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Questions and Answers
What is the role of the capital market in a financial system?
The capital market facilitates the buying and selling of financial securities, which helps allocate resources efficiently and supports economic growth.
Discuss the objectives of BDCB and its role in the financial system, particularly in the capital markets.
The objectives of BDCB include promoting stability in the financial system, ensuring compliance with regulations, and protecting investors, particularly in capital markets.
What are the roles of the SMO and the SMR? How do these roles help the Authority attain its regulatory objectives?
The SMO provides a framework for regulating the securities market, while the SMR outlines specific requirements for market participants, facilitating compliance with regulations.
What is the key difference between the SMO and the SMR?
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What are the compoundable offences or breaches under the SMO?
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What entities are supervised and regulated by the Authority?
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What is the primary legislation governing the capital markets in Brunei Darussalam?
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What was the former name of the Brunei Darussalam Central Bank (BDCB)?
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Which organization is responsible for administering the Securities Markets Order, 2013?
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The BDCB has the right to manage and issue currency notes and coins in Brunei Darussalam.
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What is one of the principal objectives of the BDCB?
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The three subsidiary legislations under the SMO are the Securities Markets Regulations, 2015, the Securities Markets (Compoundable Offences) Regulations, 2015, and the Securities Markets (___) Regulations, 2015.
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Match the following objectives of the Authority under the SMO:
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Study Notes
Introduction
- The Brunei Darussalam Central Bank (BDCB) is the principal regulator of the capital markets in Brunei Darussalam.
- The capital market facilitates the flow of funds from investors to issuers of securities.
- Investors provide funds to issuers of securities in exchange for shares or bonds.
- The capital market provides alternative funding options for businesses.
BDCB’s Roles and Responsibilities
- BDCB was established in 2011 and is mandated to maintain price stability, ensure a stable financial system, regulate payment systems, and oversee the development of the financial services sector.
- BDCB is responsible for the issuance and management of the Brunei currency notes and coins.
- BDCB implements monetary policy to maintain the pegged exchange rate between the Brunei Dollar and the Singapore Dollar.
- BDCB is also the primary regulator of banks, financial institutions, capital markets services firms, and other financial service providers.
- BDCB is a member of the International Organization of Securities Commissions (IOSCO) and fully subscribes to the IOSCO Multilateral Memorandum of Understanding (MMoU).
Securities Market Order 2013 & Regulations 2015
- The Securities Markets Order 2013 (SMO) is the primary legal framework for regulating Brunei’s capital markets.
- The SMO defines securities as shares, debentures, and units in collective investment schemes.
- The SMO has three subsidiary regulations, namely: the Securities Markets Regulations 2015 (SMR), the Securities Markets (Compoundable Offences) Regulations 2015, and the Securities Markets (Fees) Regulations 2015.
- Prior to 2013, capital markets were regulated under the repealed Securities Order 2001 and the Mutual Funds Order 2001.
Key Features of the SMO & SMR
- The SMO and SMR require companies to obtain a Capital Markets Services Licence (CMSL) to conduct regulated activities in the capital markets.
- The SMO and SMR require registration of all securities offered to the public. This includes submitting a registration statement and prospectus to the Authority for approval.
- The SMO and SMR also enforce disclosure obligations on issuers, aiming to enhance investor protection and market confidence.
- The SMO and SMR further regulate market operators, market infrastructure providers, capital market intermediaries, and securities themselves.
Regulatory Objectives
- The SMO’s regulatory objectives are to ensure market confidence, promote public awareness, protect investors, and reduce financial crime.
- The SMR provides detailed regulations on securities registration, prospectus requirements, continuing disclosure obligations, CMSL and Capital Market Services Representative’s Licence (CMSRL) requirements, market operator and market infrastructure regulations, and collective investment schemes.
- The SMO empowers the Authority with the discretion to compound certain offenses. This allows the Authority to collect a sum of money from individuals suspected of committing certain offenses, without pursuing legal action.
- Enforcement of the SMO and SMR are essential for fostering market confidence, ensuring fairness, promoting efficiency, and protecting investors.
SMO and SMR Overview
- AMO (Autoriti Monetari Brunei Darussalam) is the regulatory body for the capital market in Brunei Darussalam.
- SMO (Securities Market Order) and SMR (Securities Market Regulations) are the primary and subsidiary legislations for the capital market sector administered by AMO.
- The SMO sets out the general framework for regulating the securities market in Brunei, while the SMR provides detailed rules and regulations.
- The SMO and SMR aim to:
- Protect investors
- Ensure market integrity
- Promote market efficiency
- Facilitate capital formation
SMO and SMR Structure
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SMO Structure:
- Part I: Preliminary matters - defining key terms, scope, and citations.
- Part II: General application of the SMO, including prohibitions and licensing requirements.
- Part III: Regulation of market operators and market infrastructure.
- Part IV: Regulation of self-regulating organizations.
- Part V: Public offering of securities.
- Part VI: Reporting requirements for public companies.
- Part VII: Licensing for CMSL and CMSRL (Capital Markets Services License and Capital Markets Services Representative’s License).
- Part VIII: Requirements for books, audit, and client assets.
- Part IX: Regulation of collective investment schemes (CIS).
- Part X: Authority’s intervention powers in regulated entities.
- Part XI: Complaints committee and investor compensation schemes.
- Part XII: Financial markets services panel.
- Part XIII: Miscellaneous matters, such as license fees and penalties.
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Schedule:
- Part I: List of securities.
- Part II: List of activities deemed investment business.
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SMR Structure:
- Part I: Preliminary matters - commencement and application dates.
- Part II: Registration statement and prospectus requirements for public offerings.
- Part III: Continuing disclosure obligations for public companies.
- Part IV: Requirements for CMSL and CMSRL, including compliance, risk management, and internal audit.
- Part V: Licensing, resources, business conduct, and supervision of market operators and market infrastructure.
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Part VI: Detailed requirements for CIS, including:
- Marketing and transactions.
- Administration.
- Operations and administration.
- Delegation and outsourcing.
- Enforcement.
Securities Defined
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Securities:
- Shares: representation of ownership in a company.
- Debentures: long-term debt instrument.
- Government and public securities: securities issued by government and readily traded.
- Instruments creating entitlements to shares or securities: confer rights to the holder like owning the underlying securities.
- Certificates representing securities: similar to the above but issued by a depository.
- Units in a collective investment schemes (CIS): units in pooled investment scheme (e.g., investment funds).
- Options: right, but not obligation, to buy or sell a financial instrument at a predetermined price.
- Futures: contract to buy or sell an item at a predetermined price and time (e.g., commodities).
- Contracts for differences (CFD): profit or loss based on price difference between entry and exit for financial instruments.
- Investment-linked insurance contracts: insurance policies with investment fund participation.
- Rights and interests in investments: specific rights or interest tied to an investment asset.
Investment Business Activities
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Activities Deemed Investment Business:
- Dealing in Investments: buying and selling of investment securities.
- Arranging deals in investments: facilitating transactions for others to buy or sell securities.
- Safekeeping and administration of assets: holding and managing investment securities for clients.
- Managing securities: handling investment securities on a client's behalf.
- Investment advice: providing customers with guidance on the merits of an investment.
- Establishing collective investment schemes (CIS): setting up arrangements for pooled investments.
- Using computer-based systems for investment instructions: electronic order transmission.
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Description
This quiz explores the roles and responsibilities of the Brunei Darussalam Central Bank (BDCB) and its impact on the capital markets. It covers the functions of the BDCB, including monetary policy, financial regulation, and management of the Brunei currency. Test your knowledge about how BDCB facilitates investment and maintains economic stability in Brunei.
