Payment and Settlement Systems (Finality and Netting) Act 2002

Payment and Settlement Systems (Finality and Netting) Act 2002 2020 REVISED EDITION This revised edition incorporates all amendments up to and including 1 December 2021 and comes into operation on 31 December 2021 An Act to make provision for the protection of payment and settlement systems from disruptions that may lead to risks to the financial system and for purposes connected therewith. [9 December 2002] PART 1 PRELIMINARY Short title 1. This Act is the Payment and Settlement Systems (Finality and Netting) Act 2002. Interpretation 2.—(1) In this Act, unless the context otherwise requires — “Authority” means the Monetary Authority of Singapore established under the Monetary Authority of Singapore Act 1970; “book‑entry securities” means any securities that — (a) are issued — (i) by the Government, or a statutory board, under any written law; or (ii) by a corporation; and (b) are transferable by a book‑entry, on a register or otherwise; “business day”, in relation to a designated system — (a) in any case where the Rules of the designated system specify what constitutes a business day for that case, has the same meaning as in those Rules; or (b) in any other case, means any day other than a Saturday, Sunday or public holiday; “collateral holder”, in relation to a designated system, means any person who has possession, control or ownership of any collateral security of the designated system under an arrangement with the operator of the designated system relating to that collateral security; “collateral security”, in relation to a designated system, means any property held by or deposited with a collateral holder for the purpose of securing any liability arising directly in connection with ensuring — (a) the clearing or settlement of payment obligations by the designated system; or (b) the clearing, settlement or transfer of book‑entry securities by the designated system; “default arrangements” means the arrangements made by the operator of a designated system to limit systemic and other types of risks that arise when a participant is or is likely to become unable to meet its obligations in respect of a transfer order, examples of which include any of the following arrangements: (a) any arrangements for netting; (b) any arrangements for the closing out of open positions; (c) any arrangements relating to collateral security; “defaulter” means a person in respect of whom action has been taken by a designated system under its default arrangements; “designated system” means a system that is designated by the Authority under section 3 to be a designated system for the purposes of this Act; “disposition of property” includes a payment made into or out of an account of a participant; “netting” means the conversion into one net claim or one net obligation of claims and obligations resulting from transfer orders which a participant either issues to, or receives from, one or more other participants with the result that only a net claim can be demanded or a net obligation be owed; “operator”, in relation to a designated system, means the person specified in the order referred to in section 3(1) as the operator of the designated system; “participant” means a party to an arrangement that establishes a system; “relevant office holder” means — (a) the Official Assignee exercising his or her powers under the Insolvency, Restructuring and Dissolution Act 2018; (b) a person acting in relation to a company as its liquidator, receiver, receiver and manager, judicial manager or an equivalent officer; or (c) a person acting in relation to an individual as the individual’s trustee in bankruptcy or interim receiver of the individual’s property or an equivalent officer; “Rules”, in relation to a designated system, means any rules, regulations, by‑laws or other similar body of written statements, by whatever name called, and whether or not contained in the constituent documents of the designated system, that govern the activities and conduct of — (a) the designated system; and (b) any other persons in relation to the designated system; “settlement institution”, in relation to a designated system, means any body corporate that — (a) provides accounts for the participants of the designated system, or facilitates the settlement of transfer orders between the participants in the designated system; and (b) is specified in an order under section 3(1) to be the settlement institution of the designated system; “system” means a system established for — (a) the clearing or settlement of payment obligations; or (b) the clearing, settlement or transfer of book‑entry securities; “transfer order” means — (a) an instruction by a participant, which may be carried out in or through one or more designated systems — (i) to place at the disposal of a recipient an amount of money by means of a book‑entry on the accounts of a settlement institution for a designated system; or (ii) that, when settled, results in the assumption or discharge of a payment obligation as defined by the Rules of a designated system; or (b) an instruction by a participant to transfer book‑entry securities. [4/2018; 40/2018] (2) A reference in this Act to the law of insolvency is to be construed as a reference to — (a) the Insolvency, Restructuring and Dissolution Act 2018; and (b) any other written law or rule of law whether of Singapore or a place outside Singapore which is concerned with or in any way related to the bankruptcy, winding up or insolvency of a person. [40/2018] Designation of system 3.—(1) The Authority may, by order in the Gazette, designate a system to be a designated system for the purposes of this Act, if the Authority is satisfied that a disruption in the operations of the system may — (a) trigger, cause or transmit disruption to other participants; (b) trigger or cause systemic disruption to the financial system of Singapore; or (c) affect public confidence in the payment systems of Singapore or in the financial system of Singapore. [4/2018] (2) Any order made under subsection (1) — (a) must specify the operator and settlement institution of the designated system; and (b) has effect until the order is revoked by the Authority. [4/2018] Revocation of designation 4.—(1) The Authority may, by order in the Gazette, revoke the designation of a designated system if — (a) the Authority is satisfied that — (i) the designated system has ceased to operate as a system; (ii) the operator of the designated system has knowingly furnished information or documents to the Authority in connection with the designation of the system which is or are false or misleading in any material particular; (iii) the operator or settlement institution of the designated system is in the course of being wound up or otherwise dissolved, whether in Singapore or elsewhere; (iv) the operator or settlement institution of the designated system has entered into a compromise or scheme of arrangement with its creditors, whether in Singapore or elsewhere; or (v) a receiver, receiver and manager, judicial manager or an equivalent officer has been appointed, whether in Singapore or elsewhere, in relation to or in respect of any property of the operator or settlement institution of the designated system; (b) the Authority is no longer satisfied that a disruption in the operations of the system may have any effect mentioned in section 3(1)(a), (b) or (c); or (c) the Authority considers that it is in the public interest to revoke the designation. [4/2018] (2) Subject to subsection (3), the Authority must not revoke a designation without giving the operator of the designated system an opportunity to be heard. (3) The Authority may revoke a designation on any of the grounds described in subsection (1)(a)(iii), (iv) or (v) without giving the operator of the designated system an opportunity to be heard. (4) A revocation of a designation must not operate so as to avoid or affect any transaction cleared or settled in the designated system prior to the revocation or preclude the application, in accordance with section 5(1), of this Act to any such transaction. [4/2018] Prohibition against holding out as operator or settlement institution of designated system 4A.—(1) A person must not hold out that the person is an operator or a settlement institution of a designated system, unless — (a) the person is an operator or a settlement institution (as the case may be) of a system; and (b) the Authority has designated the system to be a designated system under section 3. [4/2018] (2) Any person who contravenes subsection (1) shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $100,000 or to imprisonment for a term not exceeding 2 years or to both and, in the case of a continuing offence, to a further fine not exceeding $10,000 for every day or part of a day during which the offence continues after conviction. [4/2018] Application of this Act 5.—(1) This Act applies to all transactions cleared or settled in a designated system, subject to any restrictions that the Authority may by order in the Gazette prescribe. [4/2018] (2) Despite subsection (1), the Authority is exempt from complying with any requirement imposed on a participant, an operator, a settlement institution or a collateral holder of a designated system by section 15A, 15B, 16, 19A or 20A, when the Authority acts in the capacity of a participant, an operator, a settlement institution or a collateral holder of a designated system. [4/2018]