Financial Institutions (Miscellaneous Amendments) Bill

Order for Second Reading read.

Mr Speaker: And now I call on Minister of State Alvin Tan.

2.23 pm

The Minister of State for Trade and Industry (Mr Alvin Tan) (for the Deputy Prime Minister and Minister for Finance): Mr Speaker, on behalf of Mr Lawrence Wong, Deputy Prime Minister and Minister for Finance, and Minister-in-charge of the Monetary Authority of Singapore (MAS), I beg to move, "That the Bill be now read a Second time".

Sir, MAS plays a central role in upholding Singapore's status as a safe and trusted international financial centre. 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 (FIs), as well as investigate and punish serious misconduct in our financial sector.

The Financial Institutions (Miscellaneous Amendments) Bill (FIMA Bill), will harmonise and enhance MAS' investigative powers across six Acts, namely the Financial Advisors Act 2001, the Financial Services and Markets Act 2022, the Insurance Act 1966, the Payment Services Act 2019, the Securities and Futures Act 2001 and the Trust Companies Act 2005, collectively, the MAS-administered Acts.

Other key amendments in the FIMA Bill pertain to the regulation of capital markets in Singapore. These amendments empower MAS to issue directions to capital markets services licence (CMSL) holders to manage potential risks from the conduct of unregulated businesses and also to enhance MAS' supervisory powers.

Let me first start with the amendments to enhance MAS' investigative powers. MAS investigates and enforces a wide range of violations using its powers under the laws and regulations it administers. Such violations range from breaches of business conduct requirements by regulated FIs, to insider trading, fraud or deception when dealing in securities. Let me give two examples of recent cases.

First, MAS reprimanded several FIs and individuals, including AIA Financial Advisers Private Limited and two Aviva entities, for breaching requirements under the FAA in relation to remuneration of supervisors as well as adequacy of risk management.

Second, following contraventions of the SFA and its business conduct requirements by Three Arrows Capital, MAS issued nine-year prohibition orders against Three Arrows Capital's Chief Executive Officer (CEO) and Chairman. Such enforcement actions are not possible without MAS conducting rigorous investigations of suspected violations.

However, some of the investigation powers available to MAS under the Securities and Futures Act (SFA) and the Financial Advisers Act (FAA) are not available in the other MAS-administered Acts, specifically the Financial Services and Markets Act (FSMA), Insurance Act (IA), Payment Services Act (PS Act) and Trust Companies Act (TCA). For convenience, I shall refer to this latter group of legislation as the other MAS-administered Acts. We also need to strengthen or widen some existing powers under the SFA and FAA to ensure their effectiveness.

The FIMA Bill will close these gaps by enhancing and making consistent the investigation powers across all of the MAS-administered Acts. The FIMA Bill will also facilitate the transfer of evidence between MAS and other agencies for enforcement to be more efficient and more effective. I shall now explain the main categories of amendments in detail.

First, MAS is proposing to introduce in the other MAS-administered Acts the power to require persons to appear before an MAS officer for examination and statement recording for the purpose of investigations under the relevant Acts. Such powers already exist under SFA and FAA and are effective in enabling investigators to obtain information about suspected misconduct.

Second, the FIMA Bill will remove the requirement in SFA and FAA for MAS to first issue orders to a suspect to produce information and show that the suspect has failed to comply with such orders before MAS can enter, without a warrant, premises believed to be occupied by the suspect. This will enable MAS to enter premises without tipping off the suspect and, therefore, reduce the risk of the suspect destroying evidence related to the investigation. A similar power to enter premises without a warrant will be extended to the other MAS-administered Acts.

Sir, MAS officers will not have the powers to search the premises and seize evidence on the premises when they exercise the power of entry without warrant. They can, however, require any person on the premises to produce information or state where such information can be found. MAS officers can also require any person on the premises to preserve evidence.

The FIMA Bill will also introduce provisions in the other MAS-administered Acts to empower MAS to obtain a Court warrant to search premises and seize evidence. This power already exists in SFA, FAA and TCA and it allows MAS to obtain evidence that is in the possession of uncooperative subjects before it is concealed, removed, tampered with or destroyed.

The FIMA Bill will also amend the current transfer of evidence provisions in SFA and FAA to facilitate the exchange of information between MAS and the Police, Public Prosecutor or other law enforcement agencies. In cases where MAS investigations reveal serious misconduct that warrants a criminal prosecution, the ability for MAS to transfer evidence to the Police would be helpful. It reduces the need to duplicate investigations and enhances the efficiency of our law enforcement agencies. Conversely, there may be cases investigated by the Police or other law enforcement agencies that may be more effective or appropriately dealt with by MAS through regulatory actions.

However, under the current SFA and FAA, MAS may only transfer evidence to the Police or Public Prosecutor for the purpose of criminal investigations or proceedings for marked misconduct offences under the SFA and offences under the FAA. The FIMA Bill will expand the existing provisions to allow evidence gathered by MAS to be transferred to the Police or the Public Prosecutor for the purpose of criminal investigations or proceedings for any offence under the MAS-administered Acts.

Presently, the Police or other law enforcement agencies may only transfer evidence to MAS for the purpose of civil penalty investigations or actions for market misconduct offences under the SFA. The FIMA Bill will replace these provisions with the power for 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.

In this regard, the specific provisions for the transfer of evidence between MAS, the Police and other law enforcement agencies are consistent with the existing general common law principle permitting enforcement agencies to share with other enforcement agencies – evidence that would ordinarily be kept confidential where it is in the public interest to do so. Expressly legislating for the transfer of evidence between MAS, the Police and other law enforcement agencies, notwithstanding the common law principle, will make clear when evidence may be transferred and facilitate operational arrangements in respect of the transfer.

Sir, let me now explain in more detail how the Bill will enable MAS to regulate FIs in the capital markets sector more effectively. This pertains to amendments specific to three Acts, namely, the SFA, the FAA and the TCA.

The first set of amendments relates to expanding MAS' powers to issue directions to CMSL holders and their representatives for their unregulated businesses. Currently, CMSL holders may conduct unregulated businesses, such as dealing in products that are not regulated by MAS. Examples of such products include digital payment token derivatives that are traded on overseas exchanges.

These unregulated businesses may pose contagion risks to CMSL holders' regulated businesses. For instance, losses from a CMSL holder's unregulated business could adversely impact its ability to meet its obligations to customers in its regulated businesses. Customers may also not be fully aware that regulatory protections do not apply to the CMSL holder's unregulated businesses.

While MAS has issued guidance to CMSL holders on risk-mitigating measures and safeguards that they should adopt when they conduct unregulated businesses, we should put these on a clear legal footing. The FIMA Bill will empower MAS to issue legally binding directions to CMSL holders and their representatives in relation to their conduct of unregulated businesses, to mitigate risks posed to its regulated businesses.

Sir, the second set of amendments enhances MAS' supervisory powers under the SFA, FAA and the TCA. They will harmonise requirements across the Acts and where relevant, also align MAS' powers under these Acts with the Banking Act 1970. I will highlight a few key amendments.

The first relates to the appointment and removal of key persons. Regulated FIs are generally required to obtain MAS' approval before appointing their chief executive officers and directors. However, this requirement currently does not apply to locally incorporated recognised market operators and recognised clearing houses, and approved trustees. The FIMA Bill will therefore introduce approval requirements for such entities.

In addition, while MAS already has powers across the SFA, FAA and TCA to remove a director or key management officer, there are some minor differences in the grounds for removal. The FIMA Bill will consolidate the grounds for removal into a single ground of not being "fit and proper". Certain factors that MAS may consider, in its assessment, are also set out in the Bill.

The second area relates to persons obtaining control of a capital markets FI. In general, a person acquiring control in capital markets FIs, must obtain MAS' approval before doing so. However, this requirement does not currently apply to locally incorporated recognised market operators and recognised clearing houses and approved trustees. The FIMA Bill will extend the approval requirement to such entities.

For other capital markets FIs, the FIMA Bill will also clarify when MAS' approval must be sought. Currently, a person must seek MAS' approval prior to entering into an arrangement by which the person would obtain control of a CMSL holder or a licensed financial adviser. Such an arrangement may include early stages of negotiations for the acquisition. This is not MAS' intent. The FIMA Bill will make clear that MAS' approval need only be sought before a person obtains control of the regulated entity.

The last aspect relates to the appointment of external auditors. Presently, MAS' powers in relation to external auditors of Approved Exchanges, Approved Clearing Houses, Approved Holding Companies and Licensed Trade Repositories are limited to matters that the auditor must immediately report to the MAS, such as when the auditor becomes aware of any matter that constitutes a breach of the SFA or an offence involving fraud or dishonesty. It is important that the auditors appointed by such entities can satisfactorily discharge their duties, given the central role that these entities play in the capital markets.

The FIMA Bill will introduce the requirement for such entities to obtain MAS' approval for the appointment of their external auditors on an annual basis. MAS will also have powers to direct these entities to remove or replace their appointed auditors, where the appointed auditors are unable to discharge their duties satisfactorily. With these amendments, MAS will align the approach for capital markets FIs with the approach that MAS has taken for other systemically important FIs under its purview, such as banks and insurance companies.

Lastly, the FIMA Bill will also introduce various miscellaneous amendments, such as (a) the amendments to clarify MAS' reprimand powers; (b) amendments consequential from the introduction of new processes, such as updating some of the Acts to remove references to physical licences; and (c) amendments to provide for definitions necessitated by amendments made by this Bill.

Mr Speaker, in conclusion, the FIMA Bill will enhance MAS' ability to enforce its regulatory regime and supervise capital markets FIs more effectively. This will further strengthen Singapore's position as a safe and trusted international financial centre. Sir, I beg to move.

Question put, and agreed to.

Mr Speaker: Mr Edward Chia.

2.37 pm

Mr Edward Chia Bing Hui (Holland-Bukit Timah): Mr Speaker, Sir, the Financial Institutions (Miscellaneous Amendments), or FIMA, Bill extends MAS' capabilities to safeguard our financial system's integrity. While it is far-reaching, it aligns with our commitment to uphold the highest standards of financial supervision.

However, I would like to highlight five key areas that require clarification based on feedback received by the industry. This includes: first, clarifying the scope of MAS' powers; second, the appointment of agents by foreign regulators; third, managing risk profiles of CMSL holders; fourth, the extension of MAS' authority over the appointment and removal of key personnel; and fifth, the definition of "reasonable care on accuracy".

Firstly, Sir, the Bill impacts a wide range of existing financial regulations – from the FAA to the SFA and the TCA – essentially impacting the entire spectrum of our financial regulations. Specifically, the Bill grants the MAS powers including the power to enter without a warrant.

The feedback has been a palpable sense of concern. 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. It is essential to emphasise how these measures will protect legitimate institutions from undue anxiety, while simultaneously guaranteeing stricter and more expeditious enforcement actions that ultimately serve the interests of bona fide institutions.

Such a measure is not commonplace in other financial hubs, such as Hong Kong, which has not enacted similar legislation even in its recent tightening of financial regulations. How do we justify these measures and are they similar in other jurisdictions, such as Australia and the United Kingdom (UK)? Additionally, what safeguards will be put in place to prevent misuse?

Moreover, it is important to note that a Court warrant is still necessary for seizing evidence. In light of this, how can we ensure that entering premises and conducting interviews without a warrant will indeed enhance effectiveness in combating illicit activities?

Secondly, the Bill also enables MAS to approve the appointment of agents by foreign regulators to conduct an inspection of specified financial institutions under the SFA. Will this mean that agents appointed by foreign regulars can conduct inspections without a warrant as well? Is there a reciprocal arrangement with these foreign regulators? How would this impact our jurisdiction's autonomy and would MAS be obliged to approve all such appointments?

Thirdly, the Bill allows MAS to issue directions on risk mitigation for unregulated business activities for CMSL holders. Given the varied nature and scope of activities these institutions undertake, a one-size-fits-all approach could potentially overlook individual complexities. How will this approach ensure that unique risk profiles of these institutions are adequately managed? Is there a plan to engage with the industry for transparent and fair standards implementation?

Moving on to my fourth point. The extension of MAS' authority over the appointment and removal of key personnel, such as CEOs and directors, needs to be carefully managed. The industry seeks clarity on the criteria and processes that will guide these decisions. What are the policies in place to prevent potential overreach? Furthermore, what is the usual timeframe for approval and how does the timeframe compare to other jurisdictions?

Understanding the criteria that will guide these significant decisions will be crucial for maintaining industry confidence.

Finally, Sir, the Bill introduces a nuanced stance on reasonable care on accuracy, which could lead to reprimands for insufficient disclosure or lack of duty of care. I would like to seek concrete definitions to prevent ambiguity in enforcement. How will MAS assess and enforce these standards to ensure fair treatment across the board? Furthermore, what avenues will be available for individuals to demonstrate compliance?

In conclusion, this Bill represents a step towards reinforcing the robustness of our financial system. However, the measures within it must be implemented with precision and in consultation with the stakeholders they affect. Certainly, financial institutions will compare the new measures with those implemented in other global financial hubs.

Hence, to ensure our competitiveness as a financial centre remains robust, it is critical that we thoroughly explain the rationale behind this amendment Bill and work to convince the industry that these changes will ultimately prove advantageous for legitimate institutions operating within Singapore's jurisdiction.

Mr Speaker, Sir, notwithstanding my questions and clarifications, I support the amendment Bill.

Mr Speaker: Mr Neil Parekh.

2.42 pm

Mr Neil Parekh Nimil Rajnikant (Nominated Member): Mr Speaker, Sir, thank you for allowing me this opportunity to speak on this Bill. I would like to declare my interest as a board director of Elevandi, established by the MAS to advance fintech in the digital economy as well as to organise the annual Fintech Festival. I would also like to declare my interest as a member of the Advisory Council of the Singapore FinTech Association.

The FIMA Bill aims to amend various acts to enhance MAS' investigative powers, regulate additional business activities, clarify MAS' authority to reprimand formerly regulated persons for past misconduct and improve the governance and control of financial institutions.

For businesses, especially small and medium-sized enterprises (SMEs) in the financial sector, the Bill introduces stricter licensing and compliance requirements; which, while increasing administrative work, enhances trust within the business community. Also, the move towards digitisation and electronic service adoption can reduce paperwork and make compliance processes more efficient. This will encourage businesses to uphold the highest standards of compliance, enhancing our reputation for integrity and reliability in the market. However, this Bill will introduce several challenges that businesses may face.

One key challenge is the increased compliance costs due to stricter licensing and regulatory requirements, which could strain the financial and operational resources of SMEs in the sector. Additionally, the enhanced investigative powers granted to regulatory authorities may lead to a more rigorous scrutiny of business practices, requiring companies to invest more in compliance and risk management systems. The shift towards digitisation, while beneficial in the long run, may pose short-term challenges for businesses lacking the infrastructure or expertise to adapt quickly.

Lastly, the broader regulatory scope of these amendments means that more businesses, including those involved in emerging financial products and services, will come under greater regulatory oversight, perhaps necessitating adjustments to their business models to ensure compliance.

Sir, may I now take this opportunity to seek clarifications from the Minister of State on three issues?

What would be the guidelines for the MAS to manage regulated institutions in the development of unregulated financial products? Could the Minister of State also please outline how SMEs will be supported in understanding and complying with new regulations, including potential briefings, training and financial assistance, while fostering confidence in the regulatory landscape? Lastly, given the unique challenges posed by cloud services, may I clarify how MAS intends to handle investigations involving digital data stored in cloud environments, including the practicality of seizing physical evidence and ensuring the security and confidentiality of unrelated data?

Given that the financial sector is one of the pillars of our economy, this stronger regulatory oversight is paramount as the governance of financial institutions becomes increasingly important. In my view, these legislative amendments reflect MAS' recognition of the rapid evolution within the fintech sector and the need for a more comprehensive regulatory framework. These amendments will allow MAS to further develop a secure and vibrant ecosystem for fintech innovation, while ensuring the new regulatory measures are proportionate to the risks posed.

Mr Speaker, Sir, despite the short-term pain, there will be long-term gain for our financial system. This Bill will enhance Singapore's stature as a well-regulated, leading global financial hub. Notwithstanding my clarifications, I support this Bill.

Mr Speaker: Mr Don Wee.

2.47 pm

Mr Don Wee (Chua Chu Kang): Mr Speaker, Sir, I declare that I am working with a Singaporean bank. This legislative effort suggests a comprehensive approach to strengthen MAS' regulatory framework and adapt it to the evolving landscape of financial services. It aims to provide MAS with enhanced tools and flexibility to effectively regulate and supervise financial institutions operating under its jurisdiction. I therefore support the Bill, but I have few points to clarify with the Minister：

With the enhanced power, how does MAS intend to synergise the information that it collects and harmonise, with the Suspicious Transaction Reports filed with the Suspicious Transaction Reporting Office? Can the enhanced intelligence be shared with other Government agencies, such as the Singapore Police Force and the Attorney-General's Chambers (AGC) seamlessly, so as to investigate and prosecute money laundering and terrorism financing cases swiftly? How can the enhanced power allow MAS to expedite investigations into licensed payment services providers for suspected failure to comply with its obligations? Mr Speaker, in Mandarin.

(In Mandarin): [Please refer to Vernacular Speech.] In order to investigate and prosecute money laundering and terrorism financing cases, can the enhanced intelligence be shared with other Government agencies, such as the Singapore Police Force and the Attorney-General's Chambers? How can the enhanced power allow MAS to expedite investigations into licensed payment services providers for suspected failure to comply with its obligations?

(In English): This FIMA amendment Bill will allow MAS to issue written directions on the minimum standards and safeguards that should be in place when CMSL holders and their representatives conduct unregulated businesses. However, I believe MAS deserves more authority to issue stiffer measures in this aspect as an errant service provider may use consumers' investments for its unregulated activities.

What are the grounds for removal of key personnels? What are the attributes and factors that the single fit and proper test is looking out for? Under what circumstances will MAS approve the appointment of external auditors or agents by foreign regulators to conduct inspection of financial institutions? What type of information will be shared with these foreign regulators?

The FIMA Bill allows for the service of notices, orders or documents by registered post and electronic services. Has MAS considered the relevant risk factors and what measures will be imposed? Notwithstanding the above-mentioned clarifications, I support the Bill.

Mr Speaker: Mr Louis Ng.

2.50 pm

Mr Louis Ng Kok Kwang (Nee Soon): Sir, this Bill will enhance MAS' investigative, supervisory and inspection powers to more effectively ensure compliance by financial institutions. This is a positive move that strengthens the integrity of our financial institutions. I thank MAS for conducting a public consultation and incorporating its findings into this Bill. I have three points of clarification.

My first clarification is on enhancement and expansion of MAS' investigative powers. The amendments will expand MAS' investigative powers under five pieces of legislation and provide MAS new investigative powers under one additional piece of legislation.

Can the Minister of State share how much additional workload will this entail for MAS' Enforcement Department? Can the Minister of State share how the expanded investigative powers will impact the current MAS-Commercial Affairs Department (CAD) Joint Investigation Arrangement? Can the Minister of State also share what steps will be taken to ensure that MAS' enforcement officers are prepared for the expanded scope of powers?

Police are guided by the Police General Orders (PGOs) in carrying out their investigative powers. Given the expanding scope of MAS' enforcement officers' powers, can the Minister of State share what equivalent guidance there is for MAS' enforcement officers?

My second point is on the right against self-incrimination. The new section 89(1) provides that a person is not excused from disclosing information on the ground that the disclosure of information might tend to incriminate the person. However, under section 89(2) when a person claims before making a statement disclosing information that the statement might tend to incriminate the person, that statement is not admissible against the person in criminal proceedings.

Can the Minister of State confirm that what this means is that such a person must still provide information that might incriminate them but may preface it with a claim that the statement might incriminate them? Will the individual be informed that they can preface their statement with a claim that the statement might incriminate them?

This is because if there is no such notice, individuals who know to preface their statement might tend to be those who are aware or legally advised of their right against self-incrimination. In contrast, those who may not know of this right may tend to be those who are less privileged, socio-economically.

Can the Minister of State also clarify whether this claim must strictly be made before the individual provides their statement? What are the implications if the individual only states in the middle of the statement that it may be incriminating? Is such a statement still admissible in criminal proceedings? Additionally, is there a strict format or wording that such a claim must take? If the individual will be informed about their option to make such a claim, will they be informed about how they should make such a claim? Those with limited or no legal advice on their rights against self-incrimination should not be penalised if their statement fails to meet some strict, undisclosed standard.

My third and final point is on the treatment of privileged communications. Under the new section 89(3), a legal counsel who refuses to disclose privileged communications must still give the name and address of the person to whom the privileged communication was made. Can the Minister of State clarify the rationale of this requirement? Can the Minister of State also confirm that the authorities will not approach an individual to seek production of the privileged communication?

Sir, notwithstanding these clarifications, I stand in support of the Bill.

Mr Speaker: Minister of State Tan.

2.53 pm

Mr Alvin Tan: Mr Speaker, Sir, I thank Mr Don Wee, Mr Edward Chia, Mr Louis Ng and Mr Neil Parekh for their questions and comments on the Bill. I will first deal with some general questions and comments relating to the proposed enhancements of MAS' investigative powers.

Mr Edward Chia highlighted the importance of explaining the rationale for and consulting the industry on these amendments. I assure Mr Edward Chia and Members of this House that MAS did issue public consultations on the proposed amendments, in which we explained how they would enhance the effectiveness of MAS' supervision and enforcement.

MAS carefully considered the feedback received from industry and the public and has incorporated the feedback as appropriate in the amendments. For instance, in response to feedback that it was unclear whether MAS' investigative powers would override legal professional privilege, MAS inserted a new provision to state that MAS' exercise of its investigative powers does not require a person to disclose any information subject to legal privilege.

Mr Louis Ng asked how amendments to MAS' investigative powers will affect the workload of MAS' Enforcement Department and the current MAS-CAD Joint Investigation Arrangement. He also asked how MAS will ensure that its officers are equipped to exercise the expanded investigative powers and what guidance will be given to them in this regard.

Sir, the proposed amendments will enable MAS to conduct investigations using its powers under the respective MAS-administered Acts more effectively. This does not necessarily lead to an increase in the volume of investigations and a higher load on MAS officers. If there is a serious cause for investigation, MAS will take it up and commit the needed resources.

The amendments will also not affect the MAS-CAD Joint Investigation Arrangement. This Arrangement enables MAS and CAD to jointly investigate offences under the SFA as well as the FAA. MAS officers taking part in the joint investigations are gazetted as Commercial Affairs Officers and exercise criminal powers of investigation, not the investigative powers under the MAS-administered Acts.

On Mr Louis Ng's question on training and guidance to the MAS officers, I would first highlight that the expanded powers are not new to MAS. They already exist to a large extent, in the SFA and the FAA. MAS officers are experienced in conducting investigations under these Acts and I have given a few examples of such cases in my speech. MAS has internal processes and guidance, which takes into account Police procedures and practices to ensure that MAS officers exercise investigative powers lawfully and judiciously.

I now turn to the Members' questions about specific proposed provisions and powers.

Mr Louis Ng asked several questions about the proposed provisions on self-incriminating statements. These provisions state that when being examined by an MAS officer, a person is not excused from disclosing information on the ground that the information might tend to incriminate them. However, if that person claims before making a statement that the information might tend to incriminate them, then that statement is not admissible against the person in criminal proceedings. I will refer to this as the "pre-statement claim".

Before an MAS officer starts examining a person under the MAS-administered Acts, the officer will indeed inform that person that where they claim that a statement may incriminate them, that statement would not be admissible as evidence in criminal proceedings against them. There is no strict format or wording for the person to make a pre-statement claim. Thus, those who are not legally represented will not be disadvantaged in terms of their ability to make such a claim.

The pre-statement claim may be made at any point during MAS' examination of the person and the information which the person claims is self-incriminating, would then be inadmissible in criminal proceedings. MAS would, however, still be able to use such information to take non-criminal actions, such as civil penalties and prohibition orders.

Mr Louis Ng also asked: one, for the rationale for requiring a legal counsel who refuses to disclose privileged communications to MAS, to provide MAS with the name and address of the person to whom the privileged communications were made; and two, if MAS will approach the person identified by legal counsel and compel the person to produce the privileged communication to MAS.

These provisions relate to situations where legally privileged communications, made by or to a lawyer, may be relevant to MAS' investigations. The lawyer would not be required to disclose the privileged communications itself. However, the name and address of the person who received or made the privileged communication is not legally privileged information. Requiring the lawyer to disclose these details would enable MAS to contact that person, to determine if the person is willing to waive privilege and disclose the privileged communication to MAS. MAS will not compel or force the person identified to produce the privileged communication to MAS, as MAS' investigation powers do not override legal professional privilege.

Sir, let me now turn to questions about the proposed evidence transfer provisions. Mr Don Wee asked how MAS will synergise and harmonise the information it receives with the Suspicious Transactions Reporting Office (STRO). He also asked if MAS will be able to share the evidence obtained using its enhanced investigative powers with other law enforcement agencies, such as the Singapore Police Force and the AGC, for their investigations into and prosecution of money laundering and terrorism financing offences.

Sir, under the enhanced powers, MAS may transfer evidence to police officers, Commercial Affairs Officers or the Public Prosecutor for the purpose of criminal investigations or proceedings for any offence under the MAS-administered Acts. Since STRO is part of Singapore Police Force's Commercial Affairs Department, MAS will be able to share information with STRO as needed to pursue such criminal investigations or proceedings.

As for money laundering and terrorism financing offences, these may be found in laws that are not administered under MAS’ purview, such as the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act. Nevertheless, as I mentioned in my speech, MAS will still be able to share evidence with the Police and AGC for the purposes of investigating and prosecuting such offences based on the general common law principle permitting enforcement agencies to share confidential information with other enforcement agencies, where it is in the public interest to do so.

Mr Don Wee also asked if the FIMA Bill would expedite MAS’ investigations into licensed payment service providers which fail to comply with their obligations.

The FIMA Bill will enable MAS to be more effective in obtaining information regarding a suspected failure of a licensed payment service provider to comply with its obligations under the PS Act. For instance, the amendments to MAS’ investigative powers under the PS Act will empower MAS to interview and record the statement of any person, such as employees of licensed payment service providers, for the purposes of investigations under the PS Act. The other enhancements to MAS’ evidence gathering capabilities also increase the likelihood of MAS being able to obtain relevant evidence before it is tampered with or destroyed.

MAS is committed to the timely enforcement of the laws and regulations under its purview. Sir, I wish to highlight, however, that while MAS may be able to investigate licensees more effectively with its enhanced powers, the time taken to complete an investigation depends on a variety of factors, including the nature and complexity of the suspected offences and the volume of the evidence. MAS must investigate matters thoroughly to ensure we are able to take robust enforcement action against non-compliant persons.

Mr Edward Chia also raised questions concerning MAS’ proposed power to enter premises without a warrant. He asked why MAS cannot simply apply for a court warrant to enter, if the proposed power can be found in other jurisdictions, and what safeguards will be put in place to prevent misuse.

MAS recognises that the ability to enter premises is a significant power. However, this power is necessary to enable MAS to effectively investigate potential breaches under the MAS-administered Acts. Evidence crucial to our investigations is often found in premises occupied by a suspect. While legitimate financial institutions may cooperate and produce that evidence to MAS, there will be instances where the suspect is not forthcoming and there is a risk that evidence will be destroyed or concealed. In such instances, we will require a more robust approach.

It is not necessary for the Court to act as a gatekeeper in every case where MAS wishes to exercise such powers. There are safeguards built into the provisions themselves. MAS will have to give two days’ notice before entering premises without a warrant, unless: one, there are reasonable grounds for suspecting that the premises are, or have been, occupied by a suspect; or two, MAS has taken all reasonably practicable steps to give such notice to the occupier of the premises, but has not been able to do so.

Furthermore, after entering the premises without a warrant, MAS will not be able to seize evidence without a warrant. This is in itself another safeguard. If MAS wishes to seize evidence, it will have to apply to the Court for a warrant to enter premises and, at the same time, seize evidence.

Mr Chia thus asked whether the power to enter premises without a warrant will indeed be effective. The answer to this is that it depends on the circumstances. MAS will assess if gaining entry without a warrant will likely result in cooperation in producing the relevant evidence. If the assessment is that cooperation will not be forthcoming, then MAS may choose to apply for the court warrant to enter premises and seize evidence instead.

The power to enter premises without a warrant is not unique to the MAS. Financial regulators in the UK, Australia and Canada have the power in certain situations as well. For example, the UK Financial Conduct Authority has similar powers when carrying out anti-money laundering investigations. The Ontario Securities Commission can enter business premises without a warrant in respect of an investigation relating to the administration of Ontario securities laws or regulation of the capital markets in Ontario. Each jurisdiction has its own unique regulatory frameworks and operating environment, so such considerations do inform but they do not dictate our own approach.

The underlying concern Mr Chia raised is that MAS’ power to enter premises without a warrant should not adversely affect Singapore’s competitiveness as a financial hub. We do not think that it will.

Firstly, the power to enter premises without a warrant is not new. It already exists under the SFA and the FAA. The financial industry would therefore already be familiar with MAS’ ability to enter premises in investigations in that context. The proposed amendments will allow MAS to exercise this power to pursue misconduct more effectively and across additional sectors of the financial industry. Secondly, having robust powers of investigation will in fact further underscore MAS’ commitment and ability to uphold a clean and trusted financial sector.

Mr Neil Parekh asked how MAS intends to handle investigations involving digital data stored in cloud environments, including ensuring the security and confidentiality of unrelated data.

The proposed amendments make clear that MAS has the power to require a person to produce digital evidence and to access digital evidence, including evidence stored in a cloud. MAS will also have the power to apply to the court for a warrant to search and make a copy of any digital data.

MAS has in place procedures and guidelines to ensure that all data obtained in the course of investigations is kept confidential. Indeed, MAS officers have the obligation to keep such information confidential under the Official Secrets Act, the Monetary Authority of Singapore Act and prevailing Government policies.

I will now move on to the questions relating to the enhancements of MAS’ supervisory powers in the capital markets.

On the proposed power for MAS to issue directions to CMSL holders and their representatives that conduct unregulated businesses, Mr Chia asked how MAS would exercise the new direction-making power to address and manage the unique risk profiles of each CMSL holder, given the varied nature and scope of activities that these CMSL holders undertake. With the amendment, MAS will be able to issue directions to CMSL holders as a class as well as to individual CMSL holders. MAS is prepared to do the latter when there are unique risks characteristics exhibited by individual CMSL holders’ business models.

Mr Parekh and Mr Chia also asked about MAS’ process for developing and implementing the new scope of power and standards. MAS will conduct a public consultation to seek industry feedback on the proposed list of unregulated financial products and standards and will provide an appropriate transition period for industry to adopt these standards. Where relevant, MAS will engage the industry to keep them updated on new regulations.

Both Mr Don Wee and Mr Edward Chia have sought clarification on the criteria and processes that will guide MAS’ decision to approve the appointment of key persons or to direct their removal.

The fitness and propriety of a key person is an important consideration when MAS reviews whether to approve the appointment or direct the removal of a key person. Mr Wee asked about the attributes and factors MAS is looking for under the single fit and proper test, under the various Acts administered by MAS. MAS may consider, for example, whether the individual has previously been convicted for fraudulent or dishonest offences. Other factors that MAS may consider include honesty, integrity, competence and also financial soundness. These factors and how they are assessed are also currently set out in MAS’ Guidelines on Fit and Proper Criteria.

Sir, MAS is mindful that the removal of a key person has serious implications on the individual’s future livelihood, professional standing as well as his or her reputation. MAS' guidelines therefore also make clear that an individual who does not meet any particular criteria is not automatically deemed as being not fit and proper. MAS adopts a proportionate approach which considers the nature and the responsibilities of the individual in determining the relative emphasis and the standard expected of that person. Further, the financial institution and the affected key person can appeal MAS' decision. For example, if a key person is removed from office, both the affected financial institution and the key person may appeal to the Minister-in-charge.

Mr Edward Chia also asked about the timeframe for approval of appointment of key persons. MAS will endeavour to make the decision in a timely manner. However, the time taken to process an application would depend on factors such as the complexity of the application, the completeness of the information and documents provided, and any additional clarification that might be required.

Mr Wee and Mr Chia raised a few questions on the proposal to empower MAS to approve appointment of agents by foreign regulators to conduct inspections of financial institutions on their behalf.

Sir, when MAS receives a request from a foreign regulator for its agent to inspect a MAS-regulated financial institution, MAS will duly consider the request on a case-by-case basis and is not obliged to approve all such requests for appointments. MAS will approve such appointments when it is satisfied that the inspection of the financial institution is relevant to the foreign regulator’s discharge of its regulatory function and mandate. An example would be where the MAS-regulated financial institution is part of a financial services group under the consolidated supervision of the foreign regulator. MAS similarly conducts onsite inspections of regulated financial institutions in foreign jurisdictions under comparable arrangements.

These are inspections which rely on the cooperation of the financial institution and are not investigations and the question of a warrant does not arise.

Mr Edward Chia also asked about the type of information that will be shared with such foreign regulators. These would generally include compliance policies and procedures of the inspected financial institution as well as transaction information that may be relevant to the scope of the inspection. In granting its approval, MAS has the power to impose conditions or restrictions to ensure that the appropriate safeguards are in place, such as those for the protection of confidentiality of information.

Mr Don Wee asked whether MAS has considered the relevant risk factors for the service of notices, orders or documents, or the "relevant documents", by registered post and electronic service, and what measures will be imposed. Sir, the amendments are intended to clarify the existing practice of serving relevant documents through registered post or electronic service. Relevant documents may only be served through electronic service with a person’s prior consent to ensure that such documents are brought to the attention of the person as needed. If served through registered post, the envelope containing the relevant documents should be properly addressed, stamped and posted by registered post.

Mr Edward Chia sought clarification on what constitutes exercising "reasonable care" in the submission of information to MAS. Sir, to be precise, the term used in the provision is "due care" rather than "reasonable care". This is the same standard of care that is already adopted for the existing offences for the provision of false or misleading material information under the SFA, FAA and TCA. MAS is simply extending this standard of care to the provision of non-material false or misleading information. This new offence does not apply to individuals.

Mr Chia also asked how MAS will assess and enforce proposed standards to ensure fair treatment across the board. It is not MAS' intent to automatically or mechanistically take financial institutions to task for errors in their submissions. In assessing whether to take action against a financial institution, MAS would consider the nature of the information submitted, the significance of the error, the robustness of the financial institution's internal controls and processes, the frequency of erroneous submissions to MAS and the circumstances leading to the breach.

Mr Speaker, Sir, let me conclude by reiterating the importance of this set of amendments. The amendments are necessary to enable MAS to supervise FIs and uphold the regulatory regime under its purview more effectively in a rapidly-evolving financial system. It signals our commitment to maintain the high standards of integrity and trust in Singapore's financial system. Mr Speaker, I beg to move.

Mr Speaker: Are there any clarifications for Minister of State Tan? None.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. – [Mr Alvin Tan].

Bill considered in Committee; reported without amendment; read a Third time and passed.

Mr Speaker: Order. I propose to take a break now. I suspend the Sitting and will take the Chair at 3.40 pm.

Sitting accordingly suspended

at 3.17 pm until 3.40 pm.

Sitting resumed at 3.40 pm.

[Deputy Speaker (Ms Jessica Tan Soon Neo) in the Chair]