MAS Consultation on Measures to Enhance Investor Recourse Avenues in Market Misconduct Cases
The suggested proposals aim to make it easier and more affordable for retail investors to seek redress if they suffer losses from market misconduct, for instance false disclosures, insider trading, market abuses. The core measures discussed in the consultation paper are focused on retail investors, but non-retail investors are still able to benefit indirectly from collective actions or improved legal process.
Investor confidence and market integrity are fundamental to a well-functioning financial centre like Singapore. Giving investors stronger protection incentivises participation on the securities market.
Currently, the Securities and Futures Act (SFA) section 234 and 236 provides civil remedies for investors to seek recourse. However, the current system is deemed challenging to investors due to complexity and costs considerations.
The MAS is therefore looking to implement a framework aimed at achieving the following outcomes:
- Facilitating self-organisation
- Providing access to funding
- Reducing legal barriers to civil action.
MAS recognises that investors often struggle to coordinate with fellow investors due to limited knowledge and resources. Currently, an independent claimant can assist claimants but it cannot bring action on behalf of claimants.
To address this, MAS proposes allowing an independent “designated representative” to be appointed to bring legal action on behalf of affected investors.
The representative would be subject to approval and must meet three key criteria:
- Investor consent – a sufficient number of investors must support the appointment, to be determined on a case-by-case basis by the approving authority.
- Independence – the designated representative must be independent, including having no business relationship, financial interest, connections, etc., which could impair judgement.
- Fee arrangement – as far as possible, fees paid to the designated representative should be fixed, and not contingent on successful action. Fee arrangements should be disclosed and approved by investors.
Market misconduct cases may involve substantial costs including expert witness, document discovery, financial analysis, legal expertise, etc. Very often the high costs is a significant deterrence to retail investors.
To address the issue of costs, the MAS proposes to establish a grant scheme to co-fund meritorious investor action. The key parameters of the funding scheme is as follows:
- Minimum number of investors: Set minimum number of 50 retail investors as a starting point. The approval panel may adjust the threshold on a case-by-case basis.
- Designated representative: The designated representative must satisfy the Approval Panel that it has the operational capability to bring the action on behalf of investors.
- Coverage: Coverage is limited to actions commenced in Singapore courts for alleged market misconduct.
- Legal opinion: Investor group shall provide a legal opinion provided by law firms from a pre-approved panel to justify that the case is legally meritorious.
- Qualifying costs: Costs allowed under the funding scheme include publicity costs in seeking out other investors, coordination and arranging meetings, legal opinions, legal and expert fees, and even adverse cost orders if the case fails.
- Funding caps: Grant quantum is subject to approval by the Approval Panel and capped based on complexity.
- Participation fees: Investors will pay a modest fee – to be determined based on complexity of each individual case.
- Approval Panel: An approval panel comprising legal academics and lawyers.
The MAS seeks to further enhance the legal process via the following changes:
- Widen the piggyback provision and simplify the process to use the piggyback provision
- Facilitate investors’ proof of their reliance on false and misleading statements
- Remove statutory caps on compensation.
Implications for market participants
The consultant signals a significant shift in Singapore’s investor protection and market accountability framework. The above-mentioned proposals will empower retail investors to coordinate and see legal redress due to market misconduct.
On the other hand, whilst investors may benefit, this could mean more reputational risks once the proposals are implemented. Financial Institutions will need stronger governance assurance, disclosure controls, and risk management frameworks to mitigate the new reputational and litigation risks.
Enhancements may be required in the areas of governance and oversight, compliance and controls (for e.g. market misconduct, market abuse, conflicts of interest), etc.
Consultation and next steps
Industry participants are welcome to submit responses to MAS’s proposals by 31 December 2025 via the submission link.
How can Waystone help?
Regulated financial institutions face more vigilant standards as the regulatory framework evolves. The implementation of the above-mentioned measures requires financial institutions to place more focus on compliance, risk management and best practices.
Waystone is a leading global provider of institutional governance, administration, risk, and compliance services to the asset management and financial services industry. Our global Compliance Solutions team helps clients navigate the regulatory landscape with confidence, aligning investment strategies and operational processes with compliance requirements. With over 100 compliance specialists based across Asia, the Middle East, Europe, and North America, we offer a comprehensive range of solutions, from company registration and licensing to compliance programmes and ongoing support.
In Singapore and Hong Kong, Waystone brings over 20 years of experience, working with clients regulated by the Monetary Authority of Singapore and the Securities and Futures Commission. Our team is well equipped to provide bespoke, risk-focused, and cost-effective solutions. With extensive experience, we deliver the expertise you need while adding value to your corporate governance standards.
If you would like to discuss the themes raised in this guide with one of our APAC Compliance Solutions team members and learn how we can assist you, please contact us using the details below.