The Monetary Authority of Singapore (MAS) issued a Public Consultation on Revisions to Misconduct Reporting Requirements and Proposals to Mandate Reference Checks (Consultation Paper) on 6 July 2018.
 
Proposals to mandate reference checks
 
The Consultation Paper proposes that it be made mandatory for financial institutions (FIs) to conduct reference checks on prospective representatives. The reference checks should be conducted with all previous employers of the representative. This includes employers that are not regulated by the MAS. At a minimum, they should cover the representative’s employment history in the past 10 years.
 
An FI that receives a request for a reference check must provide information within 14 days of receiving the request. The following information must be provided:

• Information pertaining to the individual’s appointment history with the FI, the duration of the appointment, the roles and job functions of the individual (including last position held), and the reason for the cessation of the appointment (such as resignation, termination, or cessation of contractual tenure);
• Compliance records on the individual’s fitness and propriety, including but not limited to the following:
  • Past or ongoing internal or external investigations that the individual is or has been subjected to, and the outcome of the investigations;
  • Incidents which relate to the individual’s honesty or integrity, and the extent of consumer detriment;
  • Incidents where the individual had been found to be in breach of legal or regulatory requirements, and the extent of consumer detriment;
  • Whether misconduct reports were filed with the MAS against the individual and, if so, details on the nature of the offences committed and the extent of consumer detriment; and
  • Disciplinary actions taken against the individual;
• The last four balanced scorecard grades assigned to the individual within the past 10 years; and
• Where the representative is in the insurance industry, the persistency of insurance policies sold by the individual and the methodology used in computing the persistency. 

The Consultation Paper is also seeking views on whether FIs should be required to update references that have been given if new information comes in.
 
The duty of an employer in responding to a request for a reference check was considered by the Court of Appeal in the 2016 decision of Ramesh s/o Krishnan v AXA Life Insurance Singapore Pte Ltd. It should be noted that the Court held that an employer had a duty to, among other things, exercise reasonable care to ensure that “the reference did not give an unfair or misleading overall impression of the employee, even if the discrete pieces of information which it contained were factually correct”. To this end, notwithstanding that the MAS is considering mandating the provision of specific information, FIs should be aware that it would not be sufficient for them to simply provide the mandated information if the information provided would lead to an unfair or misleading overall impression of the employee.
 
Misconduct reporting requirements
 
The proposed changes to the misconduct reporting requirements are as follows:

• The misconduct reporting requirements should be extended to also apply to Registered Fund Management Companies.
• The current categories of misconduct should be revised by removing the current category of “Failure to satisfy the Guidelines on Fit and Proper Criteria” and the general sweep-up category.  A new category of “Acts involving illegal/improper monetary gains, or which may lead to erosion of trust in the financial system, such as money laundering” will be added.
• In addition to the current requirement to inform the MAS of police investigations, FIs will need to update the MAS no later than 14 days after they become aware of the outcome of police investigations.
• FIs should be required to notify their representatives when they are under investigation. Where an FI lodges a misconduct report with the MAS, it should also provide the affected representative with a copy of the misconduct report (including any subsequent updates), regardless of whether the representative is still appointed with the company. The exception would be if notifying the representative would tip him off or compromise the quality of the FI’s investigation. 

The MAS also intends to provide greater guidance on the rigour and quality of FIs’ investigations and it is seeking views as to what the proposed standards should be. It also proposes requiring FIs to submit their investigation reports in a prescribed format to ensure that consistent and sufficient information is provided to the MAS.