Singapore to Amend The Financial Institutions (Miscellaneous Amendments) Bill 2024: Enhances MAS Investigative Powers, Enter Premises Without Warrant But No Power to Search or Seize, Individuals to Attend Interviews & Record Written Statements, Court Warrant to Seize Evidence, Transfer Evidence to Other Agencies, Reprimand Powers Increase, Power to Issue Directions to CMS License Holders that Conduct Unregulated Activities
7th March 2024 | Hong Kong
Singapore has proposed (7/3/24) to amend The Financial Institutions (Miscellaneous Amendments) Bill 2024 (2nd reading), including enhancing Monetary Authority of Singapore (MAS) investigative powers, enter premises without warrant but has no power to search or seize, individuals to attend interviews & record written statements, court warrant to seize evidence, transfer evidence to other agencies, reprimand powers increase, and power to issue directions to Capital Markets Services (CMS) license holders that conduct unregulated activities. Singapore MAS: Mr Alvin Tan, Minister of State, Ministry of Culture, Community and Youth & Ministry of Trade and Industry, and Board Member of MAS, on behalf of Mr Lawrence Wong, Deputy Prime Minister and Minister for Finance, and Chairman of MAS, on 7 March 2024 I beg to move, “That the Bill be now read a second time”. – MAS plays a central role in upholding Singapore’s status as a safe and trusted international financial centre. As our financial industry grows in size and complexity, MAS must continually review and enhance its regulatory powers, to ensure it can effectively supervise financial institutions (or “FIs”), as well as investigate and punish serious misconduct in our financial sector.he Financial Institutions (Miscellaneous Amendments) Bill (“FIMA Bill”) will harmonise and enhance MAS’ investigative powers across 6 Acts, namely, Financial Advisers Act 2001 (or “FAA”); the Financial Services and Markets Act 2022 (or “FSMA”); the Insurance Act 1966 (or “IA”); the Payment Services Act 2019 (or “PS Act”); the Securities and Futures Act 2001 (or “SFA”); and the Trust Companies Act 2005 (or “TCA”), (collectively, the “MAS-administered Acts”). Other key amendments in the FIMA Bill pertain to the regulation of capital markets in Singapore. These amendments a) empower MAS to issue directions to Capital Market Services Licence holders (or “CMSL holders”) to manage potential risks from their conduct of unregulated businesses; and b) enhance MAS’ supervisory powers.” See below for more info:
“ Singapore to Amend The Financial Institutions (Miscellaneous Amendments) Bill 2024: Enhances MAS Investigative Powers, Enter Premises Without Warrant But No Power to Search or Seize, Individuals to Attend Interviews & Record Written Statements, Court Warrant to Seize Evidence, Transfer Evidence to Other Agencies, Reprimand Powers Increase, Power to Issue Directions to CMS License Holders that Conduct Unregulated Activities “
Singapore to Amend The Financial Institutions (Miscellaneous Amendments) Bill 2024
7th March 2024 – “Financial Institutions (Miscellaneous Amendments) Bill” – Second Reading Speech by Mr Alvin Tan, Minister of State, Ministry of Culture, Community and Youth & Ministry of Trade and Industry, and Board Member of MAS, on behalf of Mr Lawrence Wong, Deputy Prime Minister and Minister for Finance, and Chairman of MAS, on 7 March 2024
1. Mr Speaker, on behalf of Mr Lawrence Wong,
- Deputy Prime Minister and Minister for Finance, and
- Minister-in-charge of the Monetary Authority of Singapore (“MAS”)
2. I beg to move, “That the Bill be now read a second time”.
Introduction
3. MAS plays a central role in upholding Singapore’s status as a safe and trusted international financial centre. As our financial industry grows in size and complexity, MAS must continually review and enhance its regulatory powers, to ensure it can effectively supervise financial institutions (or “FIs”), as well as investigate and punish serious misconduct in our financial sector.
4. The Financial Institutions (Miscellaneous Amendments) Bill (“FIMA Bill”) will harmonise and enhance MAS’ investigative powers across 6 Acts, namely,
- the Financial Advisers Act 2001 (or “FAA”);
- the Financial Services and Markets Act 2022 (or “FSMA”);
- the Insurance Act 1966 (or “IA”);
- the Payment Services Act 2019 (or “PS Act”);
- the Securities and Futures Act 2001 (or “SFA”); and
- the Trust Companies Act 2005 (or “TCA”),
(collectively, the “MAS-administered Acts”).
5. Other key amendments in the FIMA Bill pertain to the regulation of capital markets in Singapore. These amendments –
- empower MAS to issue directions to Capital Market Services Licence holders (or “CMSL holders”) to manage potential risks from their conduct of unregulated businesses; and
- enhance MAS’ supervisory powers.
Key Features of the FIMA Bill
(A) Enhancement of MAS’ investigative powers
6. Let me start with the amendments to enhance MAS’ investigative powers.
7. MAS investigates and enforces a wide range of violations using its powers under the laws and regulations it administers. Such violations range from breaches of business conduct requirements by regulated FIs, to insider trading and fraud or deception when dealing in securities.
8. Let me give two examples of recent cases:
(i) First, MAS reprimanded several FIs and individuals, including AIA Financial Advisers Pte Ltd and 2 Aviva entities, for breaching requirements under the FAA in relation to remuneration of supervisors as well as adequacy of risk management.
(ii) Second, following contraventions of the SFA and its business conduct requirements by Three Arrows Capital, MAS issued 9-year prohibition orders against Three Arrows Capital’s Chairman and CEO.
9. Such enforcement actions are not possible without MAS conducting rigorous investigations of suspected violations. However, some of the investigation powers available to MAS under the SFA and FAA are not available in the other MAS-administered Acts, specifically the FSMA, IA, PS Act and TCA.
10. For convenience, I shall refer to this latter group of legislation as the “Other MAS-administered Acts”. We also need to strengthen or widen some existing powers under the SFA and FAA to ensure their effectiveness. The FIMA Bill will close these gaps by enhancing and making consistent the investigation powers across all the MAS-administered Acts. The FIMA Bill will also facilitate the transfer of evidence between MAS and other agencies, for enforcement to be more efficient and effective.
11. I shall now explain the main categories of amendments in detail.
Amendments to strengthen evidence gathering capabilities
12. First, MAS is proposing to introduce in the Other MAS-administered Acts, the power to require persons to appear before an MAS officer for examination and statement-recording for the purpose of investigations under the relevant Acts. Such powers already exist under the SFA and FAA, and are effective in enabling investigators to obtain information about suspected misconduct.
13. Second, the FIMA Bill will remove the requirement in the SFA and FAA for MAS to first issue orders to a suspect to produce information and show that the suspect has failed to comply with such orders, before MAS can enter – without a warrant – premises believed to be occupied by the suspect. This will enable MAS to enter premises without tipping off the suspect, and hence reduce the risk of the suspect destroying evidence relevant to the investigation. A similar power to enter premises without a warrant will be extended to the Other MAS-administered Acts.
14. MAS officers will not have powers to search the premises and seize evidence on the premises when they exercise the power of entry without warrant. They can, however, require any person on the premises to produce information, or state where such information can be found. MAS officers can also require any person on the premises to preserve evidence.
15. The FIMA Bill will also introduce provisions in the Other MAS-administered Acts to empower MAS to obtain a Court warrant to search premises and seize evidence. This power already exists in the SFA, FAA and TCA, and it allows MAS to obtain evidence that is in the possession of uncooperative subjects, before it is concealed, removed, tampered with, or destroyed.
Amendments to facilitate transfer of evidence
16. The FIMA Bill will also amend the current transfer of evidence provisions in the SFA and FAA. This will help facilitate exchange of information between MAS and the Police, Public Prosecutor or other law enforcement agencies.
17. In cases where MAS’ investigations reveal serious misconduct that warrants a criminal prosecution, MAS’ ability to transfer evidence to the Police would be helpful. It reduces the need to duplicate investigations and enhances the efficiency of our law enforcement agencies. Conversely, there may be cases investigated by the Police or other law enforcement agencies that may be more effectively or appropriately dealt with by MAS through regulatory actions.
18. However, under the current SFA and FAA, MAS may only transfer evidence to the Police or Public Prosecutor for the purpose of criminal investigations or proceedings for market misconduct offences under the SFA, and offences under the FAA. The FIMA Bill will expand the existing provisions to allow evidence gathered by MAS to be transferred to the Police or the Public Prosecutor, for the purpose of criminal investigations or proceedings for any offence under the MAS-administered Acts.
19. Presently, the Police or other law enforcement agencies may only transfer evidence to MAS for the purpose of civil penalty investigations or actions for market misconduct offences under the SFA. The FIMA Bill will replace these provisions with the power for the Police or other law enforcement agencies to transfer evidence to MAS, for the purpose of taking regulatory actions in respect of any misconduct under the MAS-administered Acts, if such transfer is in the public interest.
20. In this regard, the specific provisions for the transfer of evidence between MAS, the Police and other law enforcement agencies are consistent with the existing general common law principle permitting enforcement agencies to share with other enforcement agencies, evidence that would ordinarily be kept confidential where it is in the public interest to do so. Expressly legislating for the transfer of evidence between MAS, the Police and other law enforcement agencies, notwithstanding this common law principle, will make clear when evidence may be transferred and facilitate operational arrangements in respect of the transfer.
(B) Enhancing MAS’ powers in the capital markets
21. Sir, let me now explain in more detail how the Bill will enable MAS to regulate FIs in the capital markets sector more effectively. This pertains to amendments specific to three (3) Acts, namely the SFA, FAA and TCA.
22. The first set of amendments relates to expanding MAS’ powers to issue directions to CMSL holders and their representatives for their unregulated businesses. Currently, CMSL holders may conduct unregulated businesses such as dealing in products that are not regulated by MAS. Examples of such products include digital payment token derivatives that are traded on overseas exchanges.
23. These unregulated businesses may pose contagion risks to CMSL holders’ regulated businesses. For instance, losses from a CMSL holder’s unregulated business could adversely impact its ability to meet its obligations to customers in its regulated business. Customers may also not be fully aware that regulatory protections do not apply to the CMSL holder’s unregulated businesses.
24. While MAS has issued guidance to CMSL holders on risk-mitigating measures and safeguards that they should adopt when they conduct unregulated businesses, we should put these on a clear legal footing. The FIMA Bill will empower MAS to issue legally binding directions to CMSL holders and their representatives in relation to their conduct of unregulated businesses, to mitigate risks posed to its regulated businesses.
Enhancement of MAS’ supervisory powers
25. The second set of amendments enhances MAS’ supervisory powers under the SFA, FAA and TCA. They will harmonise requirements across the Acts, and where relevant, also align MAS’ powers under these Acts with the Banking Act 1970.
26. I will highlight a few key amendments:
- The first relates to the appointment and removal of key persons. Regulated FIs are generally required to obtain MAS’ approval before appointing their chief executive officers and directors. However, this requirement currently does not apply to locally incorporated recognised market operators and recognised clearing houses, and approved trustees. The FIMA Bill will therefore introduce approval requirements for such entities. In addition, while MAS already has powers across the SFA, FAA and TCA to remove a director or key management officer, there are some minor differences in the grounds for removal. The FIMA Bill will consolidate the grounds for removal into a single ground of not being “fit and proper”. Certain factors that MAS may consider in its assessment are also set out in the Bill.
- The second area relates to persons obtaining control of a capital markets FI. In general, a person acquiring control in capital markets FIs must obtain MAS’ approval before doing so. However, this requirement does not currently apply to locally incorporated recognised market operators and recognised clearing houses, and approved trustees. The FIMA Bill will extend the approval requirement to such entities. For other capital markets FIs, the FIMA Bill will also clarify when MAS’ approval must be sought. Currently, a person must seek MAS’ approval prior to entering into an “arrangement” by which the person would obtain control of a CMSL holder or a licensed financial adviser. Such an arrangement may include early stages of negotiations for the acquisition. This is not MAS’ intent. The FIMA Bill will make clear that MAS’ approval need only be sought before a person obtains control of the regulated entity.
- The last aspect relates to the appointment of external auditors. Presently, MAS’ powers in relation to external auditors of Approved Exchanges, Approved Clearing Houses, Approved Holding Companies, and Licensed Trade Repositories are limited to matters that the auditor must immediately report to the MAS, such as when the auditor becomes aware of any matter that constitutes a breach of the SFA, or an offence involving fraud or dishonesty. It is important that the auditors appointed by such entities can satisfactorily discharge their duties, given the central role that these entities play in the capital markets. The FIMA Bill will introduce the requirement for such entities to obtain MAS’ approval for the appointment of their external auditors on an annual basis. MAS will also have powers to direct these entities to remove or replace their appointed auditors, where the appointed auditors are unable to discharge their duties satisfactorily. With these amendments, MAS will align the approach for capital markets FIs with the approach that MAS has taken for other systemically important FIs under its purview, such as banks and insurance companies.
27. Lastly, the FIMA Bill will also introduce various miscellaneous amendments such as – (a) amendments to clarify MAS’ reprimand powers; (b) amendments consequential from the introduction of new processes – such as updating some of the Acts to remove references to physical licences; and (c) amendments to provide for definitions necessitated by amendments made by this Bill.
Conclusion
28. Mr Speaker, in conclusion, the FIMA Bill will enhance MAS’ ability to enforce its regulatory regime and supervise capital markets FIs more effectively. This will further strengthen Singapore’s position as a safe and trusted international financial centre.
29. Sir, I beg to move.
Singapore to Amend The Financial Institutions (Miscellaneous Amendments) Bill 2024: Enhances MAS Investigative Powers, Enter Premises Without Warrant, Individuals to Attend Interviews & Record Written Statements, Court Warrant to Seize Evidence, Transfer Evidence to Other Agencies, Reprimand Powers Increase, Power to Issue Directions to CMS License Holders that Conduct Unregulated Activities
11th January 2024 – Singapore has proposed (10/1/24) to amend The Financial Institutions (Miscellaneous Amendments) Bill 2024, including enhancing Monetary Authority of Singapore (MAS) investigative powers, enter premises without warrant, individuals to attend interviews & record written statements, court warrant to seize evidence, transfer evidence to other agencies, reprimand powers increase, and power to issue directions to Capital Markets Services (CMS) license holders that conduct unregulated activities. Singapore MAS: “Minister of State, Ministry of Culture, Community and Youth and Ministry of Trade and Industry, Mr Alvin Tan, on behalf of Deputy Prime Minister and Minister-in-charge of the Monetary Authority of Singapore (“MAS”), Mr Lawrence Wong, today moved the Financial Institutions (Miscellaneous Amendments) Bill 2024 (“FIMA Bill”) for First Reading in Parliament. The FIMA Bill enhances and rationalises MAS’ investigative, reprimand, supervisory and inspection powers across various Acts under MAS’ purview. These Acts are namely (a) Financial Advisers Act 2001 (“FAA”); (b) Financial Services and Markets Act 2022 (“FSMA”); (c) Insurance Act 1966 (“IA”); (d) Payment Services Act 2019 (“PS Act”); (e) Securities and Futures Act 2001 (“SFA”); and (f) Trust Companies Act 2005 (“TCA”). The Bill also includes miscellaneous amendments to certain Acts under MAS’ purview which are – (a) consequential from the introduction of new processes; (b) clarificatory or technical in nature; and (c) meant to update the provisions or remove certain administrative constraints.” See below for more info:
Singapore to Amend The Financial Institutions (Miscellaneous Amendments) Bill 2024
10th January 2024 – Minister of State, Ministry of Culture, Community and Youth and Ministry of Trade and Industry, Mr Alvin Tan, on behalf of Deputy Prime Minister and Minister-in-charge of the Monetary Authority of Singapore (“MAS”), Mr Lawrence Wong, today moved the Financial Institutions (Miscellaneous Amendments) Bill 2024 (“FIMA Bill”) for First Reading in Parliament.
The FIMA Bill enhances and rationalises MAS’ investigative, reprimand, supervisory and inspection powers across various Acts under MAS’ purview. These Acts are namely (a) Financial Advisers Act 2001 (“FAA”); (b) Financial Services and Markets Act 2022 (“FSMA”); (c) Insurance Act 1966 (“IA”); (d) Payment Services Act 2019 (“PS Act”); (e) Securities and Futures Act 2001 (“SFA”); and (f) Trust Companies Act 2005 (“TCA”). The Bill also includes miscellaneous amendments to certain Acts under MAS’ purview which are – (a) consequential from the introduction of new processes; (b) clarificatory or technical in nature; and (c) meant to update the provisions or remove certain administrative constraints.
MAS has conducted public consultation on the key amendments in the FIMA Bill. Comments received have been incorporated, where appropriate, into the FIMA Bill.
KEY AMENDMENTS IN THE FIMA BILL
4 Amendments have been made to four key areas, which are briefly described below.
(I) Enhance MAS’ investigative powers
5 To strengthen MAS’ evidence-gathering powers and facilitate greater inter-agency coordination, MAS will introduce several enhancements to its investigative powers under the SFA and the FAA, and amend the IA, PS Act, TCA and the FSMA (collectively, the “other Acts”) to broadly align the investigative powers under the other Acts with those under the SFA and FAA. The main changes are as follows:
(a) Power to compel individuals to attend interviews and record written statements. The existing power under the SFA and FAA to compel individuals to attend interviews and record written statements will be extended to the other Acts.
(b) Entering premises without warrant. The existing power to enter premises without a warrant under the SFA and FAA will be enhanced to allow MAS to do so without giving prior notice, where there are reasonable grounds for suspecting that the premises are or have been occupied by a person who is being investigated in relation to a contravention under the SFA and FAA. This power will also be extended to the other Acts.
(c) Obtaining court warrant to seize evidence. Under the SFA, FAA and TCA, MAS can obtain a Court warrant to enter premises and seize evidence when a person has failed to comply with an order to produce information, or evidence may be destroyed or tampered with. This power will be extended to the IA, PS Act and FSMA.
(d) Transfer of evidence between MAS and other agencies. The current provisions in the SFA and FAA that enable evidence to be transferred between MAS and the Commercial Affairs Department (“CAD”) or the Attorney-General’s Chambers (“AGC”) have been expanded and extended to the other Acts. This will enable (i) MAS to use evidence obtained by other agencies under the Criminal Procedure Code 2010 for MAS’ investigations, regulatory actions, as well as in appeals against the latter; and (ii) CAD and AGC to use evidence gathered via MAS’ exercise of statutory investigative powers for criminal proceedings.
(II) Clarify applicability of MAS’ reprimand powers
6 Currently, under the SFA, FAA and TCA, MAS may reprimand a “relevant person” (which refers to financial institutions regulated by MAS under those Acts or employees, officers, partners or representatives of such regulated financial institutions), whom MAS is satisfied to be guilty of misconduct.
7 The FIMA Bill makes it clear that MAS’ powers under those Acts allow MAS to reprimand a person who was a “relevant person” at the time of the misconduct, even if the person has ceased to be a “relevant person” since the misconduct, i.e. the person is no longer regulated by MAS or has left the employ of a regulated financial institution.
(III) Expand MAS’ powers to issue directions to capital markets services licence holders (“CMSL holders”) that conduct unregulated business
8 CMSL holders 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), which may pose contagion risks to their regulated activities. For instance, losses from unregulated businesses could adversely affect a CMSL holder’s ability to meet its obligations to customers in its regulated activities. While MAS has issued guidance to CMSL holders to adopt risk-mitigating measures if they conduct unregulated businesses with retail investors, the FIMA Bill will now allow MAS to issue written directions on the minimum standards and safeguards that should be in place when CMSL holders and their representatives conduct unregulated businesses.
(IV) Enhance supervisory and inspection powers
9 MAS will enhance its supervisory and inspection powers under the SFA, FAA and TCA, to ensure that it has consistent powers across these Acts and to align with the Banking Act 1970.
10 We set out a summary of the key amendments in the FIMA Bill below:
(a) Appointment and removal of key persons: The SFA will have approval requirements for the appointment of chief executive officers and directors of Singapore-incorporated recognised market operators (“RMOs”), Singapore-incorporated recognised clearing houses (“RCHs”) and approved trustees (“ATs”). The provisions in the FAA and TCA on the appointment of key persons (e.g. chief executive officers, resident managers or directors) of licensed financial advisers (“LFAs”) and licensed trust companies will also be amended to align with provisions in the SFA. The grounds for removal of key persons in these Acts will be aligned to a single fit and proper test;
(b) Obtaining effective control: Existing approval requirements in the SFA and FAA for controllers of CMSL holders and LFAs will be refined so that MAS’ approval is only required prior to a person obtaining effective control. Approval requirements will be extended to controllers of RMOs, RCHs and ATs;
(c) Appointment of agents by foreign regulators: MAS’ powers will be expanded to enable MAS to approve the appointment of agents by foreign regulators to conduct inspection of specified financial institutions under the SFA;
(d) Appointment of external auditors: There will be new requirements and powers in the SFA pertaining to the appointment of external auditors of approved exchanges, approved clearing houses, licensed trade repositories, and approved holding companies;
(e) Failure to exercise reasonable care in submission of information: It will be an offence in the SFA, FAA and TCA if a person, other than an individual, fails to exercise reasonable care in ensuring the accuracy of information submitted to MAS, even if the information is not false or misleading in any material particular; and
(f) Service of documents: There will be similar and consistent provisions in the SFA, TCA and FAA, for service of notices, orders or documents by registered post and electronic service.
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