Investigations into "Penny Stock" Cases
Prime Minister's OfficeSpeakers
Summary
This question concerns Mr Leon Perera’s inquiry regarding Singapore’s safeguards against "penny stock" fraud and the adequacy of resources within the Commercial Affairs Department compared to international counterparts. Deputy Prime Minister Tharman Shanmugaratnam highlighted that Singapore’s regulatory regime is robust and rated favorably by the International Monetary Fund, involving close cooperation between the Singapore Exchange, Monetary Authority of Singapore, and Commercial Affairs Department. He noted that surveillance has been enhanced through more detailed "Trade With Caution" alerts and that joint investigations leverage specialized expertise in data analytics and digital forensics. Regarding resources, the Minister stated that current staffing levels are commensurate with Singapore’s market capitalization and are comparable to developed markets like Hong Kong and Australia. He emphasized that because securities fraud investigations are complex and evidence-intensive, the focus remains on deepening specialized capabilities rather than simply increasing resources to accelerate the investigative process.
Transcript
21 Mr Leon Perera asked the Prime Minister in light of the securities fraud investigations relating to the "penny stock" case which have been ongoing for several years (a) how robust are Singapore's safeguards against such cases of fraud; and (b) how does the Commercial Affairs Department compare to equivalent bodies in other developed countries in terms of the level of staffing and resources devoted to detecting and investigating securities fraud.
Mr Tharman Shanmugaratnam (for the Prime Minister): Singapore has robust safeguards against attempts to manipulate or rig our capital markets. There are strict rules in place and our regulatory regime against market misconduct is comparable to those in other developed markets. But it is not possible to have safeguards that can prevent all misconduct, which is why we have an effective enforcement regime to ensure that any market misconduct is swiftly detected, thoroughly investigated and firmly dealt with. In the most recent Financial Sector Assessment Report on Singapore, the International Monetary Fund rated our regime very favourably.
The Singapore Exchange (SGX), the Monetary Authority of Singapore (MAS) and the Commercial Affairs Department (CAD) work closely together in investigating suspected fraud in our capital markets and taking enforcement actions. SGX is the frontline supervisor. It monitors trading activities and conducts preliminary assessments of possible market misconduct, using electronic surveillance systems. SGX recently enhanced its "Trade With Caution" alerts by providing investors more detailed information on unusual trading activities. Such alerts serve to disrupt at an early stage any efforts at market manipulation by those who may be responsible for the unusual trading activities.
Besides referrals from SGX, MAS and CAD also receive market intelligence on suspected misconduct from interactions with financial institutions and market participants, suspicious transaction reports lodged with CAD, and public feedback.
MAS and CAD conduct joint investigations on securities market misconduct, such as insider trading and market manipulation. This close interagency cooperation leverages MAS' expertise in financial markets and CAD’s experience in investigating financial crime. MAS and CAD are continually enhancing their enforcement capabilities to detect and investigate market abuse and misconduct, including the use of data analytics and digital forensics.
MAS and CAD have also taken tough enforcement actions to deter securities fraud. Between 2011 and 2015, MAS took 21 civil penalty actions against market misconduct offences under the Securities and Futures Act. Over the same period, CAD prosecuted a total of 34 persons for false trading and other serious market misconduct.
Given the complexity of most instances of securities market fraud, investigations take time. The amount of evidence that needs to be gathered and analysed, such as bank accounts and transactions, is typically large. If suspects and witnesses are not available or uncooperative, it adds to the length of investigations. These are challenges that cannot be directly addressed by merely increasing resources.
The resources that Singapore has devoted to investigating market misconduct offences are commensurate with the market capitalisation and number of listed companies in our securities market, and comparable with other developed markets, such as Hong Kong and Australia. More important than the numbers are the quality and type of resources we have to detect and investigate capital market crimes. The approach taken by CAD and MAS is to focus on having dedicated units equipped with specialised skillsets that look into securities fraud-related crimes and to continually deepen expertise and capabilities.