Parliament passes Bill to enhance MAS investigative powers over financial sector

SINGAPORE: A new Bill passed by parliament on Thursday (Mar 7) will give the Monetary Authority of Singapore (MAS) wider investigative and supervisory powers over the financial sector, such as the ability to enter premises without a warrant and without giving prior notice if certain conditions are met.

The Financial Institutions (Miscellaneous Amendments) Bill, which was tabled for a second reading by Minister of State for Trade and Industry Alvin Tan, sought changes to six Acts that come under the purview of MAS.

The Bill aims to “harmonise and enhance” the regulator’s investigative powers across the six pieces of legislation, which govern the financial services and markets, insurance, payment services, financial advisers, securities and derivatives industry, and trust companies.

Said Mr Tan: “As our financial industry grows in size and complexity, MAS must continually review and enhance its regulatory powers to ensure that it can effectively supervise financial institutions, as well as investigate and punish serious misconduct in our financial sector.”

STRONGER INVESTIGATIVE POWERS

To strengthen MAS’ evidence-gathering powers and facilitate greater inter-agency coordination, the Bill proposed enhancing and extending the regulator’s investigative rights to all six Acts.

Currently, MAS can compel individuals to attend interviews and record written statements, enter premises without warrant and obtain court warrant to seize evidence for only certain parts of the sector, such as financial advisory services, as well as the securities and derivatives industry.

The amendments to extend such powers to Acts that govern other parts of the financial sector will help to “close these gaps”, said Mr Tan, who is also an MAS board member.

At the same time, the existing power to enter premises without a warrant will be enhanced to allow MAS to do so without giving prior notice, if there are reasonable grounds for suspecting that the premises are or have been occupied by a person who is being investigated.

Provisions that enable evidence to be transferred between the regulator and other agencies will also be expanded.

Currently, MAS may only transfer evidence to the police or public prosecutor for criminal investigations or proceedings for market misconduct offences under the Securities and Futures Act, and offences under the Financial Advisers Act.

This will be expanded to cover any offences under the MAS-administered Acts.

Likewise, the transfer of evidence from the police or other law enforcement agencies to MAS is currently restricted to civil penalty investigations for market misconduct offences under the Securities and Futures Act.

The Bill will replace these provisions to allow the police or other law enforcement agencies to transfer evidence to MAS for the purpose of taking regulatory actions in respect of any misconduct under the MAS-administered Acts, if such transfer is in the public interest, said Mr Tan.

ENHANCED SUPERVISORY POWERS

In addition, the proposed amendments will expand MAS’ power to issue directions to capital markets services licence holders that conduct unregulated business, such as Bitcoin futures and other payment token derivatives traded on overseas exchanges.

Such unregulated businesses may pose contagion risks, said Mr Tan, noting that losses from unregulated businesses could adversely impact a capital markets services licence holder’s ability to meet its obligations to customers in its regulated business.

Customers may also not be fully aware that regulatory protections do not apply to a licence holder’s unregulated businesses, he added.

“While MAS has issued guidance to (capital markets services licence holders) on risk mitigation measures and safeguards that they should adopt when they conduct unregulated businesses, we should put these on a clear legal footing,” Mr Tan told the House.

Hence, the Bill will allow MAS to issue legally-binding directions on the minimum standards and safeguards that should be in place when licence holders and their representatives conduct unregulated businesses.

Among others, the new laws will enhance MAS’ supervisory and inspection powers.

These include the appointment and removal of key persons such as chief executives, the appointment of external auditors, as well as the appointment of agents by foreign regulators to inspect certain financial institutions. 

MPS RAISE CONCERNS

Members of Parliament (MPs) supported the Bill but also voiced concerns related to the extension of the regulator’s investigative powers.

For instance, the ability for MAS to enter premises without a warrant has stirred up “a palpable sense of concern”, said Mr Edward Chia (PAP-Holland-Bukit Timah).

“We must acknowledge and address these concerns proactively and explain the need for these powers and explain why MAS cannot simply apply for a warrant to enter,” he said. 

Adding that such a measure is not common in other financial hubs like Hong Kong, Mr Chia wanted to know if there are safeguards in place to prevent misuse.

In response, Mr Tan said the power to enter premises without a warrant is necessary for the MAS to effectively investigate potential breaches.

While legitimate financial institutions may cooperate by producing crucial evidence to the MAS, there will be instances where a suspect is not forthcoming thereby raising the risk that evidence will be destroyed or concealed.

A more robust approach will hence be needed for such instances, said Mr Tan, adding that it is “not necessary for the court to act as a gatekeeper” each time the MAS wishes to exercise such powers.

Nevertheless, safeguards are in place such as how the MAS is required to give two days’ notice before entering premises without a warrant.

The MAS is only allowed to do so without giving prior notice in instances where there are reasonable grounds for suspecting that the premises are or have been occupied by a suspect, or when the MAS has taken all “reasonably practical steps” to give such a notice to the occupier of the premises but was unable to do so.

Another safeguard pertains to how MAS will not be able to seize evidence after entering the premises without a warrant. If it wishes to do so, it will have to apply to the court for a warrant to enter premises and seize evidence.

“MAS will assess if gaining entry without a warrant will likely result in cooperation in producing the relevant evidence. If the assessment is that the cooperation will not be forthcoming, then MAS may choose to apply for the court warrant to enter premises and seize evidence instead,” he said.

Mr Tan noted that the ability to enter premises without a warrant is not unique to Singapore. Financial regulators in the United Kingdom, Australia and Canada also have the power to do so in certain situations such as anti-money laundering investigations. 

The extension of MAS’ investigative powers is also unlikely to affect Singapore’s competitiveness as a financial hub, as the provision for the regulator to enter premises is already available under certain Acts, he added.

Questions were also raised about the appointment of agents by foreign regulators to conduct inspection.

Mr Tan said that MAS “is not obliged to approve all such requests or appointments”.

It will only grant approval “when it is satisfied that the inspection of the financial institution is relevant to the foreign regulators discharge of its regulatory function and mandate”. 

Similarly, MAS conducts on-site inspections of regulated financial institutions in foreign jurisdiction under comparable arrangements, he added.

In conclusion, Mr Tan noted that the amendments are necessary to enable MAS to supervise financial institutions and uphold the regulatory regime more effectively in a rapidly evolving financial system. 

“It signals our commitment to maintain the highest standards of integrity and trust in Singapore's financial system.”