SINGAPORE Law and Practice Contributed by: Kenneth Pereire and Lin YingXin, KGP Legal LLC
Robo-advisers are regulated under the FAA and SFA subject to their specific activities. They must comply with MAS TRM Guidelines and PDPA for data privacy. Regtech firms offering compliance tools must follow MAS outsourcing guidelines, AML/CFT requirements and PDPA for secure data handling. Crowdfunding platforms would be regulated by the SFA, requiring a Capital Markets Services Licence if they carry out any regulated activity. They must ensure transparency and investor protection per MAS regula - tions. 2.3 Compensation Models In Singapore, industry participants in the fintech sec - tor utilise a variety of compensation models, includ - ing transaction-based fees, subscription models, management fees and commission-based structures, depending on their service offerings. Under the relevant regulatory frameworks, including the FAA and PSA, industry participants are required to provide clear and comprehensive disclosures to their clients. These disclosures must include specific information on the nature, amount, frequency and duration of any fees and charges associated with the services provided. This ensures transparency, help - ing clients fully understand the financial terms of the services they engage with, and fostering trust in the fintech ecosystem. These disclosure requirements are consistent across the various compensation models used in the sector. These disclosure obligations are enforced through MAS conduct requirements under the FAA and PSA, including fair dealing and transpar - ency expectations applicable to financial institutions and payment service providers. 2.4 Variations Between the Regulation of Fintech and Legacy Players In Singapore, fintech companies and banks are regu - lated differently due to varying business models, scale and risks. Fintechs operate under laws like the PSA, SFA, and FAA, tailored to services such as payments, lending and digital assets. Banks are governed by the BA with stricter prudential regulations for capital, liquidity and solvency due to their systemic impor - tance.
Fintechs are generally subject to more activity-specif - ic licensing and proportionate capital requirements, often needing SPI or MPI licences under the PSA, while banks comply with Basel III capital adequacy rules. Fintechs focus on AML, cybersecurity and data privacy with flexible frameworks, whereas banks fol - low stringent AML, CTF and cybersecurity standards. Fintechs typically offer niche products like peer-to- peer lending or robo-advisory, while banks provide a broader range of services subject to stricter regula - tions. Fintechs can test innovative products through MAS’s regulatory sandbox with relaxed requirements, unlike banks, which must adhere to full regulatory compliance. However, the introduction of the DTSP regime under the FSMA 2022 demonstrates MAS’s commitment to closing regulatory gaps, with Sin - gapore-incorporated entities serving overseas cus - tomers now subject to similar stringent oversight as Singapore has a regulatory sandbox, which is oper - ated by the MAS, known as the MAS FinTech Regula - tory Sandbox. This framework provides a controlled environment for testing innovative financial products, services and business models. This allows nascent fintech endeavours space to develop within a super - vised environment. In addition to the general sand - box framework, MAS administers Sandbox Express, which provides a streamlined approval process for certain low-risk activities such as insurance broking and remittances, allowing eligible applicants to com - mence operations within a shorter timeframe subject domestic-serving operations. 2.5 Regulatory Sandbox Singapore’s Regulatory Sandbox Under the regulatory sandbox, companies, including start-ups and existing financial institutions, can apply to test their innovations in a live production environ - ment. During this testing phase, certain regulatory requirements may be relaxed to facilitate experimen - tation, while still ensuring consumer protection and financial stability. Examples of legal and regulatory requirements that MAS is prepared to consider relax - ing for the duration of the sandbox include, but are not limited to: (i) asset maintenance requirements; (ii) to standardised conditions. How the Sandbox Works
730 CHAMBERS.COM
Powered by FlippingBook