13 July 2021
From 2 July 2021 to 1 August 2021, the Monetary Authority of Singapore (“MAS”) is conducting a public consultation on its proposals to strengthen its investigative powers under MAS-administered Acts so as to enhance its ability to gather evidence and facilitate greater inter-agency coordination.
The proposed amendments will be made under a Financial Institutions (Miscellaneous Amendments) Bill (“FI Amendment Bill”).The FI Amendment Bill seeks to introduce amendments to the Banking Act (“BA”), Credit Bureau Act, Financial Advisers Act (“FAA”), Insurance Act (“IA”), Payment Services Act (“PS Act”), Securities and Futures Act (“SFA”), Trust Companies Act (“TCA”) and the upcoming new omnibus Act for the financial sector (“new Act”) (collectively, “relevant Acts”).
Proposed changes include those relating to examinations of persons and recording of statements, entering premises without a warrant, obtaining a court warrant to seize evidence, and the transfer of evidence between MAS, the Police and the Public Prosecutor. Other proposals include clarifying that MAS may reprimand a person under the SFA, FAA and TCA for misconduct even after the person has left a financial institution (“FI”) or the financial industry, and introducing powers for MAS to impose requirements on certain FIs to manage risks arising from the conduct of unregulated business.
1. Enhance MAS’ investigative powers
Requiring information from any person for investigation purposes
It is proposed to give MAS the power to require information, including in electronic form, from any person, including employees and ex-employees of FIs, for the purposes of an investigation. This would help overcome the difficulties where the evidence lies with ex-employees over whom the FI has no authority, or with employees who refuse to comply.
Examinations of persons and recording of statements
MAS proposes the following changes:
- Power to require any person to appear for examination and statement-recording: MAS proposes providing in the BA, IA, PS Act, TCA and the new Act the power for MAS to examine individuals and take statements, and specifying the manner in which this power is to be exercised. This will align these Acts with the SFA and FAA which already contain express powers of examination and the procedural requirements for such examinations.
- Power to obtain a court warrant if examinee fails to appear for examination: To enable MAS to secure attendance at interviews, it is proposed to empower MAS to report any failure by an examinee to attend an interview to a Magistrate, who may then issue a warrant ordering the examinee to attend the interview. Failure to comply with the warrant would result in the examinee being subject to penalties for contempt of court, in addition to the penalties for non-compliance with MAS’ requirement to attend an examination.
- Giving a copy of the written record to the examinee: MAS proposes to make explicit in the relevant Acts its current practice of an MAS investigator providing a copy of a written record of the examination to the examinee upon his request at such time as the investigator determines is appropriate, e.g. when the disclosure will not prejudice ongoing investigations.
Enter premises without warrant
Amendments to the BA, IA, PS Act, TCA and the new Act are proposed to include provisions allowing any MAS investigator or authorised officer to enter any premises without a warrant, if the investigator has reasonable grounds to suspect the premises are, or have been, used by a person being investigated by MAS. This power would not, however, empower MAS to use force to gain entry. Under these provisions, MAS may require any person on the premises to produce evidence which the officers consider relevant to the investigation or to state where such evidence can be found. This power would be exercised where MAS assesses that there is a real risk of evidence being destroyed or tampered with, if a production order is issued in advance of entry.
MAS also proposes to remove the requirement in the SFA and the FAA for MAS to provide two days’ notice to the occupier of the premises before entry can be made without a warrant as this requirement creates an undue risk that incriminating evidence may be destroyed or concealed prior to entry.
Obtain court warrant to seize evidence
Amendments to the BA, IA, PS Act and the new Act are proposed to include provisions enabling MAS to obtain a warrant from the Magistrate to seize evidence, including electronic evidence, from premises when (i) a person has failed to comply with an order to produce such evidence; or (ii) if there is a risk that evidence will be concealed, removed, tampered with or destroyed if a production order is made for the same. These provisions will also set out expressly what MAS may be authorised to do under the warrant.
Existing provisions in the SFA and FAA which allow MAS to obtain a warrant to seize evidence will be clarified to include electronic evidence. Further, MAS proposes to amend the TCA to align the scope of the warrant that may be issued under the TCA with that under the other relevant Acts and to clarify that the warrant also applies to electronic evidence.
Transfer of evidence between MAS, Police and Public Prosecutor
MAS proposes to expand the current transfer of evidence provisions in order to facilitate the efficient and expedient enforcement of offences under the relevant Acts:
- The existing transfer of evidence provisions in the SFA provide for the transfer of evidence obtained under the Criminal Procedure Code (“CPC”) to MAS for civil penalty investigations and actions only in relation to Part XII offences (market misconduct), but not Part VII offences (disclosure of interests). MAS proposes to expand the scope of section 168C(1) of the SFA to allow the transfer of evidence collected under the CPC from the Police to MAS for Part VII civil penalty investigations and actions.
- MAS proposes to expand the scope of section 168B of the SFA to enable the transfer of evidence collected by MAS in cases involving any offence under the SFA (and not only offences under Part XII, as is currently the case) to the Police or the Public Prosecutor for the purpose of criminal investigations or proceedings. Equivalent provisions will be introduced in the other relevant Acts, save for the FAA which already provides for such transfer of evidence in section 76B.
- It is proposed to allow other authorised persons or officers of law enforcement agencies exercising criminal investigative powers under the CPC to transfer to MAS evidence revealing that offences under the relevant Acts have been committed. In this way, MAS can take the appropriate regulatory action against the offender without duplicating investigative efforts.
2. Clarify MAS’ reprimand powers under SFA, FAA and TCA
The SFA, FAA and TCA contain provisions empowering MAS to reprimand a relevant person where MAS is satisfied the relevant person is guilty of misconduct, and if MAS thinks it is necessary in the interest of the public or for the protection of investors, policy owners or protected parties of licensed trust companies, as the case may be (“Reprimand Provisions”).
A “relevant person” includes any FI that is licensed, registered, authorised, approved, recognised or exempted (as applicable) under the SFA, FAA or TCA, as well as any employee, officer, partner or representative (as applicable) of each FI.
Amendments to the Reprimand Provisions are proposed to make clear the policy intent that MAS may reprimand any person who was a “relevant person” at the time of the misconduct, even if they have left the FI (in the case of individuals) or are no longer licensed, registered, authorised, approved, recognised or exempted (in the case of FIs) when the misconduct is discovered or when the reprimand is issued. This is to minimise situations where a “relevant person” leaves the employment of his principal, or ceases its regulatory status (in the case of an FI) to avoid MAS’ censure and maintain a clean record.
3. Empower MAS to issue directions to regulated FIs conducting unregulated business
Regulated FIs holding capital markets services licences to conduct regulated activities under the SFA may conduct unregulated businesses, such as offering products that are not regulated by MAS (e.g. bitcoin futures and other payment token derivatives traded on overseas exchanges). Such unregulated businesses present with risks that need to be managed, e.g. losses from unregulated business activities could adversely affect an FI’s ability to meet its obligations to customers in regulated activities.
Regulated FIs conducting the unregulated business of offering bitcoin futures or other payment token derivatives are subject to MAS guidance to them to adopt risk-mitigating measures, such as maintaining appropriate levels of collateral and disclosing to customers who are retail investors that those products are not regulated by MAS.
In addition to its guidance, MAS proposes to introduce a power in the SFA to issue legally-binding directions to regulated FIs and their representatives in relation to conducting unregulated business. MAS intends to exercise such powers where it considers it necessary in the public interest or in the interest of the investors.
Allen & Gledhill Regulatory & Compliance
To assist our clients with compliance matters, our consultancy arm, Allen & Gledhill Regulatory & Compliance, provides a range of services and solutions. Should you have any queries relating to compliance issues arising out of these developments, please contact: