What powers do national financial services authorities have to examine and investigate compliance? What enforcement powers do they have for compliance breaches? How is compliance examined and enforced in practice?
Examination and investigations into contraventions in general
The MAS has at its disposal a suite of supervisory and investigation powers, and may impose administrative actions for breaches. For example, the MAS may:
- inspect and order the production of books of a financial services firm;
- require a person to appear before an officer of the MAS for examination;
- require the financial services firm to provide such information as the MAS may require;
- enter the premises of the financial services firm without a warrant in connection with an investigation;
- issue written directions to financial services firms;
- transmit information in the possession of the MAS to a regulatory authority of a foreign country in respect of any investigation or enforcement by that regulatory authority; and
- refer the case to the Commercial Affairs Department (CAD) of the Singapore Police Force for criminal investigation where the offence is serious.
Examination and investigations of offences under the SFA and FAA
Since March 2015, the MAS and CAD have been conducting joint investigations into market misconduct offences under the SFA using criminal investigation powers. The joint investigations arrangement was extended to cover all offences under the SFA and the FAA from March 2018. Under this arrangement, MAS officers are vested with all available criminal investigation powers under the Criminal Procedure Code including the powers to:
- obtain documents;
- record statements from persons under investigation or persons who may have information to assist in investigations;
- arrest and to conduct search and seizure;
- access, inspect and decrypt the data contained in the computers and devices where computers and electronic devices are seized; and
- require suspects to surrender their travel documents to prevent suspects from leaving the country.
In addition, the MAS may apply to court for an order to freeze and prohibit any transfers of suspects’ money and securities. It may also seek a range of other injunctive relief, including court orders restraining a person from carrying on a business dealing in securities, restraining a person from trading, and declaring a securities contract void.Disciplinary powers
What are the powers of national financial services authorities to discipline or punish infractions? Which other bodies are responsible for criminal enforcement relating to compliance violations?
The MAS can pursue a wide range of enforcement sanctions as set out in its Enforcement Monograph (revised in September 2018), which include:
- referring a case for criminal prosecution;
- civil penalty actions (court action or settlement);
- withdrawal or suspension of a licence or regulatory status;
- removal from office;
- prohibition orders;
- reprimands; and
- warnings or letters of advice.
As part of the joint investigation arrangement, the MAS may seek stiff imprisonment terms or fines for serious offences under the SFA and the FAA that have been referred to the Attorney-General’s Chambers (AGC) for criminal prosecution. For criminal offences under MAS-administered written laws that are not covered under the joint investigation arrangement, the MAS may refer these to the CAD for criminal investigation, or to the AGC with a view to making a criminal prosecution.
Revocation or suspension of regulatory status
The MAS may revoke or suspend the regulatory status of financial services firms where the financial services firm:
- is found to have widespread control failures;
- has pervasive patterns of non-compliance; or
- has ineffective governance over its operations such that there is gross misconduct by its staff or serious breaches of laws.
The MAS may direct a financial services firm to remove directors and officers under relevant legislation such as the BA and SFA. The MAS may do so if it is satisfied that such a removal would be in the interests of the public or for the protection of the stakeholders of the financial services firm. The severity of the misconduct and the impact caused by the non-performance of the individual’s duties will determine the MAS’s decision on the period for which the individual should remain removed from his or her office or employment.
Compositions, reprimands and warnings
Compositions, reprimands and warnings are administrative sanctions issued by the MAS without the need to go to court. The MAS will take into account the facts and circumstances of each case, including the effect of the breach, the compliance record of the offender, the degree of cooperation shown, and the culpability of the offender in determining which sanction should be administered.
A composition is a financial penalty. An offence may be compounded by the MAS if it is prescribed as compoundable under the relevant legislation. The MAS may seek to retrieve an amount with reference to the fine prescribed by the particular offence. Generally, compositions will be entered in lieu of prosecution where the breach is less serious. Acceptance of compositions does not amount to a guilty plea.
A reprimand is a form of supervisory warning that is more severe than an ordinary supervisory warning or letter of advice. The MAS may issue reprimands where it has found failures in a financial services firm’s internal compliance function or control systems.
The MAS may also reprimand representatives of financial services firms whom it deems guilty of misconduct, if it is satisfied that a reprimand would be in the interests of the public and for the protection of investors.
The MAS may make reprimands public to deter the industry or to safeguard the interests of customers. Such situations include where formal actions have been taken for significant breaches of laws or regulatory requirements and failures to take remedial action following repeated warnings from the MAS.
Warnings and letters of advice
In less serious cases of misconduct or breaches, or cases of first time breaches with low impact on the market, the MAS may issue warnings or letters of advice to the offender. These are usually not published. The fact that an offender has been previously warned by the MAS would be taken into account in any future investigations and enforcement actions against the same person.
Prohibition orders may be issued to bar persons from conducting regulated activities, taking part in the management, acting as a director or becoming a substantial shareholder of a financial services firm in Singapore. These orders are usually issued to persons who do not meet the MAS’s fit and proper requirements, and in more serious cases of misconduct. The severity and effect of the misconduct will determine the MAS’s decision on the duration of the prohibition order.
Powers in relation to market misconduct offences under the SFA and the FAA
Civil penalty actions in court
The MAS may also choose to bring civil penalty actions in court for market misconduct offences. Under the civil penalty regime, action may be taken as long as the contravention can be proven on a balance of probabilities, which is a lower threshold than the criminal standard of proof.
In determining if a civil penalty or criminal sanction is the more appropriate enforcement measure, the MAS will consider factors such as the evidential strength of the case, the severity of the misconduct, the impact on the market, and whether the imposition of a civil penalty is a fair and proportionate sanction that will be an effective deterrent. Before it commences a civil penalty action in court, the MAS will seek the Public Prosecutor’s consent.
Civil penalty settlement
The MAS may also reach an out-of-court settlement with persons who have contravened the market misconduct provisions. However, it is the MAS’s policy to enter into civil penalty settlement agreements only on the basis of an admission of liability.
In determining the civil penalty settlement amount, the MAS will consider a wide range of factors, including:
- impact on the market;
- difficulty in detecting the misconduct (eg, where misconduct was deliberately concealed by using sophisticated trading methods or withholding information); and
- the existence of prior misconduct.
What tribunals adjudicate criminal and civil financial services infractions?
Tribunals that adjudicate financial services civil infractions include the Financial Industry Disputes Resolution Centre (FIDReC), and arbitration tribunals for civil infractions if the contract provides for dispute resolution through arbitration.
The jurisdiction of FIDReC in adjudicating disputes between consumers and financial services firms is up to S$100,000 per claim. FIDReC’s services are available to all consumers who are individuals or sole proprietors. Consumers who have not been able to resolve a dispute with a financial services firm can file a complaint free of charge with FIDReC.
Criminal infractions are adjudicated in the Singapore courts only.Penalties
What are typical sanctions imposed against firms and individuals for violations? Are settlements common?
See question 10.