MAS Reprimands Transworld Rubber Pte Ltd for Contravention of Section 102(3) of the Securities and Futures Act (CAP. 289) [“SFA”] and Regulations 39, 37(2), 13, 18 and 22(1) of the Securities and Futures (Licensing and Conduct of Business) Regulations [“SF(LCB)R”]

1          On 9 December 2013, MAS reprimanded Transworld Rubber Pte Ltd [“Transworld”] for contravention of section 102(3) of the SFA and regulations 39, 37(2), 13, 18 and 22(1) of the SF(LCB)R.

2          Section 102(3) of the SFA read with regulation 39 of the SF(LCB)R requires a capital markets services [“CMS”] licensee to retain its books and records, including personal details of customers and details of customers’ orders, for a period of not less than five years.

3          Section 102(3) of the SFA read with regulation 37(2) of the SF(LCB)R requires a CMS licensee to maintain records of its daily computation of its trust accounts, together with all supporting data for a period not less than five years.

4          Regulation 13 of the SF(LCB)R requires a CMS licensee to implement, and ensure compliance with, effective written policies on operational areas of the CMS licensee, including the company’s financial policies, accounting and internal controls, internal auditing and compliance with all laws and rules governing the company’s operations.

5          Regulation 18 of the SF(LCB)R requires a CMS licensee, before depositing moneys received on account of its customers into a trust account, to give written notice to the bank and obtain an acknowledgment from the bank that -

(a)   all moneys deposited in the trust account are held on trust by the CMS licensee for its customer and the bank cannot exercise any right of set-off against the moneys for any debt owed by the CMS licensee to the bank; and

(b)   the account is designated as a trust account, or a customer’s or customers’ account, which shall be distinguished and maintained separately from any other account in which the CMS licensee deposits its own moneys.

6          Regulation 22(1) of SF(LCB)R states that, subject to any agreement between a CMS licensee and its customer, all interest earned from the maintenance of the moneys received on account of the customer in the trust account shall accrue to the customer. 

7          Transworld had contravened section 102(3) of the SFA read with regulation 39 of the SF(LCB)R as it did not maintain records of the personal details of its customers and details of its customers’ orders.

8          Transworld had contravened section 102(3) of the SFA read with regulation 37(2) of the SF(LCB)R as it failed to keep records of its daily computation of its trust accounts with all supporting data for a period not less than five years.

9          Transworld had contravened regulation 13 of the SF(LCB)R when it failed to implement appropriate policies, procedures, processes and internal controls resulting in numerous contraventions of regulatory requirements and significant control deficiencies, and failed to exercise management oversight over the back-office function of the company.

10        Transworld had contravened regulation 18 of SF(LCB)R as it failed to obtain the requisite acknowledgements from two banks in respect of four customers’ designated trust accounts.

11        Transworld had contravened regulation 22(1) of the SF(LCB)R as the accrued interest in a trust account was fully accrued to the company instead of to customers when Transworld did not have any agreement with its customers that the accrued interest arising from their accounts would belong to Transworld.

12        In view of Transworld’s contraventions, MAS had, on 31 July 2013, pursuant to section 101(1) of the SFA, issued written directions to Transworld.

13        Transworld has since withdrawn its capital markets services licence.

In order to safeguard the interest of customers, a CMS licensee shall put in place effective systems and controls to ensure proper record keeping and handling of customers’ moneys. A CMS licensee shall also implement, and ensure compliance with, effective written policies on operational areas. Any person carrying on business in any regulated activity should ensure compliance with the requirements under the law at all times.

Last Modified on 26/11/2016