Statute Details
- Title: Securities Industry (Exempt Dealers) (No. 2) Notification
- Act Code: SIA1986-N3
- Type: Subsidiary legislation / statutory notification
- Authorising Act: Securities Industry Act (Chapter 289), section 40(1)(d)(v)
- Revised Edition: Revised Edition 1990 (25th March 1992)
- Status (as provided): Current version as at 27 Mar 2026
- Key Provisions:
- Section 1: Citation
- Section 2: When a merchant bank is an “exempt dealer” (including conditions 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). Its central purpose is to specify when a particular category of financial institution—a merchant bank—can be treated as an “exempt dealer” for the purposes of the Securities Industry Act.
In plain language, the Notification creates a narrow exemption pathway for merchant banks that are otherwise regulated as financial institutions under Singapore’s financial regulatory framework. The exemption is not automatic: it depends on (i) the merchant bank’s regulatory status, (ii) the nature of its main business, and (iii) the limited circumstances in which it may deal in securities—specifically, dealing in Linkage securities through an approved linkage arrangement between the Singapore exchange and the NASDAQ market ecosystem.
Practically, this Notification helps define the boundary between (a) securities dealing activities that trigger the full regulatory regime for dealers under the Securities Industry Act and (b) certain dealing activities that are considered sufficiently circumscribed—because they occur within a defined market linkage and are supported by specified information flows—to justify exempt treatment.
What Are the Key Provisions?
Section 1 (Citation) is straightforward. It provides the short title by which the Notification may be cited: the “Securities Industry (Exempt Dealers) (No. 2) Notification”. While not substantive, citation provisions are important for legal certainty and for referencing the instrument in compliance documentation, regulatory submissions, and enforcement contexts.
Section 2 (When merchant bank is an exempt bank/dealer) is the operative provision. It 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 is an exempt dealer if two conditions are met.
Condition (a): Main business must not be securities dealing. The Notification requires that the main business carried on by the merchant bank is a business other than the dealing in securities. This is a structural limitation. It signals that the exemption is intended for institutions whose primary commercial activity is not securities dealing, but which may nonetheless engage in limited securities-related activities under a controlled framework.
Condition (b): Securities dealing must be limited to “Linkage securities” and must be within an approved status. The Notification further requires that the dealing is “by way of dealing in Linkage securities” and that the merchant bank is an Associate of the SES approved to deal in Linkage securities. This condition does two things:
- It restricts the scope of exempt dealing to a defined class of securities (“Linkage securities”).
- It imposes a status/approval requirement tied to the Stock Exchange of Singapore Ltd (SES)—specifically, that the merchant bank must be an approved Associate for dealing in those securities.
In effect, the exemption is designed to cover a narrow, linkage-driven securities dealing activity rather than general securities dealing. A practitioner should treat this as a compliance “gate”: if the merchant bank deals in securities outside the definition of Linkage securities, or without the required SES Associate approval, the exemption will not apply.
Section 2(2) (Definitions) provides the interpretive framework needed to apply the exemption. The Notification defines “Linkage Information”, “Linkage securities”, and multiple terms relating to the NASD/NASDAQ-SES market linkage programme. These definitions are crucial because they determine what counts as linkage dealing and what information is contemplated by the regulatory scheme.
Key defined terms include:
- “Linkage Information”: includes (a) unique identifiers of NASDAQ and SES market-makers and their individual closing price quotations in each Linkage security, (b) closing inside quotations of each Linkage security, (c) last sale prices where applicable, and (d) cumulative daily volume of each Linkage security.
- “Linkage securities”: securities identified for the NASD-SES Market Linkage as agreed between NASD and the SES from time to time.
- “NASD” and “NASDAQ”: defined with reference to corporate structure and the Delaware incorporation of NASD and its subsidiaries, including NASDAQ, Inc.
- “NASDAQ market-makers”: NASD member firms registered to make a market in Linkage securities by entering quotations in NASDAQ.
- “NASD Market Services, Inc.”: the NASD corporate subsidiary that processes last sale price information.
- “NASD-SES Market Linkage”: the programme and stock market facilities through which Linkage Information compiled from data originating from market-makers in Linkage securities is exchanged between NASD and the SES for use within their respective markets.
- “SES”: the Stock Exchange of Singapore Ltd.
From a legal drafting perspective, these definitions are not merely descriptive; they are functional. They tie the exemption to a specific cross-market linkage arrangement and to specific categories of market data. For counsel advising a merchant bank, the definitions help determine whether the bank’s dealing activity is truly “by way of dealing in Linkage securities” and whether the dealing is connected to the linkage information exchange programme.
How Is This Legislation Structured?
This Notification is compact and structured as follows:
- Section 1: Citation.
- Section 2: Substantive exemption rule for merchant banks, including:
- Section 2(1): The two-part test for when a merchant bank is an exempt dealer under section 40(1)(d)(v) of the Securities Industry Act.
- Section 2(2): Definitions of linkage-related terms (Linkage Information, Linkage securities, NASD/NASDAQ, market-makers, and the NASD-SES Market Linkage programme).
There are no additional parts or schedules in the extract provided; the instrument’s operative content is concentrated in section 2.
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 purport to regulate all dealers generally; instead, it identifies a specific class of institutions and specifies when they may be treated as exempt dealers for the purposes of the Securities Industry Act.
Within that class, the exemption is conditional. A merchant bank qualifies only if its main business is not securities dealing and if its securities dealing is limited to Linkage securities and conducted by a merchant bank that is an Associate of the SES approved to deal in those Linkage securities. Accordingly, the Notification is best understood as a fact-sensitive compliance determination rather than a blanket exemption.
Why Is This Legislation Important?
Although the Notification is brief, it can have significant practical consequences for regulated entities. Being classified as an exempt dealer affects the regulatory obligations that would otherwise apply under the Securities Industry Act framework. For a merchant bank, this can influence licensing/registration requirements, compliance processes, and the scope of permitted dealing activities.
The Notification is also important because it demonstrates how Singapore’s securities regulatory regime can accommodate market infrastructure and cross-border market linkages. The detailed definitions of NASD/NASDAQ and the NASD-SES Market Linkage programme indicate that the exemption is designed to support a specific market linkage ecosystem, where dealing is tied to defined securities and defined market data flows.
For practitioners, the key takeaway is to treat the exemption as a narrow, conditional carve-out. Counsel should verify, with evidence, that:
- the merchant bank is approved under the Monetary Authority of Singapore Act;
- its main business is not securities dealing;
- any securities dealing falls within the definition of Linkage securities (as identified from time to time for the NASD-SES linkage); and
- the bank is an approved SES Associate to deal in Linkage securities.
Because “Linkage securities” are identified “from time to time” by agreement between NASD and the SES, ongoing monitoring is essential. A compliance review should therefore include a process for confirming whether the securities being dealt are currently within the linkage list and whether the dealing activity remains within the linkage framework.
Related Legislation
- Securities Industry Act (Chapter 289), in particular section 40(1)(d)(v)
- Monetary Authority of Singapore Act (Cap. 186), in particular section 28
- NASDAQ-SES / NASD-SES Market Linkage arrangements (as referenced in the definitions, though not legislation per se)
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.