Singapore regulatory enforcement update: Q1 2016

Q1 Highlights

Key areas of regulatory focus: market misconduct, corporate governance and KYC

• Enforcement actions for insider trading 
• Guidance on MAS’ approach to enforcement
• Robust enforcement and market discipline: the “Regulatory Landscape for 2016” 
• SingPost and the importance of corporate governance 
• Panama Papers 

Enforcement actions for insider trading

MAS’ first two enforcement actions for the year were for insider trading, a key enforcement priority for 2016. As well as civil penalties, one individual was banned from the industry for 2 years.

Guidance on MAS’ approach to enforcement

In January 2016, MAS published its Capital Markets Enforcement Monograph outlining MAS’ approach to enforcement (found here). This is a helpful articulation of the way in which MAS views its investigation and enforcement powers, and highlights its regular exchange of information with foreign counterparts and close collaboration with other authorities at home (such as the CAD).

It was also an opportunity for the MAS to reinforce that it will “spare no effort in pursuing investigations into suspected market misconduct”.

Robust enforcement and market discipline: the “Regulatory Landscape for 2016”

Mr. Ong Chong Tee, Deputy Managing Director of MAS gave a keynote address at the SGX Equities Dialogue 2016 on the “Regulatory Landscape for 2016”. The speech also touched on Singapore’s market regulatory structure and MAS’ role in market surveillance and enforcement vis-à-vis the SGX and its shared regulatory role (full speech found here).

Mr Ong also took another opportunity to reinforce the MAS’ market abuse agenda:

“MAS has and will spare no effort to investigate any serious market misconduct and to take appropriate enforcement action…our enforcement agencies will be relentless in our pursuit of persons who break our securities laws. We will also seek criminal actions or higher civil penalties in appropriate cases to send the right deterrent message.”

SingPost and the importance of corporate governance

The furore that has erupted over Singapore Post’s (SingPost) corporate governance practices is a clear indicator of a heightened attention in Singapore on corporate governance issues.

In December last year, SingPost acknowledged that it had not properly disclosed a director's interest in a 2014 acquisition due to an "administrative oversight". The director, Keith Tay Ah Kee, had interests relating to SingPost's acquisition of stakes in three companies: Famous Holdings, FS Mackenzie and Famous Pacific Shipping.

SingPost then appointed a special auditor, PwC, to scrutinise the issue, and commissioned a separate corporate governance review. However, PwC’s appointment as special auditor whilst also being SingPost's external auditor, raised questions as to whether the accounting firm's roles were in conflict and would affect its independence. This led to increased scrutiny of SingPost’s corporate governance practices. Following adverse media attention, SingPost then appointed law firm Drew & Napier as joint special auditor. The joint report was published last week and confirmed that the error was as a result of carelessness rather than any intention to deliberately mislead the public. Mr Tay has stepped down as a director in SingPost with immediate effect.

As this shows, good corporate governance matters.

Panama Papers

We end with a story that has been dominating the headlines: the Panama Papers. In response to the second round of leaked names which included a number of household Singapore names, the Ministry of Finance and Monetary Authority of Singapore have said in a joint statement that they "are reviewing the batch of information that was released this morning on the persons and entities identified in the Panama Papers. If there is evidence of wrong-doing by any individual or entity in Singapore, we will not hesitate to take firm supervisory and enforcement action".

It remains to be seen what regulatory action, if any, will be taken. It is likely though that the adequacy of KYC processes will be under the spotlight, which has been a key priority for regulators in Singapore for some time in any event, particularly in an AML context. Banks and financial institutions would do well to re-assess their AML policies and procedures and their relationships with clients named in media reports in preparation for any questions which may be asked.