Guidelines on Individual Accountability and Conduct

On 10 September 2020, the MAS released the Guidelines on Individual Accountability and Conduct (“Individual Accountability Guidelines”) which lists down the five high level outcomes that financial institutions should achieve to promote the accountability of senior managers, strengthen oversight over material risk personnel, as well as to reinforce conduct standards among all employees. In addition to the Individual Accountability Guidelines, MAS has also released an FAQ on Guidelines on Individual Accountability and Conduct.

Financial institutions (“FIs”) are expected to review the measures set out in the Individual Accountability Guidelines and make the necessary adaptations/enhancements based on the nature, size and complexity of their businesses. Board and senior management are responsible for overseeing FIs’ implementation of the Individual Accountability Guidelines. For the avoidance of doubt, Board directors are considered senior managers under the Individual Accountability Guidelines, only to the extent that they are employed in the capacity of an executive function within the FI.

Essentially, all FIs should still achieve the five outcomes regardless of their respective headcounts but should be prepared to justify on the extent of their adaptation of the Individual Accountability Guidelines, or their decision to not adopt the guidance and demonstrate how they achieve the relevant outcomes through other means.

Where misconduct, regulatory breaches, or offences have occurred, MAS will take the necessary enforcement action against the FI and/or the relevant director, senior manager, or employee.

It is critical to be aware that FIs who have less than 50 headcount are expected to achieve all five individual accountability and conduct outcomes (as described below) but will not be expected to adopt the specific guidelines described in the Individual Accountability Guidelines. FIs who have more than 50 headcount have the same flexibility in not adopting specific guidelines as per the Individual Accountability Guidelines. However, those who choose not to adopt the specific guidelines, must justify their decision and demonstrate how they can achieve the Individual Accountability Guidelines outcomes.

Individual Accountability Guidelines is applicable to all financial institutions except some exempt entities such as exempt financial advisers providing financial advisory services to no more than 30 Accredited/ Institutional Investors, exempt corporate finance advisors, and exempt futures brokers.

The five accountability and conduct Outcomes that FIs should achieve are:

1. Outcome 1: Senior managers responsible for managing and conducting the FI’s core functions are clearly identified.

As part of Individual Accountability Guidelines, FIs must have clarity in individual responsibilities and the FI’s overall management structure is fundamental to an effective governance framework. It also facilitates greater transparency in the management and decision-making processes of the FI.

2. Outcome 2: Senior managers are fit and proper for their roles, and held responsible for the actions of their employees and the conduct of the business under their purview.

As part of the Individual Accountability Guidelines, FIs should establish appropriate governance policies and processes to promote proper accountability, and facilitate senior managers’ performance of their roles and responsibilities in an effective manner. This is on top of conducting the necessary due diligence prior to appointing senior managers to emphasize individual accountability.

3. Outcome 3: The FI’s governance framework supports senior managers’ performance of their roles and responsibilities, with a clear and transparent management structure and reporting relationships.

As part of internal governance framework as part of adherence of Individual Accountability Guidelines, FIs should clearly articulate the roles and responsibilities of its senior managers and their overall management structure. FIs should also ensure sufficient screening and hiring processes, review the effectiveness of their governance frameworks, including the relevant policies, systems, and documentation, as well as senior managers’ understanding of their areas of responsibility. FIs are expected to maintain accurate and comprehensive records of these arrangements as part of record keeping purposes in meeting Individual Accountability Guidelines requirements.

4. Outcome 4: Material risk personnel are fit and proper for their roles, and subject to effective risk governance, and appropriate incentive structures and standards of conduct.

Material risk personnel (“MRPs”) are individuals who have the authority to make decisions or conduct activities that can significantly impact the FI’s safety and soundness, or cause harm to a significant segment of the FI’s customers or other stakeholders. MRPs can include employees in front, middle, and back office functions, as applicable to the FI, as well as any other employee with supervisory capacity over such functions who are not senior managers. It is appropriate for FIs to subject such employees to more stringent oversight and higher conduct standards than non-MRPs given the nature of their roles.

As part of Individual Accountability Guidelines, FIs are responsible for critically assessing and identifying MRPs, and subjecting them to the necessary oversight. FIs are expected to assess the appropriateness of their identification of MRPs in achieving Outcome 4.

5. Outcome 5: The FI has a framework that promotes and sustains among all employees the desired conduct.

Board and senior management have a critical role in defining, and taking steps to actively and consistently embed, the conduct standards that they would expect of all employees. The tone-from-the-top, and the extent to which this is reinforced by the policies, systems, and processes of the FI, have a significant impact on the effectiveness with which the desired conduct standards are cascaded down and embedded throughout the organisation.

Effective monitoring and management of conduct risks at both the organisation-wide and individual levels is an iterative process and should be adopted as part of individual accountability process. The Board and senior management should regularly review the adequacy and effectiveness of the FI’s conduct framework, taking into account any gaps between observed behaviours and the desired standards of conduct.

Further information on the applicability of the Guidelines for locally incorporated banks and insurers, as well as description of what constitutes Core Management Functions are elaborated in the annexure of the Guidelines. The Individual Accountability Guidelines takes effect as of 10 September 2021. FIs have 12 months to review the requirements, conduct gap analysis against the Individual Accountability Guidelines, and adopt and implement necessary changes.

How can Argus (now Waystone Compliance) Assist?

We, at Argus Global (now Waystone Compliance), are a team of consultants who specialize in Regulatory Compliance for financial institutions in Singapore that are regulated by MAS.

We assist to do the following in relation to meeting Individual Accountability Guidelines requirements:

• Draft policies and procedures adhering to Individual Accountability requirements
• Draft/review role profile and individual statements of responsibility
• Conduct gap analysis against regulatory expectations set out in the Individual Accountability Guidelines and current procedures
• Conduct training to educate senior management and employees of the requirements
• Conduct fitness and propriety checks on senior management

Please reach out to us for an initial discussion at [email protected].

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