Whilst risks to the global outlook remain, regulatory reforms in the financial sector by the Monetary Authority of Singapore (MAS) are continuing. At our April briefing, we looked at some of the relevant topics in MAS’ pursuit to strengthening the resilience of Singapore’s financial system through regulatory reforms.
2. 2
Agenda
Enhanced Risk Management
Greater investor protection
Tackling ‘too big to fail’ problems
Regulatory reforms pipeline
Views from Europe
3. 3
Regulatory Radar
EMIR
MiFID II
MAD
AIFMD Non-
EEA AIFM
Passports
Asset Mgt and
Capital Market
vulnerabilities
Asia Region
Funds
Passport
OTC
Derivatives
Crowd
funding
Outsourcing
FAIR
Framework
OTC
Derivatives
Resolution
regimeMarket
Misconduct
Regime
Market Abuse
Investigations
Basel III
Liquidity
Rules
Regulatory
Safeguards for
Investors
Short
Position
Reporting
Suitability
Requirement
Central
Depository
System
REITS
Insurance
Remuneration
Market Risk
Capital
Requirements
Code on Take-
Overs and
Mergers
Internal
Controls
Resolution
Regime
SFC Products
Handbook
Professional
Investor
Regime
FinTech
Principles of
Responsible
Ownership
AML/CFT
4. 4
Risk is too risky?
“We need to end our risk
management project.
There is too much risk! I
am afraid we’d get it all
wrong!”
5. 5
What is Risk Management?
Risk management is the process of
o identifying potential risks;
o assessing and monitoring them; and
o ensuring steps are taken to mitigate and control them.
Some examples:
o Lehman, Merrill Lynch, Northern Rock
Be proactive, not reactive - Don’t let your risks crystallize
7. 7
Money Laundering/Terrorist Financing Risks
Credit Suisse
• $2.6bn fine and a guilty plea for assisting US persons in avoiding tax
HSBC
• $1.9bn fine for laundering of funds related to drug cartels in Mexico
BNP Paribas
• $8.9bn fine and a 5-year probation in connection with sanctions violations
Cost of non-compliance is definitely greater than the cost of compliance!
8. 8
Other Risks
• Outsourcing is a critical component for managing
business operations and controlling costs for FMCs
• MAS issued a Consultation Paper in 2014 and received
industry feedback
• Key points include due diligence, SLAs, KPIs,
jurisdiction, staffing/management, confidentiality and
liability
Outsourcing Risks
• Code of ethics
• Skills & training
• Reputational risk
• Remuneration/incentive policies to penalise misconduct
and reward good behaviour
Conduct Risks
9. 9
Other Risks
• Cross-border regulatory overlaps
• Keeping pace with new regulations
• Lack of suitably qualified compliance talent
Regulatory risk
• Market manipulation
• Best execution
• Systems failure
Trading and Execution Risk
10. 10
How are the risks effectively managed?
Governance
& Culture
Policies &
Procedures
Compliance
Monitoring
Program
People &
Training
Internal
Audit
Segregation
of
Functions
Risk
Management
11. 11
Regulatory Radar
EMIR
MiFID II
MAD
AIFMD Non-
EEA AIFM
Passports
Asset Mgt and
Capital Market
vulnerabilities
Asia Region
Funds
Passport
OTC
Derivatives
Crowd
funding
Outsourcing
FAIR
Framework
OTC
Derivatives
Resolution
regimeMarket
Misconduct
Regime
Market Abuse
Investigations
Basel III
Liquidity
Rules
Regulatory
Safeguards for
Investors
Short
Position
Reporting
Suitability
Requirement
Central
Depository
System
REITS
Insurance
Remuneration
Market Risk
Capital
Requirements
Code on Take-
Overs and
Mergers
Internal
Controls
Resolution
Regime
SFC Products
Handbook
Professional
Investor
Regime
FinTech
Principles of
Responsible
Ownership
AML/CFT
13. 13
Opting in new clients
Notify
• Eligible Investor is being treated as retail
• Has the right to opt in to A/I regime
Explain
• Provide clear description of regulatory
safeguards lost if client opts in
Confirm
• Clients confirm their understanding of the
consequences of opting in
14. 14
What about existing clients?
Does existing client
meet new A/I
criteria?
Yes
Notify client of A/I
status and their right
to opt out
Other disclosures
No
Can only treat as A/I
with respect to
existing investments
Non-retail FIs can not
offer new services /
investments to client
16. 16
Regulatory Radar
EMIR
MiFID II
MAD
AIFMD Non-
EEA AIFM
Passports
Asset Mgt and
Capital Market
vulnerabilities
Asia Region
Funds
Passport
OTC
Derivatives
Crowd
funding
Outsourcing
FAIR
Framework
OTC
Derivatives
Resolution
regimeMarket
Misconduct
Regime
Market Abuse
Investigations
Basel III
Liquidity
Rules
Regulatory
Safeguards for
Investors
Short
Position
Reporting
Suitability
Requirement
Central
Depository
System
REITS
Insurance
Remuneration
Market Risk
Capital
Requirements
Code on Take-
Overs and
Mergers
Internal
Controls
Resolution
Regime
SFC Products
Handbook
Professional
Investor
Regime
FinTech
Principles of
Responsible
Ownership
AML/CFT
17. 17
Regulatory Radar from outside Asia
EMIR
MiFID II
MAD
AIFMD Non-
EEA AIFM
Passports
Asset Mgt and
Capital Market
vulnerabilities
18. 18
Globalisation of Regulation from Europe
• Expect ESMA opinion by 30th June
• Passport – pan EU-Marketing will be much easier vs
cost of compliance
AIFMD
• Easier to access to European customers
• Possible to avoid member state regulation
MiFID II
• Do you trade in any financial instruments admitted to
trading on EU exchanges, MTFs and OTFs?
• Already seen UK enforcement action on firms and
individuals based in the United States, Seychelles, Dubai
and Switzerland
MAD II
