On September 10, 2020, the Monetary Authority of Singapore (MAS) issued the Guidelines on Individual Accountability and Conduct (Guidelines). The Guidelines focus on the measures financial institutions (FIs) should put in place to promote the individual accountability of senior managers, strengthen oversight over material risk personnel, and reinforce standards of proper conduct among all employees.
Please click here to view our client briefing on the first consultation paper issued on May 23, 2018.
Please click here to view our client briefing on the second consultation paper and MAS’ responses to the first consultation paper issued on June 21, 2019.
The Guidelines set out five accountability and conduct outcomes (Outcomes) that FIs should achieve and specific guidance on how to achieve the Outcomes. The objective of the Guidelines is to assist FIs by providing a framework and best practices for strengthening accountability and standards of conduct. They are not intended to be exhaustive or prescriptive.
We set out in the table below the five accountability and conduct outcomes.
Outcomes under the Guidelines
|
Outcome 1
|
Senior managers1 responsible for managing and conducting the FI’s core functions are clearly identified.
|
|
Outcome 2
|
Senior managers are fit and proper for their roles and held responsible for the actions of their employees and the conduct of the business under their purview.
|
|
Outcome 3
|
The FI’s governance framework supports senior managers’ performance of their roles and responsibilities with a clear and transparent management structure and reporting relationships.
|
|
Outcome 4
|
Material risk personnel2 are fit and proper for their roles and subject to effective risk governance and appropriate incentive structures and standards of conduct.
|
|
Outcome 5
|
The FI has a framework that promotes and sustains among all employees the desired conduct.
|
This Update is targeted at Singapore fund management companies (FMCs), including FMCs that hold a capital markets services license (CMS Licensees) and registered fund management companies (RFMCs) and is not exhaustive.
Scope of application and effective date
The Guidelines will apply to all FIs regulated by MAS, including CMS Licensees and RFMCs, unless exempted. The Guidelines will take effect in one year’s time on September 10, 2021.
Proportionate application
FIs should refer to the specific guidance set out in the Guidelines and carefully review the measures set out therein, identify those that are relevant, and make the relevant adaptations and enhancements based on the nature, size, and complexity of their businesses.
FIs with a smaller number of employees (e.g., fewer than 50 headcount) should still achieve the five Outcomes but will not ordinarily be expected to adopt the specific guidance described in the Guidelines. FIs with a larger number of employees also have the flexibility not to adopt specific guidance that they have assessed to be irrelevant to their businesses. FIs that choose not to adopt the specific guidance should be prepared to justify their decision and demonstrate how they intend to achieve the relevant Outcomes through other means.
MAS may require FIs, including those with fewer than 50 headcount, to adopt any of the specific guidance under the Guidelines in the event that there are potential gaps in accountability and oversight or if necessitated by the nature and complexity of the FI’s operations.
FAQs to the Guidelines and the Information Paper
The Guidelines should be read with the FAQs to the Guidelines (FAQs). FIs should note that the Guidelines and the FAQs are intended to supplement the existing regulatory framework and do not replace or override existing laws and regulations.
On September 10, 2020, MAS also issued the Information Paper on Culture and Conduct Practices of Financial Institutions (Information Paper). The Information Paper sets out nine other outcomes that FIs should work toward so as to promote a culture of ethical behaviour by strengthening practices in areas such as hiring, communication channels, monitoring and assessment, and performance management.
The intent of the Guidelines and the Information Paper is for FIs to develop and entrench a strong culture of responsibility and ethical behaviour within their organisations.
1 “Senior managers” refers to individuals who are employed by, or acting for or by arrangement with, the FI and are principally responsible for the day-to-day management of the FI.
2 “Material risk personnel” refers to individuals who have the authority to make decisions or conduct activities that can significantly affect the FI’s safety and soundness or cause harm to a significant segment of the FI’s customers or other stakeholders.
