Singapore set to criminalise manipulation of financial benchmarks

Out-Law News | 31 Jul 2014 | 12:28 pm | 1 min. read

The Monetary Authority of Singapore (MAS) has unveiled new proposals to regulate financial benchmarks in response to incidents around the world involving the alleged manipulation of key rates.

Under the proposals, outlined in a consultation paper published by MAS (8-page / 256 KB PDF), the manipulation of any financial benchmark in Singapore would be considered a criminal offence.

MAS assistant managing director Lee Boon Ngiap said: “Financial benchmarks play an important role in the functioning of the financial system. The proposed regulatory framework will deter manipulation of financial benchmarks and enhance the integrity of benchmarks set in Singapore.”

The proposals follow a consultation period in 2013 and would make the manipulation of any financial benchmark in Singapore liable to criminal and civil sanctions under the Securities and Futures Act (SFA). MAS said this will apply “to acts of manipulation occurring within Singapore and in respect of financial benchmarks administered in Singapore”.

The proposals would give MAS powers to direct persons, including financial institutions, to provide information in relation to designated benchmarks.

MAS said: “While we hold the view that the setting of financial benchmarks should be industry-led and that voluntary contribution is preferred, the powers are intended to be exercised should the need arise to ensure market functionality.”

In addition, administrators and submitters of financial benchmarks designated by MAS would be subject to regulation, including licensing requirements. MAS said it will designate key financial benchmarks, “based on their systemic importance and susceptibility to manipulation”. Initially, MAS intends to designate the Singapore Interbank Offered Rate (SIBOR) and Swap Offered Rate (SOR) as key benchmarks.

In the consultation paper MAS said it noted that “the international regulatory landscape towards financial benchmarks is evolving, and there is a potential that other jurisdictions may impose accompanying extra-territorial requirements on benchmark administrators in Singapore whose financial benchmarks are used in the respective overseas jurisdictions”.

MAS said: “This may have business continuity implications on some benchmark administrators which administer financial benchmarks that are used across national boundaries from their Singapore offices". MAS is asking for views on whether there are other types of financial benchmarks, apart from those it proposes to designate, “whose administrators may benefit from a separate voluntary registration regime with MAS, so as to facilitate them to continue their Singapore operations.”

In a separate consultation paper published earlier this month, MAS said it aimed to set up a “complexity-risk framework” to help investors “gauge the riskiness” of investment products. MAS said the move was designed to strengthen Singapore’s regulatory framework for safeguarding investors’ interests in the aftermath of the global financial crisis.