Singapore’s new bill grants the Monetary Authority of Singapore (MAS) broader authority over the financial sector to oversee, investigate, and penalize misconduct. It aims to address the industry's growth and complexity, enabling MAS to issue directives to capital market services (CMS) license holders and strengthen its supervisory capabilities.
The new Financial Institutions (Miscellaneous Amendments) Bill (FIMA Bill) seeks to amend several legislations in Singapore to give the Monetary Authority of Singapore (MAS) wider investigative and supervisory powers over the financial sector. The proposed amendments come at a time when the financial industry is growing and becoming more complex, necessitating the need to enhance MAS’s regulatory powers to ensure that it can effectively supervise, investigate, and penalize serious misconduct in the financial sector.
The FIMA Bill seeks to harmonize and enhance MAS’s investigative powers across the following six legislations (MAS-Administered Acts) in Singapore:
- Financial Advisers Act 2001 (FAA)
- Financial Services and Markets Act 2022 (FSMA)
- Insurance Act 1966 (the IA)
- Payment Services Act 2019 (PSA)
- Securities and Futures Act 2001 (SFA)
- Trust Companies Act 2005 (TCA)
The bills also aims to empower MAS to issue directions to CMS license holders to manage potential risks from their conduct of unregulated businesses, as well as enhance MAS’s supervisory powers.
The FIMA Bill was first read in the Parliament of Singapore (PARL) on 10 January 2024, and the second reading of the FIMA Bill occurred on 7 March 2024. Before becoming a law, the FIMA Bill will need to go through three readings in the PARL and be assented to by the president of Singapore.
This LawFlash seeks to highlight some of the key features of the FIMA Bill.
KEY FIMA BILL FEATURES
Enhancement of MAS’s Investigative Powers
Currently, some of the investigative powers available to MAS under the SFA and FAA are not available under the FSMA, IA, PSA, and TCA (collectively, the Other Acts).
One of the key features of the FIMA Bill is to strengthen or widen the existing investigative powers of the MAS under the SFA and FAA and close the gap vis-à-vis the Other Acts by enhancing and making consistent the investigative powers of MAS across all the MAS-Administered Acts.
MAIN CATEGORIES OF PROPOSED AMENDMENTS
Strengthen MAS’s Evidence-Gathering Capabilities
Ability to Compel Persons for Examination and Statement Recording
The existing power of MAS to require persons to appear before an MAS officer for examination and statement recording in the SFA and FAA will be extended to the Other Acts. Such powers will enable investigators to obtain information about suspected misconduct more effectively.
Ability to Enter Premises Without Warrant
The SFA and FAA’s existing requirement for MAS to issue orders to a suspect to produce information and show that the suspect has failed to comply with such orders before MAS personnel can enter the premises believed to be occupied by the suspect without a warrant will be removed. A similar power to enter premises without a warrant will be extended to the Other Acts. Such proposed amendments will enable MAS to enter premises without tipping off the suspect which in turn reduces the risks of destruction of evidence relevant to the investigations.
In exercising their power of entry into premises without a warrant, MAS officers will not have the power to search the premises and seize evidence on the premises, but they can require any person on the premises to (1) produce information or state where such information can be found and (2) preserve evidence.
Obtain Court Warrant to Search Premises and Seize Evidence
The existing power in the SFA, FAA, and TCA which empowers MAS to obtain a court warrant to search premises and seize evidence will be extended to the IA, PSA, and FSMA. Such power allows MAS to obtain evidence in the possession of uncooperative subjects before it is concealed, removed, tampered with, or destroyed.
Transfer of evidence between MAS and other agencies:
The existing provisions in the SFA and FAA on transfer of evidence will be amended to help facilitate exchange of information between the MAS and the police, public prosecutor, and other law enforcement agencies. This will help reduce duplicative investigation efforts and enhance the efficiency of the law enforcement agencies, as well as allow the more appropriate enforcement agency to deal with the relevant investigation and enforcement.
Under the current SFA and FAA, the 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 under the SFA and FAA to allow evidence gathered by MAS to be transferred to the police or public prosecutor for the purpose of criminal investigations or proceedings for any offence under the MAS-Administered acts.
Currently, 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 such provisions with the power for the Police or other law enforcement agencies to transfer evidence to MAS, for the purposes of taking regulatory actions in respect of any misconduct under the MAS-Administered Acts, if such transfer is in the public interest.
Clarification of MAS’s Reprimand Powers
The FIMA Bill also makes it clear that MAS’s powers under the SFA, FAA, and TCA allow MAS to reprimand a person who was 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) at the time of the misconduct, even though such person is no longer regulated by MAS or has left the employ of a regulated financial institution.
ENHANCEMENT OF MAS’S POWERS IN CAPITAL MARKETS
The FIMA Bill also proposed that certain amendments be made specifically to the SFA, FAA, and TCA to enable MAS to regulate the financial institutions in the capital markets sector in a more effective manner.
Empowers MAS to Issue Legally Binding Directions to CMS License Holders and Their Representatives
The FIMA Bill will empower MAS to issue legally binding directions to CMS license holders and their representatives in relation to their conduct of unregulated business (for example, dealing in products that are not regulated by the MAS such as digital payment token derivatives that are traded on overseas exchanges).
Such unregulated businesses may pose contagion risks to CMS license holders’ regulated businesses (for example, there is a risk that losses from the unregulated business may adversely impact a CMS license holders’ ability to meet its obligations to customers in its regulated business). Furthermore, there are also risks that customers may not be fully aware that regulatory protections do not apply to unregulated businesses of CMS license holders.
Enhance MAS’s Supervisory Powers
The FIMA Bill will enhance the supervisory powers of the MAS under the SFA, FAA, and the TCA to harmonise requirements across these acts, and where relevant, align MAS’s powers under these acts with the Banking Act 1970 of Singapore. Certain of the key amendments are set out below:
- Appointment and removal of key persons: Singapore-incorporated recognised market operators, recognised clearing houses, and approved trustees will soon need to obtain MAS’s approval before appointing their chief executive officers and directors. In addition, while MAS already has powers across the SFA, FAA, and TCA to remove a director or key management officer, the grounds for removal differ slightly across these acts. The FIMA Bill will consolidate the grounds for removal into a single ground of not being “fit and proper” and include factors which MAS may consider in its assessment.
- Acquiring control of a capital markets financial institution: The requirement for a person acquiring control in capital markets financial institutions to obtain MAS’s approval before doing so will be extended to apply to Singapore-incorporated recognised market operators, recognised clearing houses, and approved trustees. For other capital markets financial institutions, the FIMA Bill will also clarify the timing when MAS’s approval needs to be sought. Currently, a person must seek MAS’s approval prior to entry into an arrangement by which the person would obtain control of a CMS license holder or a licensed financial adviser. The FIMA Bill will clarify that MAS’s approval need only be sought before a person obtains control of the regulated entity (i.e., not at the early stages of negotiations for the acquisition).
- Appointment, removal, or replacement of external auditors: Currently, MAS’s powers in relation to external auditors of Approved Exchanges, Approved Clearing Houses, Approved Holding Companies and Licensed Trade Repositories (as defined in the SFA) are limited to matters requiring immediate reporting by the external auditors to the MAS (e.g., any matter that constitutes a breach of the SFA or an offence involving fraud or dishonesty). The FIMA Bill will introduce the requirement for the above entities to obtain MAS’s approval for the appointment of their external auditors on an annual basis. In addition, MAS will have powers to direct the above entities to remove or replace their appointed auditors if the appointed auditors are unable to discharge their duties satisfactorily. With the FIMA Bill, the MAS will align the approach for capital markets financial institutions with the approach that MAS is taking for other systemically important financial institutions under its purview, such as banks and insurance companies.
The FIMA Bill will also introduce other miscellaneous amendments such as amendments to clarify MAS’s reprimand powers, amendments consequential from the introduction of new processes, and amendments to provide for definitions necessitated by amendments made by the FIMA Bill.
The amendments proposed under the FIMA Bill aim to create a more consistent regulatory framework for financial institutions regulated by MAS in Singapore, ensuring robust oversight and alignment with MAS’s supervisory practices in respect of other regulated entities.
With the passing of the FIMA Bill, financial institutions which are regulated by MAS in Singapore will soon face a more vigilant regulatory environment. The enhancement of supervisory, investigative, and regulatory powers of the MAS over such regulated entities may result in such entities having a heightened focus on compliance, risk management, and adherence to industry best practices. Compliance costs may also increase for such regulated entities, as they seek to comply with the enhanced requirements.
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