MAS out to identify cases of tardy corporate disclosure

The Monetary Authority of Singapore's (MAS) enforcement department is taking a closer look into whether listed companies here have been tardy in disclosing corporate information in recent times.

It named this as its focus upon the release of its first enforcement report on Wednesday, which lists the penalties and censures imposed on financial institutions, traders and financial advisers for infractions committed between July 2017 and December 2018.

Over those 18 months, S$16.8 million in financial penalties and settlements were imposed on 42 financial institutions here, based on investigations led by the MAS. The fines come alongside action taken against various forms of misconduct; there was a criminal conviction for false trading, S$698,000 in civil penalties for misconduct in trading, 19 prohibition orders that bar individuals from working in the financial industry, and 223 warnings.

The enforcement department also works with other regulators in Singapore and those abroad. Between July 2017 and December 2018, MAS referred seven investigation cases to the Attorney-General's Chambers for criminal prosecution or civil penalty action; it also aided in 119 requests from 22 international regulators, who had reached out through the International Organisation of Securities Commission.

MAS said on Wednesday it would focus its enforcement efforts to strengthen "timely and adequate" disclosure of corporate information by listed firms. This comes amid an observed trend of listed companies failing to disclose material information in recent months.

MAS will also review the business conduct of financial advisers, and compliance by financial institutions in rejecting illicit funds. It will look at brokerages' internal controls over detecting rogue trading as well, and step up on surveillance and investigations into suspected insider trading.

The enforcement report, which should detail these efforts, will be made public every 18 months.

Mak Yuen Teen, a governance advocate and professor of accounting, told The Business Times that he was pleased that corporate disclosure will be a focus area.

"I think failure to disclose material information and false or misleading statements are quite rampant and important for investor protection," he said. "Overall, I think this is a very good first step and I would like to see all regulatory agencies doing the same... I also hope to see MAS doing more to help investors recover losses under civil liability actions, which are provided for under the Securities and Futures Act."

More details on potential action taken by regulators provide accountability to the corporate community, and can address a perception that little is being done, he added.

For example, the enforcement report from MAS said criminal prosecutions take an average of 33 months, and civil ones, about 30 months. It takes an average three months for referrals to external agencies. All in, the average time taken for MAS' reviews and investigations is eight months.

This eight-month timeframe compares against the 19.1 months taken by UK's Financial Conduct Authority (FCA), as detailed in the FCA's enforcement performance report.

In another example flagged in the report, the S$16.8 million in financial penalties imposed in the 18-month period includes the S$6.4 million fine on Standard Chartered Bank and Standard Chartered Trust in March 2018 over anti-money laundering breaches.

The trust accounts of StanChart's customers were transferred from an overseas branch of Standard Chartered Trust to its Singapore branch, with this occurring shortly before that overseas branch implemented additional common reporting standards. These transfers thus raised questions of whether clients were avoiding reporting obligations aimed at deterring global tax evasion. MAS had found the risk management and controls of the bank to be "unsatisfactory".

The latest published fines largely exclude the S$30 million levied on private banks for various breaches of anti-money laundering requirements tied to the 1MDB scandal. The 1MDB-related penalties were mainly imposed on these financial firms before July 2017.

While MAS has revealed names of those involved in criminal or civil prosecutions, it has mostly shied from posting names of companies or individuals involved in most other forms of regulatory censure, and particularly so in the report.

Following the 1MDB scandal that dented Singapore's reputation as a clean financial centre, MAS had said it now sees the benefits of naming and shaming banks that fail anti-money laundering standards. But it said it would do this "judiciously", making public its sanctions against financial institutions that run afoul of anti-money laundering rules "persistently or egregiously".

The enforcement report is the work of a dedicated department set up by MAS in 2016 to centralise its enforcement functions across the banking, insurance, capital markets and other regulated sectors.

In a statement on Wednesday, Gillian Tan, MAS' executive director (Enforcement), said: "As Singapore's financial industry grows in size and complexity, so will the risks of financial misconduct. Enforcement plays a critical role in financial supervision through the detection, investigation and punishment of serious misconduct. This is intended to deter illegal and unethical behaviour and protect consumers."

MAS separately said it has been using an augmented intelligence tool, said to be a global first in the securities enforcement world, to help it decide on how to prioritise and pursue cases of market manipulation. Developed in-house last year, the tool is called Project Apollo and models rogue trading behaviour using traits identified by human experts.

Project Apollo also offers analysis and prediction during the early stages of investigations, and helps enforcement officers in the triaging of cases for investigation, MAS said.

MAS said the new system offers an accuracy rate of 98 per cent when tested using past cases where investigations had been completed and market manipulation was found to have occurred. This means Apollo was able to correctly assess whether market manipulation had occurred 98 per cent of the time, said an MAS spokesman.

Jamie Lee

21 March 2019