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Singapore – The New Market Misconduct Enforcement Regime, And A Brief Comparison With The Position In Hong Kong.

2 April, 2015


Legal News & Analysis – Asia Pacific – Singapore  Capital Markets


On 17 March 2015, the MAS announced a new market misconduct enforcement regime, which came into force with immediate effect. The new regime will see the MAS and CAD jointly investigating all potential market misconduct cases at the outset. Decisions on whether a case is subject to civil penalty action or criminal prosecution will be made when investigations are concluded. The MAS announcement can be accessed here.


In the past, an initial assessment was made of whether the offence was likely to result in a civil penalty or criminal prosecution. The MAS would then take over and investigate all cases classified as “civil”. Cases classified as “criminal” would all be passed to the CAD for investigation. The two agencies conducted separate and independent investigations on market misconduct cases. Recent examples of previous market misconduct enforcement cases that the two agencies have undertaken separately are set out at the bottom of this bulletin.


The Implications Of The New Regime


An important feature of the new regime is that officers of the MAS who take part in the joint investigations will be gazetted as “Commercial Affairs Officers”. As such, they will have the same statutory investigative powers as officers of the CAD. Such powers include the ability to search premises and seize items and to order financial institutions to monitor customer accounts.


Furthermore, the new enforcement regime, in particular the collaboration between the MAS and the CAD, is expected to result in:


  1. consolidation of investigation resources and expertise;
  2. creation of significant investigative synergies;
  3. greater coordination when formulating enforcement policies in the area of market misconduct; and
  4. improvement in the overall effectiveness of market misconduct investigations.


The Position In Hong Kong


In Hong Kong, market misconduct is prohibited by the Securities and Futures Ordinance (SFO). Part XIII of the SFO sets out the civil regime and Part XIV of the SFO sets out the criminal regime. Part XIII and XIV of the SFO contain two substantively identical sets of provisions which define the various forms of market misconduct. As a result, the same form of market misconduct (say insider dealing) is covered by both the civil and criminal regime of the SFO.


In general, the Securities and Futures Commission (SFC) is the principal local enforcement agency that investigates suspected market misconduct. It is not common for other enforcement agencies (like the Hong Kong Police, the Independent Commission Against Corruption, etc.) to be concerned with market misconduct. Unlike the previous or new regime in Singapore, the SFC is in general the only agency that investigates market misconduct in Hong Kong.


In practice, the SFC will commence investigation by issuing a Direction to Investigate. The Direction will recite which provisions under the SFO that the SFC suspects the relevant persons have contravened. The SFC will commonly recite provisions under both the civil and criminal regime of the SFO because the provisions under the two regimes are substantively identical.


The issuance of a Direction to Investigate also means investigators of the SFC may exercise all the investigative powers conferred by the SFO. Such powers include applying to a magistrate for the issuance of search warrants, executing such warrants by breaking into any premises and seizing any relevant items found, compelling financial institutions to produce relevant records and documents, compelling any person to attend interviews, etc.


After completion of the investigation, a decision on whether to enforce under the civil or criminal regime will be made pursuant to established legal principles. As with the new regime in Singapore, the relevant decision will be made when investigations have been concluded.




Although the market misconduct regimes in both territories are broadly similar, there are subtle but important differences between the law and practice in Singapore and that in Hong Kong. The new joint investigation arrangement between the MAS and the CAD represents an important refinement to the market misconduct enforcement regime in Singapore. According to the MAS, the new regime is expected to deliver more effective enforcement outcomes. One would also expect that there may now be a greater number of investigations into suspected market misconduct in Singapore, which will move the position there closer to that of Hong Kong, where there have historically been a far greater number of enforcement actions in connection with possible market misconduct offences.


Organisations which are subject to regulatory investigation, both in Singapore and Hong Kong, should always consider the possibility that a regulatory matter will result in criminal prosecution against not just the firm, but also its senior management and staff individually.


Our regulatory and investigations teams in Singapore and Hong Kong would be pleased to assist with any questions regarding these recent developments and their implications for your business.


Recent Singapore Enforcement Actions




1) Mr Tan Hua Ann (2015)


  • Mr Tan admitted to false trading under section 197(1)(b) of the SFA.
  • A prohibition order was issued preventing Mr Tan from (i) conducting business in any regulated activity under the SFA or acting as a representative in respect of any regulated activity under the SFA; and (ii) taking part in the management of any holder of a capital market services licence (or any person exempt from holding a capital market services licence) in Singapore for a period of two years.
  • Mr Tan also paid a civil penalty of SGD 157k (about HKD 890k).


2) Former China Sky CEO Mr Huang Zhong Xuan (2014)


  • Mr Huang admitted to making misleading disclosures in contravention of section 199(c) of the SFA, and failing to make prompt and proper disclosure to the market in contravention of section 203 of the SFA.
  • Mr Huang entered into a settlement agreement with the MAS to make an offer to surrender 10% of his shareholding in China Sky, equivalent to over 15 million shares.
  • Under the settlement agreement, Mr Huang also paid a civil penalty of SGD 2.5m (about HKD 14.2m).




1) PP v Lee Siew Ngan (2012)


  • Ms Lee was found guilty of engaging in a conspiracy to conduct trades which has the effect of creating a false or misleading appearance under section 197(1)(b) of the SFA, together with section 109 of the Penal Code.
  • Ms Lee was convicted and fined SGD 250k (about HKD 1.4m).


herbert smith Freehills


For further information, please contact:


Siddhartha Sivaramakrishnan, Partner, Herbert Smith Freehills
[email protected]


William Hallat, Herbert Smith Freehills

[email protected]


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