MAS seeks to require fund managers to report misconduct

It also proposed amendments to how financial institutions should report misconduct.

The Monetary Authority of Singapore (MAS) opened feedback for a set of amendments that it wants to make on misconduct reporting requirements, as set out in notices issued under the Securities and Futures Act (SFA), Financial Advisers Act (FAA), and Insurance Act (IA).

MAS proposed to apply the misconduct reporting requirements to registered fund management companies (RFMC). The notices are currently applicable to the following financial institutions (FI): capital markets services, licensed financial advisers, registered insurance brokers, and exempt FIs with insurance broking activities.

The central bank proposed to make acts involving illegal/improper monetary gains, which may lead to erosion of trust in the financial system, such as money laundering as a form of misconduct, accounted for as misconduct.

MAS also proposed to revise the categories of misconduct to help clarify the types that should be reported to the central bank. “Insider trading” has been expanded to securities market manipulation and financial benchmarks manipulation.

“Acts of inappropriate advice, misrepresentation, or inadequate disclosure of information” has been expanded to acts involving inappropriate advice or recommendation, misrepresentation, gross negligence, or inadequate disclosure of information which have a material adverse impact on the interests of the client or impinges on the fitness and propriety of the representative

MAS also proposed the removal of the following categories: failure to satisfy “fit and proper” guidelines; non-compliance with any regulatory requirement relating to the provision of any regulated activity; and a serious breach of the FI’s internal policy or code of conduct which would render the representatives liable to demotion, suspension or termination of the representative’s employment or arrangement with the FI.

The central bank proposed to require FIs to update MAS no later than 14 days after they become aware of the outcome of police investigations. “This would enable MAS to conduct timely assessment on whether to take regulatory or supervisory action on the representative upon conclusion of police investigations,” it said.

FIs will also be required to notify their representatives when they are under investigation and provide them with a copy of the misconduct report filed with MAS. The only exception is when the disclosure would “tip off the representative or compromise the quality of the FI’s investigation.”

“This proposal will ensure that the representative is aware of the misconduct report filed against him or her and is given an opportunity to disclose and explain the misconduct to his or her prospective principal company,” MAS said.

MAS also proposed to enhanced standards for FIs’ investigation processes and require FIs to submit investigation reports to MAS in a prescribed format that is machine-readable.

The central bank also proposed to make reference checks mandatory for FIs when recruiting staff. The checks should be conducted will all previous employers that are both regulated and not regulated.

MAS said, “Such reference checks may be conducted after the prospective representative’s employment or appointment has ceased with his or her current principal company and should minimally cover the representative’s employment history in the past 10 years.”

It also proposed to require FIs to provide a set of mandatory information on their representatives in response to reference check requests from the representatives’ prospective principal companies which are FIs regulated by MAS.