No-nonsense approach seen as a reaction from the financial crisis.
Singapore has jailed its second individual for market manipulation in a year, signaling an increasingly hardline approach to enforcement and sending a message that the need for better compliance defenses has never been greater.
Mok Piak Liang was imprisoned for four months on January 19, 2018, for false trading after he pled guilty to manipulating the shares of oil mining firm, Wilton Resources Corporation.
His sentencing for a breach of the Securities and Futures Act came 10 months after ex-DBS Vickers securities trader Dennis Tey Thean Yang was also handed 16 weeks in prison in March 2017 for illegal manipulation of share prices by making fake orders. Tey was later also banned from the industry for five years.
Under Singapore’s laws, both Tey and Mok could have been jailed for up to seven years and fined S$250,000 for each charge.
The jailing for market abuse in Singapore should come as little surprise given the noises the regulator has been making, and is also indicative of the wider trend of enhancing individual liability for corporate failings.
In March 2016, the assistant managing director of the Monetary Authority of Singapore (MAS), Lee Boon Ngiap, said: “We will also be placing greater emphasis on individual accountability for meeting conduct standards and expectations, including that of supervisors of staff involved in misconduct, and will consider enforcement actions against those who commit serious misconduct.”
The speech contained many refrains that are familiar to seasoned UK Financial Conduct Authority-watchers; driving boards and senior management “to promote a positive culture”, and encouraging “a strong and clear tone from the top”.
Britain’s government made similar overtures about jailing bankers when it launched the Senior Managers Regime code of conduct for bankers in 2016, but it did not follow through with such action in 2017.
With a 12 month headstart, the Singaporean teams focussed on prosecuting individuals have already begun locking up those responsible, but many expect that the FCA will not be too far behind in concluding the investigations (reported to be 11 in process as of December 2017) that it is currently working on.
The MAS has the backing of Singapore’s courts in its view that financial fraud is not victimless or less severe than crimes against persons, and that in the industry often a fine or a ban is not enough. “The High Court has recognized that fines may not be an adequate punishment in egregious offences that can have a real impact on the market,” MAS said in its 2016 revamp of enforcement. “In such cases, imprisonment terms carry a more effective deterrent message than the imposition of fines.”
In June 2016, former OCBC Securities trader Prem Hirubalan was jailed for 10 months for securities fraud after he conducted unauthorized share trades in the trading accounts of three customers, and misappropriated around S$81,000 from one customer.
Initially jailed for eight weeks, his appeal was thrown out as his sentence was extended, and he was also banned for seven years from performing any regulated activity or taking part in management, acting as a director or becoming a substantial shareholder of any capital market services firm.
The Mok and Tey cases were brought jointly by the MAS and the Commercial Affairs Department (CAD) of the Singapore Police Force, its white collar team, after the combination began working together in March 2015.
Until that point, both agencies had been investigating market misconduct offences independently but now they jointly assess all potential market misconduct offences from the outset once they detect or receive a complaint. The arrangement means that MAS officers are gazetted as white collar police, giving them the same criminal powers of investigation as CAD officers. Such powers include the ability to search premises and seize items, and to order financial institutions to monitor customer accounts.
While lighter penalties are available, both market abuse cases to be investigated have resulted in jail time for the perpetrators, sending not just a zero tolerance message but also indicating a willingness to look at historic data to make a case.
Tey’s actions took place on 50 days within a period of two months from October 24, 2012, to January 8, 2013, while Mok’s instances of false trading were carried out between 24 September 2014 and 27 November 2014, both prior to the new super enforcement team being put into place.
Laying out its approach to enforcement of capital markets in 2016, the MAS said it will look first and foremost at the systems and controls firms have in place to detect and rectify issues.
“MAS aims to detect potential conduct issues or problems early and take action before they result in serious breaches,” it said.
Real-time defenses and the ability to instantly snuff out a problem can suddenly become the difference between praise from the enforcer for acting fast, or jail-time for identifiable failings.
Financial services is an important contributor to the Singapore economy, accounting for about 12 percent of gross domestic product; its flourishing capital markets scene and ongoing push to welcome more businesses means regulators have recognized the need to beef up their safeguards.
The MAS is a fiercely pro-technology regulator, and is arming itself with state-of-the-art surveillance technology as a way of better policing the markets.
Firms will want solutions that integrate directly with all leading call recorders to ingest data and conduct analytics in near to real time.
Industry experts also believe firms themselves are unlikely to escape censure for much longer should a failing occur that they could reasonably have prevented.
Throughout 2017 the MAS began to issue tougher penalties for late regulatory filings, hinting at a broader trend of targeting individuals in their personal capacity for misconduct arising from a firm’s compliance breaches.
The enforcement actions in 2017 included reprimanding a firm and its director, to accepting a composition fine from another and to even ban one firm from carrying on fund management in Singapore entirely.
“To safeguard themselves and their firms financially and reputationally, management and directors of financial firms should pay greater attention to compliance,” said Nicolas Inman, of corporate advisers Duff & Phelps. At the minimum, management and directors must ensure that their firms have effective compliance monitoring, he added.
Singapore is ramping up its enforcement regime with jail terms and hefty industry bans to remind individuals and companies of the law, as it pushes to be seen as clean and open for business as a major global financial centre.
There has never been a more critical time to invest in smart defenses that not only eliminate insider-risk but can increase efficiency and maximize profitable behaviours.