legislation / notification
- Authorising Act: Securities Industry Act (Chapter 289), section 40(d)(v)
- Revised Edition: Revised Edition 1990 (25th March 1992)
- Current version status: Current version as at 27 Mar 2026 (per extract)
- Key Provisions: Section 1 (citation); Section 2 (when a merchant bank is an exempt dealer and definitions)
What Is This Legislation About?
The Securities Industry (Exempt Dealers) (No. 2) Notification is a targeted regulatory instrument made under the Securities Industry Act (Singapore). In plain terms, it creates a specific category of “exempt dealers” within the securities regulatory framework. The notification does not generally regulate all securities dealing; instead, it addresses a narrow question: when can a merchant bank be treated as an “exempt dealer” for the purposes of section 40(d)(v) of the Securities Industry Act?
At its core, the notification recognises that certain merchant banks—though they may engage in securities dealing—should be exempt from some regulatory requirements if their securities dealing is limited to a particular type of activity. Specifically, the exemption is tied to dealing in “Linkage securities” under the NASD-SES Market Linkage arrangement. This linkage is a cross-market programme connecting market infrastructure and quotations between NASDAQ (United States) and the Stock Exchange of Singapore (SES).
Accordingly, the notification is best understood as a compliance “gatekeeping” document. It sets conditions under which a merchant bank approved as a financial institution by the Monetary Authority of Singapore (MAS) can qualify as an exempt dealer, and it defines the key terms needed to determine whether the dealing falls within the linkage framework.
What Are the Key Provisions?
1. Citation (Section 1)
Section 1 provides the short title: the notification may be cited as the “Securities Industry (Exempt Dealers) (No. 2) Notification.” While this is procedural, it is important for practitioners because it identifies the instrument precisely when referencing it in submissions, compliance manuals, or regulatory correspondence.
2. When a merchant bank is an exempt bank/dealer (Section 2(1))
Section 2 is the substantive provision. It states that, for the purpose of section 40(d)(v) of the Securities Industry Act, a merchant bank that is approved as a financial institution under section 28 of the Monetary Authority of Singapore Act is an exempt dealer if two conditions are met:
- Main business condition (Section 2(1)(a)): the merchant bank’s main business must be other than the dealing in securities.
- Scope of dealing condition (Section 2(1)(b)): the dealing must be by way of dealing in Linkage securities, and the merchant bank must be an Associate of the SES approved to deal in Linkage securities.
Practically, this means the exemption is not a blanket permission for merchant banks to deal in securities. It is conditional and narrow. A merchant bank that is primarily a non-securities business can qualify, but only insofar as its securities dealing is limited to the linkage arrangement and is conducted by an entity that has the requisite SES approval as an Associate.
3. Definitions and the linkage framework (Section 2(2))
Section 2(2) supplies definitions that are essential to applying the exemption. The notification defines “Linkage Information,” “Linkage securities,” and multiple terms relating to NASD/NASDAQ and the NASD-SES Market Linkage programme.
(a) “Linkage Information”
“Linkage Information” is defined broadly to include market data elements for each Linkage security, including:
- Unique identifiers of NASDAQ and SES market-makers and their individual closing price quotations in each Linkage security;
- Closing inside quotations of each Linkage security;
- Last sale prices of each Linkage security (where applicable); and
- Cumulative daily volume of each Linkage security.
This definition matters because it clarifies what data is contemplated within the linkage programme. For compliance purposes, a practitioner should treat “Linkage Information” as the specific category of information that is exchanged and utilised under the linkage arrangement, rather than any generic market data.
(b) “Linkage securities”
“Linkage securities” are defined as securities identified for the purposes of the NASD-SES Market Linkage programme “as agreed upon between NASD and the SES from time to time.” This indicates that the list of eligible securities is not fixed in the notification; it is dynamic and depends on ongoing agreement between the relevant market operators.
From a legal and operational standpoint, this creates an interpretive and monitoring requirement. A merchant bank seeking to rely on the exemption must ensure that the securities it deals in are indeed “Linkage securities” under the current NASD-SES linkage agreement.
(c) NASD, NASDAQ, and market-makers
The notification defines:
- NASD as the National Association of Securities Dealers, Inc., including its corporate subsidiaries (NASDAQ, Inc. and NASD Market Services, Inc.), unless the context requires otherwise;
- NASDAQ as the NASD Automated Quotation System operated by NASDAQ, Inc.;
- NASDAQ market-makers as NASD member firms registered to make a market in Linkage securities by entering quotations in NASDAQ;
- NASD Market Services, Inc. as the NASD subsidiary that processes last sale price information.
These definitions are not merely academic. They support the legal characterisation of the data sources and participants involved in the linkage programme, which in turn supports the conclusion that the dealing is “by way of dealing in Linkage securities” within the intended cross-market framework.
(d) “NASD-SES Market Linkage” and “SES”
The notification defines the NASD-SES Market Linkage as the programme and stock market facilities through which Linkage Information compiled from data originating from market-makers in Linkage securities (including NASDAQ market-makers and SES market-makers) is exchanged between NASD and the SES for utilisation within their respective markets. It also clarifies that the facilities include those of NASDAQ, Inc. and NASD Market Services, Inc.
Finally, “SES” is defined as the Stock Exchange of Singapore Ltd. This is relevant because the exemption requires the merchant bank to be an Associate of the SES approved to deal in Linkage securities. The defined term ensures that the reference is anchored to the specific exchange entity contemplated by the notification.
How Is This Legislation Structured?
This notification is extremely concise. It consists of:
- Section 1: the citation provision.
- Section 2: the operative provision, including:
- Section 2(1): the conditions under which a merchant bank qualifies as an exempt dealer for the purposes of section 40(d)(v) of the Securities Industry Act; and
- Section 2(2): definitions of key terms used to determine the scope of the exemption.
There are no additional parts or schedules in the extract provided. The practical “structure” for a lawyer is therefore: (i) identify the merchant bank’s status under MAS approval; (ii) test the main business condition; (iii) test whether the dealing is limited to Linkage securities; and (iv) confirm the entity’s SES Associate approval and the linkage definitions.
Who Does This Legislation Apply To?
The notification applies to merchant banks that are approved as financial institutions under section 28 of the Monetary Authority of Singapore Act. It does not apply to all securities dealers or all financial institutions; it is specifically directed at merchant banks within the meaning used in the regulatory context.
Even for qualifying merchant banks, the exemption is conditional. The merchant bank must (1) have a main business other than dealing in securities, and (2) conduct dealing by way of dealing in Linkage securities while being an Associate of the SES approved to deal in such securities. Therefore, the notification is best read as a narrow eligibility rule for a particular exemption category, rather than a general authorisation.
Why Is This Legislation Important?
For practitioners, the significance of this notification lies in how it operationalises an exemption under the Securities Industry Act. Section 40(d)(v) is the enabling provision; this notification supplies the detailed conditions and definitions needed to determine whether a merchant bank can be treated as an exempt dealer. In regulatory practice, such exemptions can materially affect licensing obligations, compliance programmes, reporting duties, and the scope of supervisory oversight.
Because the exemption is tied to a specific dealing channel—Linkage securities under the NASD-SES Market Linkage—lawyers advising merchant banks must focus on scope control. The exemption is not simply about the institution’s status; it is about the type of securities dealing and the approved linkage context. This means that internal compliance teams should maintain evidence of:
- the merchant bank’s MAS approval as a financial institution;
- that securities dealing is not the merchant bank’s main business;
- that the securities in question are currently “Linkage securities” under the NASD-SES linkage agreement; and
- that the merchant bank is an SES-approved Associate to deal in Linkage securities.
Finally, the definitions of “Linkage Information” and the NASD/NASDAQ components underscore that the exemption is anchored to a particular market data and trading linkage architecture. This can be important in disputes about whether a particular dealing activity falls within the intended linkage programme, especially where market data feeds or trading arrangements evolve over time.
Related Legislation
- Securities Industry Act (Chapter 289), section 40(d)(v)
- Monetary Authority of Singapore Act (Cap. 186), section 28 (approval of financial institutions)
Source Documents
This article provides an overview of the Securities Industry (Exempt Dealers) (No. 2) Notification for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.