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Senior accountability regimes were a flagship of post Global Financial Crisis regulatory change in many key jurisdictions. Where these regimes have been up and running for a period, policymakers are now looking at the effectiveness of these regimes and whether change is needed to respond to today's operating environment.
Singapore's approach to senior manager oversight has to date been less formal than other jurisdictions, with the key accountability rules set out in the MAS Guidelines on Individual Accountability and Conduct. The Guidelines focus on familiar objectives of promoting accountability, strengthening oversight of material risk personnel and reinforcing standards of proper conduct among all employees. Contravention of Guidelines is not a criminal offence and does not attract civil or administrative penalties. However, non-compliance may have an impact on MAS' overall risk assessment of that institution.
Nonetheless, we may be seeing the global trend of more robust individual accountability regimes having an impact in Singapore. MAS is increasingly taking more action against individual senior managers, particularly in the past year. An example of this increased appetite to use the current regulatory framework to pursue individuals can be seen in the Three Arrows Capital case, where MAS issued prohibition orders against both the CEO and chairman for failing to discharge their responsibilities as senior managers to ensure the financial institution's compliance with requirements under the Securities and Futures Act 2001 and the Securities and Futures (Licensing and Conduct of Business) Regulations (SFR).
While there does not seem to be a move to further formalise or legislate the Guidelines, we expect that enforcement trends against senior managers (using existing legislation such as the SFR) will continue, as MAS seeks to instil better accountability culture in financial institutions.
The Australian regime is set to expand its scope and reach in the year ahead – with joint regulation by the conduct and prudential regulators, as well as a broader array of financial services businesses within its scope. Superannuation and insurance institutions will now join banking institutions as entities within the purview of the new Financial Accountability Regime (FAR), formerly known as the Banking Executive Accountability Regime.
With a broad Australian regulatory focus upon risks such as cyber resilience, green-washing, green-hushing and emerging digital technologies, we expect that any investigation into these issues will likely be accompanied by an enquiry into the role senior executives play in appropriately managing these risks. The focus ahead is likely to be on the need to proactively identify and mitigate these risks, including by allocating appropriate resources to these issues. Clarity of responsibilities among senior executives is an important part of the process of ensuring any business, and its senior executives, discharge the standards expected of them in the year ahead.
Partner, Head of Financial Services Regulatory, Asia, Hong Kong
Senior Associate, Prolegis LLC, Singapore
Senior Associate, London
The contents of this publication are for reference purposes only and may not be current as at the date of accessing this publication. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication.
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