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Singapore Exchange (“SGX”) is inviting public comment on the proposed enforcement framework, comprising a Composition System and Mandatory Minimum Penalties, for the securities market. The proposed new measures and changes will ensure prompt enforcement actions and resolution of minor to egregious rule violations. The Exchange proposed a similar enforcement structure for the derivatives market recently on 19 December 2007.
Rule violations under the SGX-ST Rules and CDP Clearing Rules have been classified into two categories – “compoundable”1 and “non-compoundable”2 violations. The new “Composition Fines and Minimum Penalties” will apply only to Securities Member firms, Trading Members, Clearing Members, Approved Executive Directors and/or Trading Representatives.
The consultation paper proposes the following:-
(i) Composition Fines
The “Composition Fines” system provides an alternative for an offender to resolve a rule violation by fulfilling certain conditions without going through the process of Disciplinary Committee hearings.
For “Compoundable” violations, SGX retains the discretion in determining the composition sum and specifying any accompanying terms that may settle the matter. The Exchange may also refer a rule violation to the relevant Disciplinary Committee without making an offer of composition even if the rule violation has been classified as compoundable.
New schedules, which set out the guidelines on the range of composition sums for compoundable rule violations, will be published and available in the SGX-Securities Trading and CDP Clearing Rulebooks respectively.
(ii) Minimum Penalties
SGX will continue to present more serious cases, such as market manipulation activities and insider trading, before the Disciplinary Committees (DC) for disciplinary action. Rule violations which are egregious and serious in nature are categorised as “non-compoundable violations”. To underscore the severity of such offences, “Minimum Penalties” are proposed for all non-compoundable rule violations.
The general minimum penalty for non-compoundable violations will begin at S$10,000. For more serious cases, higher specific minimum penalties may be imposed to reflect the severity of these rules violations. For example, in respect of an offence of market manipulation under existing SGX-ST Rules, a mandatory minimum sentence of $30,000 is proposed if the offender is convicted after a DC hearing.
Market participants and members of the public are encouraged to participate in this public consultation. The consultation paper which sets out the proposed amendments to the SGX-Securities Trading Rules and CDP Clearing Rules will be available on www.sgx.com, from 14 February 2008 to 6 March 2008.
1. “Compoundable violations” refer to rule violations which are of minor to moderate severity.
2. “Non-compoundable violations” refer to rule violations which are more egregious/serious in nature.
The consultation paper, which sets out the proposed amendments, is attached
as follows:-
All feedback and suggestions for the proposed changes should reach us by 6 March
2008 via email and either by post/courier or fax:-
Email : rules@sgx.com
Fax : (65) 6535 5573
Post/Courier : Singapore Exchange Limited
2 Shenton Way, SGX Centre 1, #19-00
Singapore 068804
Attn: Annie Ong, Risk Management and Regulation
Chng Hwee Chin, Risk Management and Regulation
