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Regulations for controllers and directors of payment service providers in Singapore

In January 2020 the Singapore Payment Service Act (PSA) came into force. The main goal of the act is to create a contemporary regulatory framework for payment service providers and payment systems in a country that is well known for providing favorable conditions for the FinTech industry.

The PSA recognizes seven types of payment services for the operating of which an entity must acquire a certain license. You can learn more about the different licenses in this article which we prepared specifically on that matter. In this post, we will explore the regulations that govern the ownership of interest and control over payment service license holders (licensees).

Owning shares in licensees under the PSA

For the purpose of this article, a licensee is a company (a corporation) that has obtained a license to perform payment services in Singapore such as e-money issuance, domestic and cross-border transfers, token issuance and trading, etc.

Some restrictions have been provided for by the PSA for individuals who intend to control at least 20% of the shares in a licensee. The act refers to them as “controllers” and a 20% controller is considered a person that alone or together with their associates:

  1. Has an interest in at least 20% of the shares of the licensee or
  2. Is in a position to control at least 20% of the votes in the company

In order to become a 20% controller, the said individual must first file an application with the Monetary Authority of Singapore (MAS). MAS is the institution that in general controls all aspects of the payment service market in Singapore.

The Authority will approve the application if it is satisfied that the new 20% controller is a “fit and proper” person under the guidelines of the MAS. These guidelines will be referenced at the end of the current article. The rules are a bit complex but overall the controller is expected to be competent, honest, to have integrity and to be of sound financial standing.

Upon approving the application the Authority may also impose certain conditions like restrictions for the person’s disposal or further acquisition of shares or voting power in the licensee.

If the conditions for controlling 20% of a licensee are not met the MAS may object to the applications. Objections and directions are also an option if a person already is a 20% controller of a payment service provider.

Offences by 20% controllers

The PSA provides severe penalties for individuals who attempt to contravene the rules and restrictions on control over licensees. The fines for offences reach up to S$250 000 and S$25 000 per day for continued offenses. Another penalty provided for unlawful control over payment service providers is imprisonment for a term of up to 3 years.

Executive officers, directors, and partners of licensees

The PSA also provides regulations for the executive officers and directors of entities holding a payment service license in Singapore. Before appointing a chief executive officer or a director, directly responsible for the whole or any part of the licensee’s business in Singapore, the entity must first apply for and obtain the approval of the MAS.

There are several reasons on which the Authority may refuse an application:

  1. The individual has been convicted of an offense involving fraud and dishonesty in Singapore or elsewhere;
  2. The individual is an undischarged bankrupt, whether in Singapore or elsewhere;
  3. There has been an execution against the individual for unsatisfied debts or the individual has entered into a compromise scheme with their creditors;
  4. The individual has been a director of a financial institution that has been wound up by a court the license of which has been withdrawn or revoked in Singapore or elsewhere.

Once approval has been granted the approved person may be re-appointed as an executive officer again immediately upon the expiry of their appointment term without the need to once again obtain approval.

The MAS may also issue notices for the removal of appointed chief executive officers and directors of licensees if the person no longer meets the criteria that were set for this position in the first place.

Offenses by entities that appoint executive officers

Above we mentioned that the liability for offenses of 20% controllers is personal and the individuals who obtain control over a licensee are subject to fines and even imprisonment. The same is not true in the case of unlawful appointment of an executive officer or a director of a payment service provider. The fine here will be for the entity.

A licensee that, without reasonable excuse, contravenes the regulations for appointing executive officers shall be guilty of an offense and shall be liable on conviction to a fine not exceeding $100 000.

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