An extract from The International Investigations Review, 11th Edition

Conduct

i Self-reporting

Singapore's legislative and regulatory framework adopts a disclosure-based regime.

Rule 703 of the Listing Manual (LM) obliges companies listed on the Singapore Exchange to make timely disclosure of any information a listed entity has concerning itself, its subsidiaries or associated companies that is either 'necessary to avoid the establishment of a false market in [its] securities' or that 'would be likely to materially affect the price or value of its securities'. Non-compliance is an offence if intentional or reckless.25 Directors can be prosecuted in their personal capacity if it is proven that the non-compliance was committed with their 'consent or connivance' or is attributable to their neglect.26

Complementing the LM is the revised Code of Corporate Governance (the Code), issued by MAS and applicable to listed companies. Central to the Code is the 'comply or explain' concept.27 Thus, while variations to the Code are permitted, companies must 'explicitly state and explain'28 how their varied practices are 'consistent with the aim and philosophy' of the principles set out in the Code.29

Separately, FIs and payment service providers under mandatory notices issued by MAS, must also self-report. FIs are required to report to MAS misconduct committed by their representatives.30 FIs are also required to undertake internal investigations into their representatives' conduct and to submit an annual nil return where there has been no instance of reportable misconduct during the financial year. Failure to comply attracts criminal penalties.31

On 14 May 2021, MAS issued (1) Consultation Paper on Proposals to Mandate Reference Checks;32 and (2) Response to Feedback from Public Consultation on Revisions to Misconduct Reporting Requirements and Proposals to Mandate Reference Checks for Representatives.33 The Consultation Paper extends MAS's 2018 proposals to implement mandatory reference checks for representatives of FIs, by requiring that reference checks also be mandated for other significant employees whose misconduct has the potential to result in detrimental impact to an FI's prudential soundness, reputation, customers' interests or the public's confidence and trust in the financial industry. In the Response to Feedback, MAS stated it will implement certain measures relating to the reporting of misconduct and reference checks on representatives.

More broadly, self-reporting is also generally required to counter money-laundering and terrorist financing.34

In respect of competition law matters, CCCS has a leniency programme that offers different levels of benefits to businesses, depending on whether they are the first to come forward with information about cartel activity or whether investigations have already commenced when they come forward.35

Where a business is the first to provide evidence of cartel activity and does so before CCCS has commenced an investigation, it can be entitled to immunity from financial penalties, provided the business satisfies certain stipulated conditions.36

If a business is the first to come forward seeking leniency and satisfies all the conditions but does so only after CCCS has started an investigation, it would not qualify for immunity. However, it may still qualify for a reduction of up to 100 per cent of the financial penalties.37

If a business is not the first to come forward, or if it initiated the cartel activity or coerced another party to join the cartel's activity, that business may still be granted a reduction of up to 50 per cent of the financial penalties if it comes forward before CCCS issues a notice of a proposed infringement decision under the Competition Act. However, the business will still need to comply with the other stipulated conditions.38

CCCS also operates a 'leniency plus' programme. This incentivises businesses that cooperate with CCCS in a cartel investigation in one market to inform it of their participation in a separate cartel in another market. Businesses that qualify for this may be granted leniency in respect of the second market and also receive a reduction in the financial penalties in the first market.39

For offences where a deferred prosecution agreement (DPA) is available,40 self-reporting may be a factor considered in the prosecution's decisions on whether to enter into a DPA and on the conditions or any penalty imposed therein.

ii Internal investigations

A business can conduct its own internal investigations.

Internal investigations typically involve conducting interviews with relevant persons and the review of evidence.41 External third parties such as lawyers, accountants, forensic investigators and computer experts often assist in the investigations.

Depending on the seriousness and nature of the matter, individuals being interviewed or whose conduct is being investigated may choose to engage their own lawyers.

From the company's perspective, if there are reasonable grounds to suspect that an internal investigation may lead to legal proceedings, it would be prudent to retain lawyers at the earliest stage. This allows the investigation to be conducted with the benefit of legal advice and assists the company in asserting privilege over matters relating to the investigation.

A key issue that often arises is the extent to which legal professional privilege can be maintained during internal investigations. This was considered in the case of Skandinaviksa Enskilda Banken AB (Publ), Singapore Branch v. Asia Pacific Breweries (Singapore) Pte Ltd and other appeals42 (Skandinaviska).

In Skandinaviska, a company, Asia Pacific Breweries (Singapore) (APBS), constituted a special committee comprising external auditors and lawyers to investigate and review its internal controls after a fraud perpetrated by its finance manager. Although draft reports were prepared by the external auditors, a final report was never issued. The Court of Appeal considered whether the draft reports submitted by the auditors to APBS were protected by legal professional privilege.

Legal advice privilege

The Court of Appeal accepted that communications to and from a third party were not protected by legal advice privilege and the auditors would not be regarded as agents of communication for the purposes of legal advice privilege.

That said, the Court of Appeal endorsed the broader approach laid down by the Australian Federal Court in Pratt Holdings Pty Ltd v. Commissioner of Taxation43 (Pratt Holdings), which focused on the nature of the function the third party performed, rather than the nature of the third party's legal relationship with the party that engaged it.

The Court of Appeal did not have to decide whether the draft auditors' report was subject to legal advice privilege as the issue was not argued by APBS's counsel.

In the recent English Court of Appeal decision of Regina (Jet2.com Ltd) v. Civil Aviation Authority (Law Society Intervening) (Jet2),44 the English Court of Appeal confirmed that the 'dominant purpose' test applied to legal advice privilege, which is in line with the broad view as advanced in Pratt Holdings. While the position appears to be settled in the United Kingdom following Jet2, it remains to be seen whether the Singapore courts would choose to adopt a similar approach in subsequent cases. That said, bearing in mind that the Court of Appeal in Skandinaviska in fact strongly endorsed the broad approach in Pratt Holdings,45 it is likely that our courts will focus on the nature of the function the third party performed, rather than the nature of the legal relationship between the parties.46

Litigation privilege

In Skandinaviska, the Court of Appeal found that the dominant purpose of the draft reports at the time they were created was in aid of litigation. This was influenced by the fact that external auditors and a legal adviser had been appointed to discover and quantify the financial impact of the fraud and to determine APBS's potential liability. As litigation was imminent and 'foremost in the mind' of APBS, these communications were protected by litigation privilege.47

In-house counsel

Under the Evidence Act, legal advice privilege extends to communications with in-house counsel made for the dominant purpose of seeking legal advice.48

Waiver and limited waivers

Various statutes recognise that the powers to compel disclosure of documents and information to an investigating body do not extend to communications protected by legal professional privilege. The Singapore High Court has also held that statutes will not be regarded as revoking legal advice privilege unless that is expressly provided for or abrogated by necessary implication.49

Where internal investigation reports are submitted to regulators, it is important to take steps to maintain and not inadvertently waive privilege at any stage50 and to consider whether the report can be submitted to regulators on a 'limited waiver of privilege' basis and, if so, what the scope of this waiver should be.

iii Whistle-blowers

At present, there is no overarching legislation in Singapore protecting whistle-blowers.

However, different pieces of legislation contain provisions affording some protection. For instance, the Prevention of Corruption Act (PCA)51 and the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (CDSA)52 afford anonymity to whistle-blowers. Similarly, the identity of whistle-blowers on workplace safety hazards is also protected by statute.53 In the implementation of CCCS's leniency programme, CCCS will keep the identity of whistle-blowers confidential.54 Under the Companies Act, auditors are protected from defamation suits and liability when reporting fraud in good faith.55 The Terrorism (Suppression of Financing) Act (TSOFA) also protects the identity of whistle-blowers.56

It is rare for whistle-blowers to be rewarded by means of legislative provision. Two examples are found in competition matters,57 and on information relating to tax evasion.58

The Code requires listed companies to publicly disclose and clearly communicate to employees the existence of any whistle-blowing policy and the procedures for raising concerns of this nature.59

As noted above, SGX RegCo has mandated that issuers establish and maintain a whistleblowing policy, which must keep the identity of the whistle-blower confidential and ensure that the whistle-blower is protected from reprisals.60 In addition, from 1 January 2022, issuers will be required to state in their annual reports that they have such a whistle-blowing policy in place, and provide an explanation of how they have complied with certain key requirements, such as having independent oversight of the policy and commitment to protecting the identity of whistle-blowers.61

Generally, all companies should have a proper whistle-blowing policy in place that provides an independent avenue for whistle-blowing and assurance that there will be no reprisal actions taken against genuine whistle-blowers. However, in respect of frivolous or false complaints, the policy should provide for the potential ramifications.

Other than internal whistle-blowing, affected persons can also report directly to the relevant authorities. This is not uncommon, particularly for employment-related issues. While making a false report to the authorities is an offence, whistle-blowing done in good faith is unlikely to be regarded as a false report.62