Directive No. 7 — Computation of Net Liquid Capital for Trading Members that Hold a Licence Specified in Rule 4.1.1(1)(b)
|Issue Date||Cross Reference||Enquiries|
|Issued on 19 May 2014.||
Please contact Member Supervision:—
Facsimile No : 6538 8273
1.1. This Regulatory Notice sets out the computation of the net liquid capital requirement for a Trading Member that holds a licence specified in Rule 4.1.1(1)(b) pursuant to Rules 11.1A.1(2)(b)and 11.10.1(2).
2. Net Liquid Capital
2.1. A Trading Member that holds a licence specified in Rule 4.1.1(1)(b) shall compute its net liquid capital as follows:
COMPUTATION OF NET LIQUID CAPITAL
|(a) Illiquid assets2||____________|
|(b) Pre-paid expenses3||____________|
|(d) Deferred tax assets||____________|
|(e) Investments in unquoted securities||____________|
|(f) Deficits in clients' accounts less any provisions for bad and doubtful debts5||____________|
|(g) Charged assets6||____________|
|(h) Excess of book value of securities carried in own account over market value||____________|
|(i) Current assets doubtful of collection less any provisions already made||____________|
|(j) Diminution in the value of securities underwritten||____________|
|(k) Unsecured loans and unsecured advances included as current assets||____________|
|(l) Unsecured amounts due from each director and his connected person||____________|
|(m) Unsecured amounts due from related companies||____________|
|NET LIQUID CAPITAL||____________|
3. Submission of Financial Returns to SGX-ST
3.1. A Trading Member that holds a licence specified in Rule 4.1.1(1)(b) shall submit financial returns in the form as set out in paragraph 2.1 on a monthly basis pursuant to Rule 11.10 and on an annual basis pursuant to Rule 11.11.
1 Shareholders' funds means the sum of the ordinary paid-up capital, non-redeemable preference share capital and reserves after deduction of any debit balance appearing in the profit and loss account of the Trading Member.
2 These are assets considered not readily convertible into cash within 30 days which includes intangible assets (goodwill); fixed assets (furniture, fixtures, and building etc).
3 These include items such as rent and insurance.
4 Deposits exclude items such as:—
i. a current account balance, saving account deposit or fixed deposit, including accrued interest, with:
(a) a bank licensed under the Banking Act (Cap. 19);
(b) a merchant bank approved as a financial institution under the Monetary Authority of Singapore Act (Cap. 186);
(c) a finance company licensed under the Finance Companies Act (Cap.108); or
(d) a bank outside Singapore which is subject is approved, licensed, registered or otherwise regulated by a banking regulatory authority in a foreign jurisdiction to carry on banking business; or
ii. a deposit with any of the following:
(a) an approved exchange;
(b) a recognised exchange;
(c) a designated clearing house;
(d) a clearing facility appointed by a recognized exchange; or
(e) an entity which is a member of any entity referred to in sub-paragraphs (a) to (d);
where a recognised exchange means an overseas exchange regulated by a financial service regulatory authority of a country or territory specified under Group A in Table 4 of the Fourth Schedule of the SFR (Financial and Margin Requirements).
5 Deficits in clients' accounts means —
i. For a purchase contract which remains fully or partially unpaid, the excess of the amount owed by the client over the market value of the underlying securities of which the client had failed to take delivery after the due date and of any additional securities lodged by the client with the Trading Member as collateral;
ii. For a sale contract where the securities is yet to be delivered, the excess of the current market value of the underlying securities sold and any additional securities lodged by the client with the Trading Member as collateral, over the contract value of the sale contract;
iii. Where any purchase or sale contract has been offset by a contra transaction on or before the due date, the amount of loss, if any, on the date on which the contra transaction takes effect;
iv. Where any purchase or sale contract has been offset by a forced-sale or buying-in transaction after the due date, the amount of loss, if any, arising from the forced-sale or buying-in transaction on the date on which the transaction takes effect;
v. In relation to each client's margin account carried on the books of the Trading Member, the amount of margin deficiency determined in accordance with the maintenance margin requirement provided in the Trading Member's agreement with the client; and
vi. In relation to interest and other receivables arising from securities transactions, the amount which is not secured and which is outstanding for more than 14 calendar days.
6 Charged assets refer to assets which are subject to a charge under which a third party has a right of retention or sale of the assets upon default of the Trading Member.
Amended on 1 July 2016.