How to Set Up a Gold Trading Business in Singapore

Published on December 3rd, 2015 by in Blog

Singapore is a prime location for setting up a gold trading company. The country offers support of regulatory frameworks with the developed financial center and established infrastructure that make it ideal for trading companies. Trading in gold is similar to trading in any commodity.

Dating back centuries, the country has been known as one a regional hub for trading commodities. Much of the commodity trade’s prosperity is due to the trading ports in the country.

There were over 280 global trading companies in the country, and incorporating your own gold trading business can be done with relative ease.

Opening a Business in Singapore

Singapore offers many great business opportunities. If you are a foreigner attempting to open a business in the country, you will find the following options beneficial:

  • Global Investors Programme: This is a program that will help foreign individuals open and operate a business in the country.
  • Entrepass: A pass that allows foreigners to start and open a business with a validity of two years.

Registering your business will need to be done with the Accounting & Corporate Regulatory Authority. You want to choose an entity type that is beneficial for your needs. This is best discussed with an accountant that can walk you through the tax benefits and liability benefits offered.

Incorporating is the easy part, but there are some documents that need to be taken care of prior to registration. These documents and information include:

  • Company name (subject to approval)
  • Description of business activities
  • Information pertaining to shareholders
  • Information pertaining to directors
  • Information pertaining to company secretaries
  • Registered address
  • Memorandum and Articles Of Association

Following incorporation, you’ll want to do the following:

  • Open a corporate bank account within the country.
  • Apply for the respective business licenses. This is discussed in detail below for a gold trading businesses.
  • Goods and service tax registration is required.

These are just the minor details that need to be taken care of following your business’s incorporation. You’ll also want to open up your office in the country and hire personnel. Before proceeding, you’ll want to fully understand and get a copy of the Commodity Trading Act of 1992. This act is extensive, but we will briefly cover what it regulates and important details about the act.

Please familiarize yourself with the act before conducting business.

Singapore’s Commodity Trading Act of 1992

Businesses that want to get into the lucrative gold trading market need to know and understand Singapore’s Commodity Trading Act (CTA). The act regulates all of the commodities in the trading sector, and every trader must adhere to its strict rules and regulations.

The CTA regulates the following areas of commodity derivatives:

  • Brokerage
  • Markets
  • Clearing facilities

In 2008, the oversight of commodity futures was transferred to the Monetary Authority of Singapore (MAS). This is the regulating authority that controls all futures commodities and financial instruments. This includes oil, gold and other assets that may be traded.

It’s important to note that other commodity derivatives remain under the CTA. The CTA has helped protect traders and consumers.

Any trading business that wants to operate within the futures sector will need to obtain a “MAS Capital Market License.”

Licensing Requirements

The Singapore government has done its best to weed out overnight companies. As a result, you’ll need to obtain one or more licenses before you can operate in the country. There are six major licenses that you’ll need to consider, depending on the activity that your business is conducting.

  • Brokering in Commodity Contracts: If your business will be brokering in commodity contracts, you will need this license.
  • Brokering in Spot Commodity Contracts: This license will be required if dealing with the brokering of spot commodity contracts.
  • Offering Advisory Services Commodity Contracts: If your business will be offering advisory services in commodity contracts, you’ll need to obtain this license.
  • Commodity Futures Pool Operation: This license will be needed for any commodity company operating a pool operation.
  • Commodity Contracts for Operation: A business will need to acquire this license when operating a pool for commodity contracts.
  • Spot Commodity Contracts Operation: A required license for any commodity company involved in spot commodity contracts.

It’s important to note that anyone trading in gold contracts, or commodity contracts as a whole, will need to apply for licensure. Any personnel that is acting on behalf of your company will need licensing.

Licensing is offered by the IE and MAS respectively.

Penalties are assessed if you operate without a license. Applying is simple and requires the following forms and fees to be submitted to IE Singapore:

  • A statement of the applicant’s assets and liabilities
  • A copy of the Singapore corporation’s:
    • Latest balance sheet
    • Profit and loss account
    • Auditor’s report

In the event that a license is rejected, you can appeal with the Minister Of Trade & Industry within one month of your rejection. The decision will be final.

Compliance Requirements

There are several financial requirements that all commodity brokers must maintain. These requirements include:

  • Adjusted net capital cannot fall for four consecutive weeks below S$250,000 or 10% under the amount of customer funds as required under CTA regulations.
  • Adjusted net capital must not fall below S$400,000 or 12.5% of customer funds required under CTA regulations.

These are just two of the very important compliance requirements. Several more exist, and it’s important to consult with an attorney or accountant to remain compliant at all times.

Financial statements must be provided every financial quarter. This will allow for an overview of the company’s assets and liabilities.

Records and accounts must be kept in an impeccable order. You’ll need records to explain transactions and reflect your company’s financial position. Details of all amounts received and paid in transactions must be provided.

Records and copies of all contracts for a period of no less than six years must be kept.

An auditor must be appointed to audit the account of the business.

Remaining compliant is the key to operating a successful gold trading business in Singapore. You’ll want to consult with a lawyer or accountant to ensure that you follow the rules and regulations of the country. We’ve done our best to inform you of the most important requirements and compliance regulations, but there are numerous others which fall outside of the scope of this article.

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