Singapore MAS Chairman Lawrence Wong on Regulating Index-Linked Funds: Financial Benchmarks Regime Under The Securities & Futures Act 2001 Governs Activities on Setting Of Financial Benchmarks Including Equity & Bond Indices, Offence to Manipulate Index, Singapore Retail Index-Linked Funds Comply with Regulatory & Disclosure Requirements, Fund Mangers Using Indices for Index-Linked Funds Required by Regulation to Conduct Due Diligence of Index Providers, Benchmarks can be Systemically-Important Such as Singapore Interbank Offered Rate SIBOR, Largest Index-Linked Fund in Singapore Account for 3% of Singapore-Constituted Retail Funds
10th May 2024 | Hong Kong
Singapore central bank Monetary Authority of Singapore (MAS) Lawrence Wong (Chairman, Singapore Deputy Prime Minister, Minister for Finance) reply on regulating Index-linked funds – 1) Financial Benchmarks Regime under The Securities & Futures Act 2001 governs activities on setting of financial benchmarks including equity & bond indices, 2) Offence to manipulate index, 3) Singapore retail index-linked funds comply with regulatory & disclosure requirements, 4) Fund mangers using indices for index-linked funds required by regulation to conduct due diligence of index providers, 5) Benchmarks can be systemically-important such as Singapore Interbank Offered Rate (SIBOR), 6) Largest index-linked fund in Singapore account for 3% of Singapore-constituted retail funds. Singapore MAS Chairman Lawrence Wong: “The financial benchmarks regime under the Securities and Futures Act 2001 (“SFA”) governs the activities relating to the setting of financial benchmarks, which include equity and bond indices. It is an offence for any person to manipulate an index administered in Singapore, or for a person in Singapore to manipulate an index that is administered elsewhere. Index-linked funds that are offered to retail investors in Singapore are required to comply with strict regulatory and disclosure requirements. The underlying index must be representative of the market or sector which it aims to replicate. Key information on the index composition, methodology, as well as significant changes to the index must be accessible to investors to enable them to continuously evaluate the representativeness and objectivity of the underlying index. In addition, fund managers using indices for index-linked funds are required by regulation to conduct due diligence on index providers, evaluate suitability and risks associated with the use of indices, and ensure that risks, including potential conflicts of interest, are properly addressed. Where benchmarks are assessed to be systemically-important, MAS will designate and regulate them to ensure that they have proper governance processes and accountability mechanisms. MAS had designated the Singapore Interbank Offered Rate (SIBOR) as a benchmark that is systemically important for Singapore as it was widely referenced by banks to set interest rates for residential property and commercial loans in Singapore. In the case of index-linked funds, the two largest funds account for only 3% and 1% of Singapore-constituted retail funds respectively. Given this, MAS has not assessed and designated any such indices to be systemically-important. In summary, taken together, the overall framework safeguards the credibility of financial benchmarks in Singapore, as well as investors’ interest in index-linked funds.”
“ Singapore MAS Chairman Lawrence Wong on Regulating Index-Linked Funds: Financial Benchmarks Regime Under The Securities & Futures Act 2001 Governs Activities on Setting Of Financial Benchmarks Including Equity & Bond Indices, Offence to Manipulate Index, Singapore Retail Index-Linked Funds Comply with Regulatory & Disclosure Requirements, Fund Mangers Using Indices for Index-Linked Funds Required by Regulation to Conduct Due Diligence of Index Providers, Benchmarks can be Systemically-Important Such as Singapore Interbank Offered Rate SIBOR, Largest Index-Linked Fund in Singapore Account for 3% of Singapore-Constituted Retail Funds “
Singapore MAS Chairman Lawrence Wong on Regulating Index-Linked Funds
Date: For Parliament Sitting on 7 May 2024
Name and Constituency of Member of Parliament
Mr Murali Pillai, MP, Bukit Batok SMC
Question:
To ask the Prime Minister whether a digital platform for the collaborative sharing of money laundering, terrorism and proliferation financing information and cases along the lines of MAS’ Collaborative Sharing of Money Laundering/Terrorism Financing (ML/TF) Information and Cases (COSMIC) may be designed for use by gatekeepers such as law firms, trust and company service providers and accounting firms to increase these gatekeepers’ ability to detect and deter criminal activity and preserve Singapore’s reputation as a trusted financial centre.
Answer by Mr Lawrence Wong, Deputy Prime Minister and Minister for Finance, and Chairman of MAS:
1. MAS’ Collaborative Sharing of Money Laundering/Terrorism Financing (ML/TF) Information and Cases (COSMIC) is a platform for participating banks to share customer information with each other to detect and prevent significant financial crime cases. It targets the risk of criminals exploiting information silos in banks to open or control accounts across multiple banks, and to make illicit transactions through them. COSMIC will better enable these activities to be detected and disrupted across the banking sector.
2. As such information sharing has an impact on customer confidentiality, COSMIC has been carefully designed and implemented, with due consideration for its governance, effectiveness, and safeguards to ensure the proper use and safekeeping of the information shared. Participating banks also need to build confidence in each other that information shared will be carefully safeguarded. MAS is taking a phased approach, starting with six major commercial banks, before considering the expansion of COSMIC to a wider segment of the financial sector in subsequent phases.
3. There is potential to study the usefulness of such a model for other sectors at a later stage. But we will focus on implementing this for banks first, learn from the experience and ensure that it works well, before considering if it can be applied to other sectors.
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