Reply to PQ on Fraud Charges Against Goldman Sachs
Question No 432 Notice Paper No 89 of 2010 For Oral Answer
Date: For Parliament Sitting on 19 May 2010
Name and Constituency of Member of Parliament Q432 Mr Teo Siong Seng, Nominated Member of Parliament
Mr Teo Siong Seng: To ask the Senior Minister (a) whether the recent fraud charges against Goldman Sachs over its marketing of a subprime mortgage product is likely to have any impact on the Singapore economy; and (b) whether his Ministry has received any feedback on the financial reforms put in place in the aftermath of the Minibonds saga.
Mr Lim Hng Kiang, Minister for Trade and Industry and Deputy Chairman:
Fraud Charges against Goldman Sachs
Mr Teo asked whether the recent charges against Goldman Sachs & Co, (Goldman Sachs) in the United States (US) are likely to have an impact on Singapore.
2. MAS monitors developments in various jurisdictions. However not all developments in other jurisdictions will be equally applicable in Singapore. The securities fraud charges brought by the US Securities and Exchange Commission against Goldman Sachs are very specific in nature, and are in relation to a specific synthetic collateralised debt obligation (CDO) linked to the performance of subprime residential mortgage-backed securities. The allegation is that Goldman Sachs failed to disclose to investors the role that a large hedge fund had played in the portfolio selection process, and the fact that the hedge fund would benefit if the mortgage-backed securities defaulted. The notes were marketed to financial institutions, not to the retail public.
3. MAS has not found a similar situation to have taken place in Singapore. All entities offering securities to the public in Singapore are required to comply with the Securities and Futures Act which, among other things, requires disclosure of all the information that investors and their professional advisers would reasonably require to make an informed assessment of the product. Where there is a breach of regulations or law, MAS will take appropriate regulatory action.
Feedback on MAS' Proposals
4. Mr Teo has also asked about feedback on the proposals that MAS set out following its review on the regulatory regime for listed and unlisted products. MAS has released two consultation papers containing proposals to further safeguard consumers' interests and promote higher industry standards for the sale and marketing of investment products in March 2009 and January 2010.
5. MAS has received a wide range of feedback from investors, market practitioners, industry associations, as well as the Consumer Association of Singapore (CASE) and the Securities Investors Association (Singapore) (SIAS).
6. In finalising its proposals, MAS will take these views into account as well as the outcome of its own review. Some proposals will require legislative amendments and take some time to implement. MAS has started work on the legislative amendments, and will start consulting on draft legislation this year. Prior to implementation, MAS encourages financial institutions intending to sell investment products to adopt the proposed safeguards as good practice in conducting business with retail customers. MAS considers this to be part of the obligation of financial institutions' Boards and senior management to deliver fair dealing outcomes to their customers.