Singapore – MAS Consults On New Requirements For Controls Against Market Abuse.

On 5 August 2019, the Monetary Authority of Singapore (“MAS”) published a consultation paper proposing new requirements to be met by regulated financial institutions (“FIs”) in Singapore that carry out the regulated activity of dealing in capital market products. The new requirements aim to strengthen controls on and investigations into market abuse.

 

MAS had in the consultation paper, observed that there is a lack of information and delays in receiving information on the identity of persons associated with trading accounts. This is mainly due to technological changes, the increasing volume of cross-border transactions and lack of preventive measures to clamp down on market abuse at brokerage-level. These inhibit early detection of such misconduct and ultimately affects efficiency of market abuse investigations.

 

Introduction

 

The proposed requirements will be set out in a new “Notice on Controls Against Market Abuse” (“Notice”). This update outlines the four key areas where there will be new and/or amended requirements:

 

1. (a)  ultimate beneficial owners (“UBOs”) of orders and trades (“O&T”) executed in omnibus accounts;

2. (b)  record-keeping of instructions received for broker-assisted O&T;

3. (c)  unique client device identifier for O&T executed through mobile trading applications; and

4. (d)  cash payments and payments by third parties for the funding of customers’ accounts.

 

Identifying the UBOs of O&T executed in omnibus accounts

 

MAS is proposing to introduce a client identification rule, where FIs must put in place arrangements so as to allow timely provision of UBO information to law enforcement agencies within five business days from the request. The FI can decide the type and extent of measures used to comply with the rule, as long as there is a written agreement with its clients stipulating the clients’ obligation to provide the UBO information upon request. This agreement should also include the necessary consent or permission to allow the UBO information to be disclosed, notwithstanding any applicable privacy or non-disclosure laws in the client’s jurisdiction. Where an FI’s client does not wish to disclose the identity of their underlying clients to the FI, the agreement can stipulate for clients to disclose the UBO information directly to the law enforcement agency requesting so.

 

Record-keeping of instructions received for broker-assisted O&T

 

FIs are required to record all communication between their trading representatives and the person giving O&T instructions, in respect of any customers’ account for any capital market products, even if no transactions take place after communication. All records are to be kept for five years, in line with the record-keeping retention requirements under section 102(3) of the Securities and Futures Act (“SFA”). Personal devices may be used if certain conditions are satisfied, such as the FI being able to record and keep the original communication (including instant messages).

 

Unique client device identification for O&T executed through mobile trading applications

 

As self-directed trading on mobile trading applications is increasingly prominent, MAS is seeking to introduce a requirement for FIs to record the device identification (“Device ID”) for O&T executed on such applications. A Device ID is an alphanumerical identifier generated by the mobile application that is unique to the device the application is installed on. FIs can customise their own recording systems as Device IDs vary on different operating systems. The emphasis placed on the recording of all forms of O&T communications, is because such records would essentially be a source of evidence for investigations into market abuse. This requirement would bolster the regulator’s ability to capture the identity information of perpetrators.