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Key takeaways
- The Monetary Authority of Singapore (MAS) published a consultation paper seeking feedback on proposals to enhance investors’ ability to seek civil compensation for losses due to market misconduct.
- These proposals are part of a broader effort by the Equities Market Review Group to strengthen investor protection through enhancing investor recourse avenues against market misconduct.
- The three key proposals to strengthen the investor recourse regime are as follows: (a) facilitating self-organisation; (b) providing access to funding; and (c) reducing legal barriers to civil action.
Introduction
The Monetary Authority of Singapore (MAS) has published a consultation paper seeking feedback on proposals to enhance investors’ ability to seek civil compensation for losses arising from market misconduct.
As part of the Equities Market Review Group’s broader initiative to increase investor interests, boost confidence, and attract quality listings, MAS aims to strengthen investor protection through enhancing investor recourse avenues against market misconduct. An effective investor recourse regime gives investors greater confidence to participate in the securities market.
MAS notes that retail investors currently face barriers such as difficulty in self-organising and finding sufficient funds for legal advice. MAS is thus seeking feedback on proposals to strengthen the current investor recourse regime while also introducing safeguards to guard against frivolous legal actions which would place an undue burden on the market. MAS’s proposals seek to put in place relevant safeguards to strike an appropriate balance.
Key proposals
MAS sets out three main proposals to strengthen Singapore’s investor recourse regime:
- Facilitating self-organisation. Currently, while investors can bring collective legal action, organisation is often difficult. While a third party can assist claimants, it cannot bring an action on behalf of claimants. MAS therefore proposes a mechanism allowing 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.
- Providing access to funding. Recognising that the high upfront costs of legal proceedings deter many investors from taking legal action, 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. To prevent wasting judicial resources and imposing unnecessary costs on market participants, MAS proposes appropriate grant parameters, co-payment features, and a governance framework, to ensure that the scheme supports genuine claims while preventing abuse.
- Reducing legal barriers to civil action. MAS proposes to reduce legal barriers to civil action by refining existing provisions that facilitate investors’ pursuit of compensation claims (termed a “piggyback claim”). Specifically, MAS seeks to:
(a) simplify and clarify the procedural steps for bringing a piggyback claim;
(b) extend the scope of such claims to include references to default judgments, consent orders, and civil penalty settlements;
(c) amend legislation to ease investors’ proof of reliance in misstatement or omission cases in relation to the trading of capital markets products; and
(d) remove 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.
Conclusion
Taken together, MAS’s proposals would materially strengthen investor protection and confidence. By enabling designated representatives to coordinate claims and securing access to co‑funding for meritorious actions, retail investors can more feasibly pursue redress. Streamlined piggyback pathways, broader reliance on resolved enforcement outcomes, eased proof requirements, and removal of compensation caps better align remedies with actual losses. Coupled with safeguards against frivolous suits, the new regime balances accessibility with market integrity, enhancing deterrence of misconduct and supporting deeper, more resilient participation in Singapore’s capital markets. This complements the Singapore government’s broader efforts to deepen and enhance Singapore’s capital markets.
Client Alert 2025-273
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