Published Date: 30 April 2015

"Strengthening Investors’ Confidence In Our Capital Markets – Enforcement and Market Discipline" - Opening Address by Mr Lee Boon Ngiap, Assistant Managing Director, Monetary Authority of Singapore, at the Singapore Institute of Directors Launch Event on ASEAN Corporate Governance Initiative

Mr Willie Cheng, Chairman of SID
Mr John Lim, Immediate Past Chairman of SID

Distinguished guests, ladies and gentlemen, good morning

Thank you for inviting me to join you today for the launch of the 2014 results for Singapore under the ASEAN Corporate Governance Initiative.

Rules on corporate governance have been considerably strengthened in most jurisdictions including Singapore over the past few years.  Good corporate governance practices are essential to preserving investor confidence in companies.  But corporate governance rules do not operate in isolation and need to work in tandem with other factors to create a well-functioning capital market that is trusted by all stakeholders. 

This morning, I would like to touch on two other factors that are important in maintaining and strengthening investors’ confidence in our capital markets :

  • one, the role of enforcement actions against capital market misconduct
  • two, the role of market discipline in shaping business conduct     

A Robust Capital Markets Enforcement Regime

Let me begin with some insights on MAS’ approach to enforcement.  A robust capital markets enforcement regime is integral to fostering high standards of professional conduct, and in maintaining a fair, orderly and transparent market. Both issuers and investors need to have confidence that rules are enforced in a fair manner among all market participants.  MAS is committed to operating an enforcement regime that delivers fair and robust outcomes to deter market misconduct and preserve investor confidence.  Let me highlight the three broad steps that we go through in discharging our enforcement mandate.  

First, MAS and CAD review all potential market misconduct cases that are detected through our surveillance activities.  We rely on a wide range of surveillance tools, market intelligence and information sources.  These include alerts generated by real-time surveillance of trading activities carried out by the Singapore Exchange, suspicious transaction reports filed with CAD and intelligence gathered from our interactions with market participants.  There are also channels for members of the public to provide feedback and information to MAS and CAD.  We regularly seek to enhance our surveillance capabilities in response to evolving market developments, and in step with best practices adopted by enforcement agencies in other countries.   

Second, we will commence investigations into cases where there is strong suspicion of market misconduct following our review.  Just last month, we announced that  MAS and CAD will now jointly investigate all potential market misconduct offences from the outset.  This marks a change from the past practice where MAS and CAD investigated market misconduct offences independently, based on an initial assessment of whether the offence is likely to be a civil penalty or criminal prosecution case.  The new arrangement will enhance the enforcement process as both agencies will collaborate from the beginning of an investigation, bringing about greater efficiency.

Under this arrangement, MAS officers have been gazetted as CAD Officers, giving them criminal powers of investigation.  The use of more robust criminal investigative powers enhances MAS’ investigation capabilities, paving the way for more rigorous investigations into market abuse. At the same time, MAS retains powers under the Securities and Futures Act to apply for freezing orders and other injunctive reliefs to support and facilitate such criminal investigations.

With joint investigations, MAS and CAD can achieve synergies by streamlining processes, and consolidating resources and expertise.  The decision to pursue a criminal prosecution or a civil penalty action will no longer be decided up front. Instead, the decision will be made after joint investigations by both agencies have concluded.

A few market observers have commented that some market misconduct investigations take too long.  Others have asked MAS and CAD to provide regular updates on the status of investigations.  Let me take the opportunity here to address these issues. 

Market misconduct investigations are often complex and require our investigators to review voluminous amount of data and records.   The challenges are compounded when misconduct is perpetrated by multiple parties, including parties outside our jurisdiction.  Cross-border investigations are intrinsically more difficult and a large proportion of our enforcement cases are now cross-border in nature.  Our investigators have to build up a strong case and secure evidence that can withstand challenges in court.  These actions necessarily take time, which explains why market misconduct investigations by all enforcement agencies globally, including in Singapore, often take a longer time to complete. 

We also do not usually provide updates on the status of investigations because maintaining confidentiality is critical to ensuring the effectiveness of investigations.  Premature updates to the public could compromise investigations, for instance, by alerting suspects who may then destroy documentary evidence.  It is also important to ensure that adverse inference is not drawn against individuals and companies under investigation before a decision is taken to initiate enforcement actions.

Despite the challenges, I would like to assure you that MAS and CAD will spare no effort in conducting investigations into suspicious cases of market misconduct.  Cases with cross-border challenges may take longer to investigate, but we have been successful in taking enforcement actions in a number of cases with assistance from our foreign counterparts. 

This leads me to the third and final step – pursuing enforcement actions if there is sufficient evidence of misconduct.  We can take a range of enforcement sanctions, including criminal prosecution, civil penalties or other regulatory actions such as prohibition orders to bar individuals from working in the financial sector for a specified period.  Enforcement sanctions meted must be adequate to deter the offender from re-offending, and also deter others from engaging in similar conduct.  It must also be calibrated to the facts and circumstances of each case to ensure that the penalty is commensurate with the gravity of the misconduct. This balances deterrence with fairness and enhances the overall credibility of our enforcement regime.

Criminal sanctions provide the highest level of deterrence, and is the preferred course of action in the most serious cases of market abuse. From 2010 to 2014, criminal prosecutions have successfully led to convictions in 22 market misconduct cases in Singapore.  Over the same period, MAS also achieved 22 successful civil penalty outcomes and imposed a total of S$4.9 million in civil penalties for securities violations. Since the civil penalty regime commenced in 2004, there has been a general increase in both the number of civil penalty enforcement actions and the civil penalty quantum imposed for market misconduct offences. 

2015 has already been an eventful year for our capital markets enforcement:

  • Just yesterday, MAS took civil penalty action against two individuals for insider trading and false trading.  The offenders have agreed to pay civil penalties totalling $11.8 million, the highest amount under the civil penalty regime to-date.
  • In February 2015, the former CEO of a SGX-listed company paid a civil penalty of $2.5 million for making misleading public disclosures and failing to make required disclosures to the market.  As part of the settlement, the offender offered to surrender 10% of his shareholding in the listed company and undertook not to assume the role of a company director or be involved in the management of any entity listed on the SGX for three years.

Our success in these cases is a demonstration of our resolve to pursue effective enforcement outcomes and achieve credible deterrence. Enforcement is a key pillar of MAS’ regulatory mandate and we will explore all avenues to enforce the law against those who commit offences in our capital markets. 

Strengthening market discipline 

A robust enforcement regime is a key imperative in strengthening investors’ confidence in our markets.  But it cannot substitute for market discipline, which is the process by which stakeholders apply effective scrutiny on a company.  The key enabler for market discipline is disclosure.  SGX’s listing rules prescribes mandatory disclosure requirements while best practices disclosure guidelines are set out in the Code of Corporate Governance respectively.  But for disclosure to enable effective market discipline, it must also be meaningful.    

The code applies on a “comply or explain” basis, so expectations are pitched at the level of best practice while companies have the flexibility to deviate from these expectations if their particular circumstances warrant it.  But any deviation must be clearly explained and disclosed. Unfortunately, there are many instances where disclosures made by companies deviating from the Code are uninformative.  Some companies adopt boilerplate disclosures that shed no light on the reasons for deviation. 

To spur improvements in disclosures, SGX issued a Corporate Governance Disclosure Guide in January this year to require companies to disclose their compliance with key principles of the Code in a standard format.  This will make unsatisfactory explanations more stark to the market and investors will find it easier to compare corporate governance practices among listed companies. 

I encourage all directors to step up their efforts to improve disclosures by their companies.  Companies should provide meaningful explanations of their reasons for deviation.  For a “comply or explain” regime to work well, clear explanations of deviations are as important as complying with the Code itself.  

Other interested stakeholders are also playing an increasingly significant role in enhancing market discipline.   There are now indices which assess and rank companies based on their corporate governance practices.  The Governance and Transparency Index (GTI) developed by NUS Centre for Governance, Institutions and Organisations assesses all Singapore-listed companies based on their disclosures in their annual report. Smaller companies have been given more focus in a new scorecard, the Governance Evaluation Mid and Small Caps (GEMS) that was launched on 8 April 2015 to assess the governance of companies with lower market capitalization.  Even as these initiatives help investors to identify exemplary companies, they can serve to encourage companies with lower scores to improve their governance   practices. 

Another similar initiative is the ASEAN Corporate Governance Scorecard introduced under the auspices of the ASEAN Capital Market Forum in 2011.  The mean scores for Singapore companies in 2014 have improved compared to the 2013 exercise. I am pleased to note that Singapore’s top company once again achieved the highest score among all participating ASEAN corporates. The top 10 listed companies in Singapore that have attained the highest total scores will be announced later this morning.

For the 2015 Scorecard, the plan is to publish a list of the top 50 listed companies in ASEAN.  This will be the first time that a combined list ranking Singapore companies together with the best companies in other participating ASEAN countries is published.  Compared to the requirements under the Scorecard, there is still room for improvement in the disclosure practices of Singapore companies.  I strongly encourage all Singapore companies to make prompt improvements in these areas and take this opportunity to demonstrate that they feature among the companies with the best corporate governance practices in the region.


Let me now briefly conclude. A well-functioning capital market requires an eco-system where all stakeholders play their part in strengthening investor confidence.  In enforcement, MAS takes a strong stance against market misconduct and we will spare no effort in investigating possible transgressions.  We also look forward to continuing our close partnership with SID and other stakeholders to make market discipline work better.       

Thank you