Download 4 Oct 2013 Consultation paper on Prohibition Orders

CONSULTATION PAPER
P012 - 2013
October 2013
MAS' power to issue
prohibition orders under
the Banking Act
MAS’ POWER TO ISSUE PROHIBITION ORDERS UNDER THE BANKING ACT
OCTOBER 2013
PREFACE
i
To maintain the integrity of and public confidence in
Singapore’s banking sector, persons engaged in the banking sector
should be fit and proper and possess, among other traits, honesty,
integrity and good repute. To ensure the fitness and propriety of those
involved in banking activities, it is proposed that MAS be given the
power to issue prohibition orders (“PO”) under the Banking Act (“BA”) to
prohibit unfit and improper persons from conducting banking business
and functions incidental thereto.
ii
This consultation paper invites comments on the proposed PO
framework to be introduced into the BA. Electronic submission is
encouraged. Please submit your written comments by 4 November
2013 to:
Prudential Policy Department
Monetary Authority of Singapore
10 Shenton Way
MAS Building
Singapore 079117
Email: [email protected]
iii
Please note that all submissions may be made public unless
confidentiality is specifically requested.
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MAS’ POWER TO ISSUE PROHIBITION ORDERS UNDER THE BANKING ACT
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OCTOBER 2013
INTRODUCTION
1.1
MAS expects persons engaged in financial businesses to be fit
and proper. MAS currently has the power to issue POs to prevent
unsuitable persons from engaging in capital markets, financial advisory
and insurance intermediation activities, but does not have similar
powers for banking business. Banks are central to Singapore’s financial
sector, and it is important to ensure that MAS has the power to
safeguard the banking industry by excluding unfit and improper persons
from it. The power to do so is in line with those possessed by other
regulators, including those in Australia and the United Kingdom.
1.2
MAS proposes to introduce new provisions into the BA to give it
the power to issue a PO against any person who is not fit and proper,
prohibiting him from conducting banking business and functions
incidental thereto and taking part, directly or indirectly, in the
management of, acting as a director of, or becoming a substantial
shareholder of a bank for such period as MAS may specify.
1.3
As with POs issued under the Securities and Futures Act (“SFA”),
Financial Advisers Act (“FAA”) and Insurance Act (“IA”), MAS will not
make any PO against a person without giving the person an opportunity
to be heard. Thus, a person against whom MAS intends to issue a PO
will be notified of MAS’ intention to do so, and afforded an opportunity
to make representations. MAS will give due consideration to the
representations before making the final decision as to whether to issue
the PO.
1.4
Even after the PO has been issued, any person who is aggrieved
by MAS’ decision to make a PO against him may, within 30 days of the
decision, appeal in writing to the Minister. Within 28 days of the receipt
of the appeal, the Minister shall constitute an Appeal Advisory
Committee comprising not less than 3 members of the Appeal Advisory
Panel and refer the appeal to the Appeal Advisory Committee. The
Appeal Advisory Committee shall submit to the Minister a written report
on the appeal, and make such recommendations as it thinks fit. The
Minister shall consider the Committee’s report in making his decision,
but is not bound by its recommendations, and may confirm, vary or
reverse MAS’ decision or give such directions in the matter as he thinks
fit. The Minister’s decision shall be final.
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MAS’ POWER TO ISSUE PROHIBITION ORDERS UNDER THE BANKING ACT
OCTOBER 2013
1.5
All POs issued under the BA will be published on MAS’ website.
Any breach of such a PO will be an offence punishable, in relation to an
individual, by a fine not exceeding $125,000 or imprisonment for a term
not exceeding 3 years or both, and, in relation to a corporation, a fine of
up to $250,000.
1.6
MAS intends to use the proposed PO powers only in egregious
cases of misconduct, such as misbehaviour reflecting the lack of honesty
and integrity of, or which leads to the erosion of trust in, the person
against whom the PO is issued. For example, MAS may consider issuing
a PO against a bank employee who misappropriates customers’ monies,
dishonestly manipulates a financial benchmark, or who misuses his
employer’s trade secrets for personal gain.
1.7
MAS wishes to remind banks that the introduction of the power
for MAS to issue POs into the BA would in no way reduce the
responsibility to conduct comprehensive due diligence checks prior to
employing their staff. As explained above, MAS intends to exercise the
power to issue a PO under the BA only in the most severe circumstances;
the fact that no PO has been issued against a person should not
automatically be taken as an indication of his fitness and propriety. MAS
would also like to highlight that a PO issued under the BA relates to
employment in the financial sector, and should not necessarily prejudice
an individual’s credit-worthiness and suitability for employment in nonfinancial sectors.
Question 1: MAS seeks views on the grant of the power to MAS to issue
POs under the BA to prohibit unfit and improper persons from
conducting banking business and incidental functions.
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MAS’ POWER TO ISSUE PROHIBITION ORDERS UNDER THE BANKING ACT
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OCTOBER 2013
PERSONS WHO MAY BE PROHIBITED
2.1
MAS proposes to be allowed to issue POs under the BA against
any person, which would include any corporation or individual. Bank
employees routinely deal with customers, process customer
information, and are often entrusted with handling customers’ money
and other assets. It is therefore important for MAS to be able to issue
POs under the BA against all bank employees, and not only their key
appointment holders.
2.2
MAS’ prohibition powers should also extend to persons who are
not currently employed by a bank. This would enable MAS to prohibit
banks’ outsourced agents who contravene MAS’ rules from further
involvement in banking business and incidental functions. It would also
allow MAS to pre-emptively bar unsuitable persons from being
employed by banks, rather than have to wait until they are so employed
before issuing a PO against them. For example, MAS may consider
issuing a PO against a person operating fraudulent schemes flagged in
MAS’ Investor Alert List, particularly if he tries to join a bank after the
schemes are shut down by the Commercial Affairs Department.
2.3
It is further proposed that MAS’ prohibition powers apply not
only to individuals, but to corporations as well. Extending the
prohibition powers to corporations would, for example, allow MAS to
issue a PO against a foreign bank which applies to MAS for a licence to
operate in Singapore, and furnishes false or misleading information to
MAS in support of its application. Aside from being a clear indication of
MAS’ intention not to grant any licence to the bank for the duration of
the PO, such a PO would also serve as a reminder to the industry to act
with integrity and honesty in all its dealings with MAS. MAS may also
consider issuing a PO against a bank whose licence is revoked, where
appropriate and necessary to clearly signal MAS’ dissatisfaction with its
conduct.
Question 2: MAS seeks views on the persons against whom a PO may be
issued under the BA.
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OCTOBER 2013
GROUNDS FOR ISSUING PROHIBITION ORDERS
3.1
Persons engaged in the banking sector should be fit and proper.
As stated in MAS’ Guidelines on Fit and Proper Criteria (FSG-G01)1 (“the
Guidelines”), the criteria that MAS takes into account in considering
whether a person is fit and proper include the following:
(a) honesty, integrity and reputation;
(b) competence and capability;
(c) financial soundness.
3.2
The Guidelines list the factors which are relevant in the
assessment of each criterion. For example, in assessing the honesty,
integrity and reputation of a person, MAS may consider whether the
person has demonstrated an unwillingness to comply with regulatory
requirements or to uphold any professional and ethical standards,
whether in Singapore or elsewhere, and whether he has been convicted
of any offence under any law in any jurisdiction. Aside from the factors
which are currently listed in the Guidelines, MAS intends to enhance the
Guidelines to ensure that any unethical behaviour or conduct which may
lead to an erosion of trust will suffice to render a person unfit and
improper.
Question 3: MAS seeks views on the proposed grounds for issuance of
POs under the BA.
1
As the Guidelines currently apply only to banks’ key appointment holders, MAS will expand the
Guidelines to apply to all banks licensed under the BA and all their employees.
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OCTOBER 2013
EFFECT OF PROHIBITION ORDERS
4.1
MAS proposes that POs issued under the BA may do one or both
of the following:
(a) prohibit the person, for a specified period, from –
(i)
performing any banking business and function
incidental thereto, or performing such banking
business and function incidental thereto in specified
circumstances or capacities; or
(ii)
taking part, directly or indirectly, in the management
of, acting as a director of, or becoming a substantial
shareholder of a bank; and
(b) include a provision allowing the person, subject to any
condition specified in the order –
(i)
to do specified acts; or
(iii) to do specified acts in specified circumstances,
that the order would otherwise prohibit him from doing.
4.2
POs issued under the BA can extend to prohibit the conduct of
banking business as well as incidental functions. The BA defines
“banking business” to mean only the business of taking deposits, paying
and collecting cheques drawn by or paid in by customers and making
advances. Given this narrow definition of “banking business”, it is
necessary to extend the scope of prohibition to functions that support,
bear a close relation to, or are provided in connection with the banking
business. Such incidental functions may include:
(a) activities regulated under other legislation such as the SFA,
FAA and IA, e.g. the provision of financial advisory services;
(b) functions common to activities regulated under other
legislation such as the SFA, FAA and IA, e.g. compliance, risk
management and internal audit functions; and
(c) activities specific to banking business, e.g. the provision of
payment, clearing and settlement services and facilities.
4.3
Notwithstanding the extension of the prohibition powers to
functions incidental to banking business, the scope of prohibition of
each PO issued under the BA will be tailored to the circumstances of
each case, and no wider than necessary to safeguard the interests of the
financial sector.
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MAS’ POWER TO ISSUE PROHIBITION ORDERS UNDER THE BANKING ACT
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Question 4: MAS seeks views on the proposed scope of prohibition of
POs issued under the BA.
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