Statute Details
- Title: Securities Industry (Exempt Dealers) (No. 2) Notification
- Act Code: SIA1986-N3
- Authorising Act: Securities Industry Act (Chapter 289), section 40(d)(v)
- Type: Subsidiary legislation / notification (sl)
- Revised Edition: Revised Edition 1990 (N 3), 25 March 1992
- Status (as provided): Current version as at 27 March 2026
- Key Provisions:
- Section 1: Citation
- Section 2: When a merchant bank is an “exempt dealer” for purposes of section 40(d)(v) of the Securities Industry Act
What Is This Legislation About?
The Securities Industry (Exempt Dealers) (No. 2) Notification is a Singapore subsidiary legal instrument made under the Securities Industry Act. Its core function is to identify a specific category of market participants—certain merchant banks—that may be treated as “exempt dealers” for a defined regulatory purpose under the Securities Industry Act.
In plain language, the Notification creates a pathway for a merchant bank to be exempted from particular requirements that would otherwise apply to securities dealers. The exemption is not automatic for all merchant banks; it is conditional. The Notification sets out two main conditions: (i) the merchant bank’s main business must be something other than dealing in securities, and (ii) any securities dealing must be limited to a particular type of securities activity—namely dealing in “Linkage securities”—and must be carried out only if the merchant bank is an Associate of the Stock Exchange of Singapore (SES) approved to deal in such Linkage securities.
The Notification also defines the technical terms needed to administer the exemption, including “Linkage securities” and “Linkage Information”. These definitions reflect the cross-market linkage arrangements between the Singapore Exchange environment and the NASDAQ market structure in the United States. For practitioners, the Notification is therefore both a legal instrument and a technical compliance document: it ties legal status (“exempt dealer”) to a specific market linkage framework and to specific data and quotation flows.
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 standard drafting, it matters for legal referencing in submissions, compliance manuals, and regulatory correspondence.
2. Exemption for merchant banks (Section 2(1))
The substantive provision is Section 2, titled “When merchant bank is an exempt bank” (as shown in the extract). The operative language states that, for the purpose of section 40(d)(v) of the Securities Industry Act, a merchant bank approved as a financial institution under section 28 of the Monetary Authority of Singapore Act (Cap. 186) is an exempt dealer if both conditions are satisfied.
Condition A: Main business is not securities dealing (Section 2(1)(a))
The merchant bank must have a main business carried on that is other than dealing in securities. This condition is designed to prevent the exemption from being used by entities whose primary commercial activity is securities dealing. In practice, this requires evidence of business lines, licensing/authorisations, internal business descriptions, and possibly financial or organisational indicators showing that securities dealing is not the core business.
Condition B: Dealing is limited to Linkage securities and only by an approved Associate (Section 2(1)(b))
The second condition is more specific and is the heart of the Notification. It provides that the dealing must be “by way of dealing in Linkage securities” and that the merchant bank must be an Associate of the SES approved to deal in Linkage securities.
This means the exemption is not a general securities dealing exemption. It is a narrow exemption tied to a particular category of securities and a particular regulatory relationship with the SES. For counsel advising a merchant bank, the compliance question is therefore twofold: (i) are the securities in question “Linkage securities” as defined, and (ii) is the merchant bank properly approved as an SES Associate to deal in them?
3. Definitions supporting the exemption (Section 2(2))
Section 2(2) defines multiple terms that are necessary to administer the exemption. These definitions are detailed and reflect the mechanics of the NASD–SES Market Linkage programme.
“Linkage securities” are securities identified for the NASD–SES Market Linkage as agreed between NASD and the SES from time to time. This is an important drafting choice: it makes the category dynamic. Practitioners should therefore not treat “Linkage securities” as a fixed list; rather, it depends on ongoing identification by NASD and SES.
“Linkage Information” is defined broadly to include unique identifiers of NASDAQ and SES market-makers and their individual closing price quotations in each Linkage security; closing inside quotations; last sale prices where applicable; and cumulative daily volume. This indicates that the linkage framework is data-driven and that the exemption is designed to facilitate dealing that relies on or is connected to these cross-market information flows.
The Notification also defines NASD, NASDAQ, NASDAQ market-makers, NASD Market Services, Inc., and NASD–SES Market Linkage. These definitions are relevant because the legal status of the merchant bank depends on whether the dealing is in “Linkage securities” and whether it is within the NASD–SES linkage programme.
“SES” is defined as the Stock Exchange of Singapore Ltd. This anchors the Singapore side of the linkage arrangement.
How Is This Legislation Structured?
The Notification is structured as a short instrument with only two substantive provisions.
Section 1 is purely citation. Section 2 contains both the exemption rule and the definitions. Specifically, Section 2(1) sets out 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. Section 2(2) then provides the interpretive definitions for key terms used in Section 2(1), including “Linkage Information” and “Linkage securities”, and the parties and systems involved in the NASD–SES Market Linkage.
From a practitioner’s perspective, the Notification’s brevity is deceptive: it embeds a regulatory test (main business not securities dealing; dealing limited to Linkage securities; and SES Associate approval) and it incorporates a technical market linkage framework through definitions. Advising on compliance therefore requires both legal analysis and operational understanding of the linkage dealing model.
Who Does This Legislation Apply To?
The Notification applies to merchant banks that meet a threshold regulatory status: they must be approved as financial institutions under section 28 of the Monetary Authority of Singapore Act. This means the exemption is only available to merchant banks already within the MAS regulatory perimeter as financial institutions.
Once that threshold is met, the Notification applies to those merchant banks only to the extent that their securities dealing satisfies the two conditions in Section 2(1). The exemption is therefore conditional and activity-specific. A merchant bank may be approved as a financial institution but still fail to qualify as an exempt dealer if its main business is securities dealing, or if its securities dealing is not limited to Linkage securities, or if it lacks the required approval as an SES Associate to deal in Linkage securities.
Why Is This Legislation Important?
This Notification is important because it operationalises a targeted exemption under the Securities Industry Act. For lawyers and compliance teams, the key practical value is that it provides a legal basis to treat certain merchant banks as “exempt dealers” when they engage in a narrowly defined securities activity connected to the NASD–SES market linkage.
In regulatory terms, exemptions can significantly affect licensing, reporting, conduct obligations, and oversight. Even where the Notification does not itself list all exempted obligations (because it is framed as an exemption trigger for section 40(d)(v) of the Securities Industry Act), it is still a critical step in the compliance chain. Without qualifying as an exempt dealer under the Notification, a merchant bank may need to meet the full dealer regulatory regime applicable under the Securities Industry Act.
From a risk management perspective, the Notification’s conditions create clear compliance checkpoints. First, counsel should confirm and document that the merchant bank’s main business is not securities dealing. Second, counsel should verify that the merchant bank’s dealing is by way of dealing in Linkage securities and that those securities are indeed identified for the NASD–SES Market Linkage. Third, counsel should confirm that the merchant bank is an Associate of the SES and is approved to deal in Linkage securities. Because “Linkage securities” are identified “from time to time”, ongoing monitoring is also essential.
Finally, the definitions of “Linkage Information” and the parties involved underscore that the exemption is tied to a specific market infrastructure and data exchange. This has implications for systems, recordkeeping, and trade support documentation: the dealing model must align with the linkage programme’s information and quotation mechanics.
Related Legislation
- Securities Industry Act (Chapter 289), section 40(d)(v) (authorising provision for this exemption notification)
- Monetary Authority of Singapore Act (Cap. 186), section 28 (approval of merchant banks as financial institutions)
- Stock Exchange of Singapore Ltd (SES) regulatory framework for Associates and Linkage securities dealing (referenced indirectly through the Notification’s conditions)
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.