The Monetary Authority of Singapore (MAS) today published a consultation paper seeking feedback on proposals to enhance investors’ ability to seek civil compensation for losses suffered from market misconduct.
MAS has learnt that retail investors face friction in commencing civil action, such as difficulty in self-organising, and finding sufficient funds for legal advice. Taking these into consideration, MAS is seeking feedback on proposals to strengthen the current investor recourse regime. At the same time, whilst it is important to better enable investors to seek civil recourse, MAS has also heard feedback that there is also a need to guard against frivolous legal actions which would place undue burden on the market. MAS’ proposals seek to put in place relevant safeguards to strike an appropriate balance.
The three key proposals to strengthen the investor recourse regime are as follows:
a) Facilitating self-organisation
Whilst investors impacted by market misconduct can bring collective action to strengthen their case through pooled resources and shared evidence, they may face difficulties organising themselves and finding someone willing to lead the action. Under the law, a third party can assist claimants, but it cannot bring action on behalf of claimants.
To address this challenge, MAS proposes introducing a mechanism that would allow an independent party to be appointed as a designated representative to coordinate and bring legal action on behalf of affected investors. To prevent potential profiteering behaviour and vexatious litigation, the designated representative must satisfy specified criteria such as having no conflicts of interests and no direct financial interest in the outcome of the case.
b) Providing access to funding
MAS understands that one of the most significant hurdles for investors in taking legal action is the upfront costs involved. Market misconduct cases may be complex, requiring specialised legal expertise, expert witnesses and detailed financial analysis, all of which come at substantial expense. For many investors, these upfront costs can be daunting and deter them from pursuing legitimate claims.
Recognising this, MAS proposes establishing a grant scheme to co-fund meritorious investor actions. The grant scheme will also seek to defray the costs of the designated representative in organising and coordinating investors. However, MAS is cognisant that providing funding without adequate controls risks encouraging opportunistic litigation which would waste judicial resources and impose unnecessary costs on market participants. Accordingly, MAS proposes appropriate grant parameters, co-payment features and a governance framework, to ensure that the scheme supports genuine claims while preventing abuse.
c) Reducing legal barriers to civil action
While there are existing legal provisions which facilitate investors’ pursuit of compensation claims, such as by allowing investors to bring compensation claims that reference a criminal conviction or civil penalty order made against a wrongdoer (termed a “piggyback claim”), MAS proposes to refine these provisions to address possible frictions. These include:
- Simplifying and clarifying the procedural steps by which investors may bring a piggyback claim, to address feedback that investors may not be aware of or require legal assistance to utilise this provision;
- Extending the scope of the piggyback claim to allow investors to bring compensation claims that reference not only a criminal conviction or civil penalty order, but also a default judgment or consent order against the wrongdoer, or a civil penalty settlement which the wrongdoer has entered into with MAS. This will allow investors to use a wider range of resolved enforcement cases where there is admission of liability to commence piggyback claims;
- Making legislative amendments to ease investors’ proof of reliance in cases of misstatements or omissions in relation to the trading of capital markets products. This recognises that reliance may be difficult to establish, for instance, if there are concurrent market rumours or business developments relating to the listed company; and
- Removing existing statutory caps that limit compensation amounts, so that the Court may determine compensation amounts based on the particular circumstances of each case, consistent with its standard approach to assessing damages in civil claims.
MAS will accept views and suggestions from interested parties on the proposals by 31 December 2025.
