Proposals aim to facilitate self-organisation, provide access to funding and reduce legal barriers to civil action
[SINGAPORE] The Monetary Authority of Singapore (MAS) is looking to enhance investors’ ability to seek civil compensation for losses suffered from market misconduct.
The proposals are to facilitate self-organisation, provide access to funding and reduce legal barriers to civil action, it said in a consultation paper issued on Friday (Oct 24) as part of the next set of measures to boost the local stock market.
MAS noted feedback that retail investors find it difficult to self-organise and get sufficient funds for legal advice when commencing civil action.
It also received feedback of a need to guard against frivolous legal actions which would place undue burden on the market.
“An effective investor recourse regime gives investors greater confidence to participate in the securities market,” MAS said.
Under the current Securities and Futures Act, investors can seek compensation for losses arising from market misconduct through an independent action, by bringing a private action in court for compensation.
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They can also use the piggyback provision, by applying to court for compensation after the offender is convicted or a civil penalty order is made against him.
But investors may find it difficult to organise themselves and find someone willing to lead the action.
Furthermore, under the current law, a third party can assist claimants, but it cannot bring action on behalf of claimants.
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To facilitate self-organisation, MAS is looking to allow an independent party to coordinate and bring legal action on behalf of affected investors, by being appointed as a designated representative.
The designated representative must satisfy criteria such as having no conflicts of interests or direct financial interest in the outcome, to prevent profiteering behaviour and vexatious litigation.
To provide access to funding, MAS is proposing a grant scheme to co-fund meritorious investor actions and defray the costs of the designated representative.
To address possible frictions, MAS is looking to refine legal provisions that facilitate compensation claims.
This includes simplifying and clarifying the steps of a piggyback claim; changing legislative amendments to ease investors’ proof of reliance in cases of misstatements or omissions; and removing existing statutory caps that limit compensation amounts.
It is also proposing to extend the scope of the piggyback claim, to include a default judgment or consent order against the wrongdoer, or a civil penalty settlement which the wrongdoer has entered into with MAS.
The enhancement of investor recourse avenues is intended to complement public enforcement action, MAS said.
