Mobile devices carry an ever-growing percentage of communication in many regulated industries around the world. In the Western Hemisphere, apps are being increasingly used by companies in sectors such as financial services, government, healthcare, and education. Companies and organizations in the Eastern hemisphere, particularly Asian countries, are doing the same as well, as they are subjected to several mobile phone recording requirements as strict as those in North America and Europe.
In Singapore, mobile phone recording requirements are being implemented by the Monetary Authority of Singapore (MAS) and the Singapore Exchange (SGX). To help companies comply with the MAS and SGX archiving regulations, the MAS released the Singapore Guide to Conduct & Market Practices for the Wholesale Financial Markets. The guide applies to all participants in Singapore wholesale financial markets (Market Participants or MPs) – even to financial institutions that operate in the U.S., for instance. Because of its inclusivity, it is essential for financial institutions to understand and abide by these regulations, and create an operative messaging policy that will ensure that all mobile communications are compliant with the MAS and SGX archiving regulations.
Such a compliant policy is now even more important, as MAS seeks to impose new requirements that will require financial institutions (FIs) to record all communication – including that occurring on personal devices – between their trading representatives and the person instructing the orders and trades for any capital market product in a customer’s account. This should be carried out even if communication does not result in a transaction. FIs should also maintain those records for five years.
Click here for Part 2: MAS-SGX Trade Surveillance Principles
Below are the key sections of MAS Blue Book related to the archiving mobile communications.
- Section 8.1
In this section, MAS state that recordings of telephone conversations and all other conversations of Market Participants are crucial in investigating and resolving differences and disputes, therefore recommending MPs to use recording equipment in their offices.
Market Participants are also required to inform their counterparties and clients that telephone conversations will be recorded.
Market Participants should have internal policies to ensure they comply with appropriate data and record retention requirements under applicable laws and regulations.
In general, records of communications should be kept for at least two months. Market Participants dealing in longer-term products such as interest rate swaps, forward rate agreements or other similar products where errors or discrepancies may only be discovered on the date when the first movement of funds is due to take place, should retain records relevant to these transactions for longer periods for the sake of prudence.
Market Participants should ensure that access to records, whether in use or in store, is strictly controlled so that they cannot be tampered with. Market Participants should implement policies to ensure that appropriate confidentiality of records is maintained.
- Section 8.2
This section advises Market Participants to recognize the developments in communication technology, particularly mobile phones, that can be used to circumvent the recording of communications and compromise confidentiality. Market Participants should, therefore, adopt appropriate policies to restrict the use of mobile phones or such technology in their dealing rooms.
Complying with this regulation in this age where WhatsApp is fast penetrating the heavily regulated financial services sector can be quite challenging, especially for those that have a BYOD policy in place. While companies can restrict the use of WhatsApp in the dealing rooms, there will be no guarantee that it will not be a conduit for illegal financial transactions outside of the company’s premises.
Instead of restricting WhatsApp, companies should instead invest in a WhatsApp business archiving solution that can capture and record WhatsApp communications in real-time. With this solution, Market Participants can allow their employees to execute trades from their desks, all while remaining compliant.
- Section 8.3
Market Participants should also refer to the principles in Principle 23 of the Global Code.
Principle 23 states that Market Participants should communicate with other Market Participants through approved methods of communication that allow for traceability, auditing, record keeping, and access control. Standards of information security should apply regardless of the specific mode of communication in use.
Market Participants are also advised to maintain a list of approved modes of communication and to record communication channels on sales and trading desks, particularly when being used to transact or share Market Color. Market Participants should also give consideration, under exceptional circumstances (for example, in an emergency and for business continuity purposes), to allowing the use of unrecorded lines but should guide personnel regarding any permitted use of such unrecorded lines or devices.
Penalties for Non-Compliance
The MAS has no universal amount of penalties that apply to all non-compliance cases of MAS and SGX archiving regulations. According to MAS Enforcement Monograph, “In the case of market misconduct offences, the penalty can be up to three times the amount of profit made or the amount of loss avoided as a result of the contravention. There is a prescribed statutory minimum civil penalty amount of $50,000 for an individual or $100,000 for a corporation, and the civil penalty can be up to $2 million for each contravention.”
In 2018, MAS imposed a total of S$16.8 million in financial penalties and settlements on 42 financial companies. The fines come along in addition to action taken against various misconducts that include on criminal conviction for false trading, S$698,000 in civil penalties for misconduct in trading, 19 prohibition orders that bar individuals from working in the financial industry, and 223 warnings.
In November 2019, MAS also imposed a $11.2 million civil penalty on UBS over deceptive trades by the bank’s client advisers in Singapore. The enforcement action relates to transactions executed from 2014 onwards in Singapore-managed accounts in UBS. The acts of the bank’s client advisers had contravened section 201(b) of the Securities and Futures Act (SFA).
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