Page 41 - SC SCAR 2023 ENGLISH Flipbook

PART 2 REGULATORY PERFORMANCE AND OUTCOMES
Supervision of Capital Market Intermediaries
The SC continues to adopt a risk-focused supervisory approach over its capital market intermediaries. Its efforts have been directed towards ensuring proper conduct and financial soundness of its intermediaries. To achieve this, the SC employs an array of tools ranging from ongoing desktop reviews that leverage analytics from regulatory submissions and information gathered from ongoing monitoring by its supervisors, structured supervisory assessments on selected intermediaries that are determined based on assessed risks factors, thematic reviews on emerging risks, as well as for-cause assessments which are investigative in nature and originate from complaints received, referrals and supervisory concerns with regards to misconduct (Table 18).
TABLE 18
Supervisory assessments on intermediaries
TABLE 19
Supervisory outcomes
Supervisory outcomes
2023
2022
Referral for administrative enforcement action
4
1
Issuance of guidance notes
0
2
Industry communication/ engagements
8
6
Issuance of Infringement Notices*
37
30
Issuance of supervisory letters
4
14
Assessment type
Number of completed assessments
2023
2022
Structured supervisory assessments*
28
41
For-cause assessments
113
70
Thematic industry reviews
2**
1***
Note:
* The number of intermediaries identified for these assessments are determined through the evaluation of predefined risk factors.
** The two reviews involved assessments on the adoption of the Guidance Note on Managing Environmental, Social and Governance Risks by Fund Management Companies and the state of preparedness of capital market intermediaries in complying with the Guidelines on Market Conduct and Business Practices for Investment Analysts. The two reviews covered 93 and 54 capital market intermediaries respectively.
*** This review involved an assessment on the standards and controls implemented by stockbroking companies in maintaining appropriate remuneration structures. The review covered all stockbroking companies.
Arising from its supervisory assessments, the SC issued a total of 41 communications to respective intermediaries on its regulatory concerns and expectations. These comprised both, Infringement Notices for breaches of securities law and/or SC Guidelines and supervisory letters for enhancement concerning controls and processes (Table 19).
Note:
* Statistics also reflected under the SC’s Infringement Notices (Table 26).
The SC recognises the importance of an intermediary’s culture such as the shared values, beliefs, behaviours and practices that shape its conduct. Intermediaries with good culture demonstrate strong governance, promote fair treatment of customers and protect market integrity. This in turn would translate to intermediaries being less prone to misconduct. Towards this end, in 2023, the SC undertook a survey through issuance of a questionnaire to 286 capital market intermediaries towards better understanding as to culture and practices of these intermediaries. The SC intends to share its findings which include good governance structure and practices towards cultivating and promoting good culture.
In October 2023, the SC held a series of Anti-Money Laundering, Countering Financing of Terrorism/ Proliferation (AMLCFT/PF) Workshops with Compliance Officers of stockbroking, derivatives broking and unit trust/fund management companies to emphasise the crucial role of Compliance Officers in ensuring these intermediaries not only comprehend but also effectively mitigate the risks associated with money laundering, terrorism financing, and proliferation financing. Case studies derived from the SC’s enforcement efforts and red flags were also shared.
The workshop also featured engaging discussions on case study exercises, covering topics such as risk-based approach i.e. business-based and relationship-based risk assessment, identification of beneficial owner(s), and detection of red flags/unusual transactions. These exercises encouraged participants to share their practical experiences and perspectives, fostering a rich exchange of ideas and solutions.
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