Exchange Panel: Addressing Financial Crime & Abuse in Capital Markets

Summary

The panel discussion, hosted by Regulation Asia, addressed crucial issues surrounding financial crime and abuse in capital markets, particularly focusing on the roles of social media in scams, market manipulation, and the need for robust surveillance. Industry leaders from HKEX, SGX, and Bursa Malaysia shared insights on their respective initiatives and enforcement strategies to combat these challenges. The conversation highlighted the importance of cooperation, the role of technology in surveillance, and the critical need for fostering a culture of compliance and self-regulation among market participants.

Highlights

• Jennifer Teo explained SGX's proactive stance on monitoring social media and issuing warnings about potential scams to investors who may fall prey to herd mentality 📢.
• Mohammad Azhar Hamidi detailed Bursa Malaysia's strategy to combat pump-and-dump schemes via social media by aligning detection mechanisms and enhancing investor education 📊.
• John Witts of HKEX emphasized the alliance with SFC to curb market manipulation and how their enforcement strategies focus on individual responsibilities and corporate disclosures 📝.
• The introduction of AI in SGX's surveillance systems has significantly reduced alert noise, allowing more accurate detection of market discrepancies, thus improving regulatory responses 🚀.
• HKEX has expanded its disciplinary powers to hold individuals accountable for breaches, marking a shift towards enforcing personal responsibility and integrity 👨‍⚖️.
• The panel collectively acknowledged that fostering a culture of compliance and responsibility is crucial across all market participants, beyond just adhering to rules 📈.

Key Takeaways

• Social media is a double-edged sword in financial markets – a breeding ground for scams yet powerful in information dissemination 📱.
• Surveillance technologies, like AI, are enhancing regulatory processes by reducing noise and focusing efforts on genuine threats 🤖.
• Cooperation among market players and regulators is essential to combat financial misconduct effectively 🤝.
• The enforcement focus is shifting towards individuals behind corporates to ensure accountability and deterrence 🕵️‍♂️.
• A strong compliance culture isn't just about rules – it's about fostering a proactive sense of responsibility among all stakeholders 🌐.
• Cyber risks are an emerging concern with the rise of digital trading platforms and must be pre-emptively addressed 🔐.

Overview

In a highly engaging and insightful panel discussion organized by Regulation Asia, experts shared their views on tackling financial crime and malpractices in capital markets. The focus was largely on how market surveillance and regulation must evolve in response to the increasing misuse of social media for financial manipulation. Experts like Jennifer Teo from SGX highlighted real-world instances of spotted manipulative activities and how they have intervened to protect the integrity of the market. The conversation underscored that regulatory tech and human oversight must go hand-in-hand for efficient monitoring.

Mohammad Azhar from Bursa Malaysia provided a deep dive into how their surveillance systems are adapting to modern challenges. By breaking down the types of manipulative practices observed, Azhar painted a clear picture of the spread of financial crime via digital platforms. He stressed that broker agencies and individual investors need to adopt self-regulation principles, complemented by robust surveillance infrastructure which is increasingly integrated with machine learning tools to preemptively solve issues before they escalate.

Finally, HKEX's John Witts brought attention to the innovative policies they have implemented to ensure accountability, highlighting the move towards holding individuals – not just corporations – responsible for market misconduct. This shift is pivotal in enhancing market transparency and fairness. The panel concluded on a call for an integrated approach where every stakeholder, from analysts to directors, participates actively in promoting a culture of compliance, leveraging both technological aids and fundamental ethical practices.

Exchange Panel: Addressing Financial Crime & Abuse in Capital Markets Transcription

• 00:00 - 00:30 [Music] [Applause] hello and welcome um my name is manesh samtani i'm editor for regulation asia um i'd like to first thank jimmy tong at the sfc for an interesting
• 00:30 - 01:00 discussion uh quite a great way to kick off day three of our event and certainly serves as a great launch pad for our for our next panel we're now going to discuss financial crime and abuse in capital markets i'd like to welcome three of our speakers from stock exchanges in asia pacific um first off we have john witts head of listing enforcement at hkex john has 20 years experience
• 01:00 - 01:30 relating to financial services disputes investigations and regulatory enforcement matters now i know john joined hkx in 2019 to establish and support the listing review committee before taking up his current role in enforcement last year welcome john thanks vanessa good to be here thanks very much uh next we have jennifer teo who has led the security surveillance team at sgx for the last 10
• 01:30 - 02:00 years uh her team conducts real-time monitoring for unusual trading activities uh to detect potential market misconduct and other sgx trading world breaches ms tia also oversees sgx's investigation functions for the securities markets uh welcome jennifer thank you monash i'm happy to be here today and we're happy to have you and finally we have muhammad azhar hamidi executive vice president and head
• 02:00 - 02:30 of supermarket surveillance at bursa malaysia azhar leads the market surveillance function for both equities and derivatives he also has broad experience investigating market offenses and is in fact credited with helping bursa malaysia to enhance its investigation processes reduce turnaround time and improve automation over the years welcome azar thank you manage uh thank you for the nice introduction
• 02:30 - 03:00 it's a privilege thank you for having me uh you're welcome so so so of course um i i'd like to to kick off uh by maybe uh building on some of the themes that uh that jimmy tong uh at the sfc discussed earlier um i'd like to maybe start off uh by asking jennifer and azar um sort of just sticking with that social media scams and manipulation theme are the are these concerns for you
• 03:00 - 03:30 in in your markets as well let's start with jennifer sure thanks monash we continually monitor such activities and will not hesitate to curb them when they become a concern so sometime last year we actually received alerts on unusual trading activities and a few securities from our surveillance system so as part of our process we checked the investment discussion forums and we found polls promoting a particular chat group on telegram the telegram is a popular mobile chat application we then monitored the group closely and
• 03:30 - 04:00 managed to match the chats to actual trading activity we managed to ascertain the identity of a couple of the vocal members of the chat who first appeared to accumulate shares in particular securities then through the chat inside other members to participate in pumping activities in these securities before they dumped their own shares at a profit for this case we worked very closely with the relevant authorities to stop the activities and also issued a media release in december 2020
• 04:00 - 04:30 to warn the public of possible pump and dump activities exploiting telegram chats and other social media channels more recently in february this year following the gamestop saga in u.s as jack's redco also jointly issued a statement with our regulator the monetary authority of singapore to advise the investing public to be on heightened alert to the risks related to trading its securities incited by discussion forums and social media chat groups thank you jennifer azar what are you
• 04:30 - 05:00 seeing in malaysia uh azar can you hear me
• 05:00 - 05:30 uh whether you're sort of seeing a similar theme in malaysia sorry get up can you hear me yes so we can hear you go ahead basically a social media is a preferred attraction to biological investors and social media scam and manipulation are more prevalent with increase of retail participation in
• 05:30 - 06:00 our market essentially the perpetrators will attempt to exploit the social media and engage in spreading false or misleading or promotional information about the company in order to create hype does it use public investors to purchase the company's shares the exploitation of social media for market manipulation such as farm and damn or some say disarm and dumb have more profound effect as the information can spread and range large number of investors within a short span
• 06:00 - 06:30 of time with minimum effort and at a very relatively low cost based on jimmy donkey's sharing i also like to share an overview of our case on power and down via social media based on our observation apartment dump scheme can be divided into three categories first category an individual who self-proclaimed at stock market guru will give investment advice for your explore principal account youtube channel aware himself sometimes hosting a live streaming to his followers this
• 06:30 - 07:00 individual normally will acquire a large amount of particular shares prior to giving by recommendation to his followers and backed by his own fundamental and technical analysis another second category a group of individuals even community who actively run receiving groups by your website by your telegram then even more foreign facebook and also chat room in established stock market website they are actively recruiting new members through this platform they also take position before make bar
• 07:00 - 07:30 recognition to their members the third category which i consider as a large-scale operation involving a syndicate group they begin their operation by acquiring a controlling state after the company and then promote the company by a series of disclosures and creating a lot of time around the company to pump up the share price during the process they will also trade with the shares of the company to create volume and push up the price in order to create an impression that something big is really happening in that problem
• 07:30 - 08:00 but once the share price of the company should up to a level they desire they will download shares to make huge profit these are the some examples of pump and dump a scheme that we have here where we have detected which resulted in further investigation and also transformation another key uh concern in our market uh managed is relating to possible files for misleading promotional disclosure made by the listed company for example last year during the height of public 19 pandemic some companies have taken advantage of
• 08:00 - 08:30 retail investors in tourists in the market by making all sorts of announcements in attempt to promote their company's prospect and boost their share price last year there was a surge in company announcement of new investment of business collaboration value of foru letter of intent and distribution uh agreement uh quite simple like you know relating to manufacture of growth from facebook regulators and also distribution of testing for property 19 and even vaccine so these are the key concern in our
• 08:30 - 09:00 market thank you azar now john i'd like to bring you into the conversation azar mentioned a few themes around uh manipulation um sort of uh one around uh you know the syndicate groups uh but also um you know sort of involving a listed company's disclosures which i know is kind of a key area of focus for you uh can you sort of describe how hke x initiatives sort of intersect
• 09:00 - 09:30 uh with the sfc's concerns about manipulation sure yes um certainly it's something that we're keeping a very close eye on the manipulation side is really one that's primarily for our colleagues over at the sfc but we will work very closely with them to provide them the support that they need but where we and hkx are going to take a much closer look as if there's any suggestion for any sort of complicity from within the issue or within the individuals who work within the issuer
• 09:30 - 10:00 um so if there's any suggestion that that's happened and that's something that we'll need to get involved them or want to look very very closely at and often that will manifest itself if it is going to happen as you suggest through the form of disclosures either there's a disclosure which is misleading or there's something that hasn't been disclosed that should be disclosed and so if there's any real issue around that then that very much is the subject of hkx's enforcement actions and this goes way beyond market manipulation and ramp and dump
• 10:00 - 10:30 and all that that all those issues if you look at the sanctions that we at hkx publish um you'll see quite a lot of disciplinary cases are brought just around people failing to comply with the disclosure obligations we've got very broad disclosure obligations under the listing rules that's part and parcel of making sure that the market is informed and fair and so we take it very seriously if we think there's a problem there i'm just building on that i i know that
• 10:30 - 11:00 hkx has recently released um a new enforcement policy i i i'd like um i'd like you to maybe talk a bit about that uh if you can tell our audience uh what sort of motivated the publishing of that new policy perhaps a little bit about your enforcement uh priorities uh and i suppose um you know how has the new policy been received by the market so far sure yeah happy to talk about that um we have been
• 11:00 - 11:30 uh reflecting really over the last couple of years about um all of what we do within enforcement uh the thing that's been most visible to the public in in that regard has been a public consultation in relation to the listing rules that relate to disciplinary powers and sanctions which are very much um the the key rules that uh underpin all that we do in enforcement at hke x but at the same time we've also just been reflecting on all the other uh pieces of the puzzle
• 11:30 - 12:00 and including on the areas that we should be concentrating and our approach and our priorities um and part of that was just going back to the fundamental question of why enforce why i take enforcement action at all and i think there's really sort of two important things to keep in mind when thinking about that the first is that hkx forms apart only part i would say an important part but only part of a wider regulatory framework within hong kong there are other regulators
• 12:00 - 12:30 particularly the sfc there are other law enforcement agencies there's the police that there are there are plenty of people who are around and involved to make sure that things are done properly and fairly um so when you you have to remember first of all that's just it's part of the overall picture the second thing that follows from that is that our enforcement actions are actually best focused on those who are on the ground at listed issuers or who are working with listed issuers
• 12:30 - 13:00 and who are in a position to be able to prevent things from going wrong in the first place the point is that no regulator is going to be able to stop fraud financial crime any wrongdoing by simply punishing people after the event that's too late the money's already gone the problems already happened um so what a lot of our focus is on is making sure that the people who are in a position of responsibility at the issuer have got in place the right framework to minimize the chance of that happening that leads on to
• 13:00 - 13:30 the thinking that really led into the formulation of our three enforcement priorities which are responsibility uh controls and culture and thirdly cooperation i could talk about those for far longer than you'd probably want me to in this session but i'd like to just say if i can a little bit more about the first two which are responsibility and controls and country and hopefully that will help to illustrate what i mean by them firstly in terms of responsibility what
• 13:30 - 14:00 we're talking about here is making sure that people who are working for or at listed issuers in hong kong understand the role that they have to play um their cart the focus can't just be on the business and making money there is an import important regulatory role that they need to play and that's particularly true for directors but it's not just limited to them i mean there will be others who surround them as i say they'll be senior management members there'll be advisors um and they will
• 14:00 - 14:30 also have a role to play uh one of the things that we need to make sure is that these people understand that they've made a substantial commitment by going onto the board or by working in a listed issuer and much is expected of them to try and make sure that everything is run as tightly and safely as possible and so they need to know that if they're passive or if they assume that someone else is going to take care of these things then they're at risk of falling below the standards that are expected and into enforcement action the second
• 14:30 - 15:00 of our priorities is around controls and culture and that is critical importance an issuer has got to have the right framework for compliance a lot of that means making sure that you've got the right internal and risk management controls in place you've got to make sure that proper oversight is there proper checks and balances exist um but we also thought it was important to emphasize that having the right culture is is um an element that's
• 15:00 - 15:30 perhaps sometimes forgotten as well it's not just a case of having good policies in place and having good um people reporting to the right people and in the right way that is essential but if the culture is wrong then that can also mean that things go wrong so taking that as a whole i think the important thing to take away is that um arguably our most important cases that we bring in hkx for enforcement pubs without disciplinary cases they're less about focusing on people who've done something that's really truly wrong that maybe the police or the
• 15:30 - 16:00 sfc need to get more involved in it's more about focusing on the people who their heart may well be in the right place but they need to make sure that they've discharged their responsibilities to keep the issuer and the environment that it works in as safe as possible to stop anything more serious happening further down the line that should be no surprise it's the same thing that we all see in the aml space we're not saying that the banks are taking money but we're saying the banks are there in the financial markets and they've got to make sure that controls are in place to stop others doing things wrong it's a
• 16:00 - 16:30 very similar sort of idea at listed issuers and i'd encourage anyone who wants to know more about what we're thinking in that regard to look at our new policy statement which is up on the hkx website to read our enforcement bulletin which is a six monthly newsletter um and we've just issued a one in the last few weeks and i'd encourage everyone to read that they want to know more uh thanks so much john and and you've actually touched on a lot of themes that we've been covering over these three days uh you know about responsibility about controls about culture
• 16:30 - 17:00 uh we have a panel later on in the day about culture as well um uh so so yeah these are all really interesting uh uh comments and it's interesting to hear about your priorities um in in that vein um i'd like to also ask um jennifer and azar about about your priorities i know your focus is a little bit different on sort of the market surveillance side um but i'd like to ask sort of maybe starting with jennifer what what have you seen change in the last um say 12 18 months how have you adapted
• 17:00 - 17:30 your surveillance approach and have you re-prioritized well over the past 12 to 18 months the trading landscape has shifted quite a bit as we see more participation from the retail market many of these retail participants appear new to trading and they were possibly attracted by the market volatility and also the proliferation of checks on investment and trading these participants will benefit with education on trading and investments as they could be just jumping on the bandwagon and trading on herd mentality
• 17:30 - 18:00 hence we have been more proactive in reaching out to this group of investors for example the media released on our observations in social medias were meant to alert these group to do their own due diligence and not to invest blindly on the stranger's advice so for sgx red core enforcement is also a key priority in june we announced that we are expanding our range of enforcement powers and requiring issuers to have a whistleblowing policy these changes pave the way towards
• 18:00 - 18:30 swifter enforcement outcomes and also enhances the protection of investors it provides more certainty and clarity to the market and for us we also enjoy a close relationship with our statutory regulators this can be seen through the swift action taken to curb the errant trading activity stemming from the telegram chats as well as the joint statements to the public to warn them to be alert excellent thanks thanks so much azar i i suppose um you know from previous
• 18:30 - 19:00 conversations uh you might be seeing something similar in terms of the treating landscape go ahead thank you from jennifer all right i think uh so what what we have observed you know for the past 18 months the influx of victim investors into stock markets since this proliferation of nuclear investors
• 19:00 - 19:30 was also a fundamental across the globe right from the u.s europe asia in malaysia the written investor's participation before with the increasing retail interest in the market our markets now become more volatile with more stocks experience pricing due
• 19:30 - 20:00 to the speculative trading and also a short-term view by investors who are also influenced by business and economics and also development of community we also have observed rapid intelligible team play uh
• 20:00 - 20:30 we have enhanced our surveillance detection through several first we develop and implement a new visible alerts or report on new media and technics for example uh the creation of motherboard education and also intermarket surveillance between cash and deputy market change our segments using machine learning and also use sandbox with this general system to carry out that testing of parameters every six months all assemblies required
• 20:30 - 21:00 to ensure that alert parameters suit the current market position this also helped us to maintain optimum level of minimum with our system our single system is connected to using information from the workforce for complete disclosure to look at timely price selection we are currently looking at right on your program to enhance our monitoring and detection of calls for misleading information news in the cyber space
• 21:00 - 21:30 our priority is also to ensure timely disclosure of bacterial information to facilitate training and reinvestment decision by the public investors generally there are two main categories of information that market surveillance can compel the listed property to make further disclosure one is where we see significant increase price and also volume should we observe any sudden increase in price before removal but not supported by
• 21:30 - 22:00 any material or news in the market a query will be issued to the property to ensure that necessary disposal second when we see a media coverage company if there is a material information in the media which had not been disclosed by the mission company then we will issue queries to the property so that medicaid clear information is given to the market for public justice so these are the changes and prioritization surveillance approach that we have adopted for the past few months
• 22:00 - 22:30 uh thank you azar um i i heard you mention a a little bit about machine learning uh maybe i can turn this to to jennifer because i understand that sgx uh has introduced uh ai into its surveillance approach i think that was in 2019 can you tell us a bit about this and how this is improving your regulatory processes and outcomes sure so we introduced the ai in december 2019
• 22:30 - 23:00 and the timing of this was very opportune because when the global pandemic hit in early 2020 the ai enhancements were already in place and allowed us to reap its benefits amid the increased market volatility and trading volumes so how it works is that the ai recognizes that there's a correlation in the price movement of sjx listed securities to the reference market indices so by leveraging on this core relation the ai will remove price alerts for all
• 23:00 - 23:30 securities which move in line with the reference market this helps us to remove excessive noise and allows us to focus our attention on other alerts and this ai will be activated only on days of increased volatility and in march 2020 it actually helped us reduce the alert noise by about 25 percent and allowed us to concentrate on other alerts which required our attention so following this initial implementation we recognize that there are opportunities for further enhancements
• 23:30 - 24:00 these include utilizing the futures market prices to track when the reference equity markets are closed and also tiered activation to handle different levels of volatility other than in the area of surveillance sjx redco has also introduced the use of ai and other reg tech solutions to enhance its oversight of issuers and the solutions automate the extraction of data from reports such as financial statements to compute certain indicators of
• 24:00 - 24:30 financial risk to alert of any possible financial distress or irregularities in the listed company this early detection would then allow regulatory resources to be directed more appropriately at the higher risk areas and enables us to be more targeted in our regulatory responses thank you jennifer actually we have a question from the audience that i think is a little bit related to this discussion around surveillance um and it's basically asking what are
• 24:30 - 25:00 exchanges and regulators doing to encourage or require adoption of automated trade surveillance systems by market participants you know given that manipulation can take place at very fast speeds do you have an answer for that jennifer or azar seeing as you're in this space um well for us we recognize that our member firms have different considerations
• 25:00 - 25:30 and also um sorry just the question was about whether you encourage or require uh the adoption of automated trade surveillance uh by trading members uh so so yeah jennifer sorry go ahead so our members they are of different sizes so they will have different considerations on how to carry out their
• 25:30 - 26:00 monitoring practices so generally we adopt a reasonable basis approach rather than a prescriptive approach so we still want to maintain the some standards for effective monitoring so to help them we provide them guidance through tools like trade surveillance handbooks and member dashboards the trade surveillance handbook for example will provide examples of potential trading malpractices such as roofing layering and marking the close as well as case studies on pre-arranged
• 26:00 - 26:30 trading and the member dashboards which were introduced in 2016 are customized monthly reports showing alerts which are triggered at an exchange level for each individual firm this is highly personalized and is part of our proactive approach where we work closely with members to support their existing monitoring tools so other things to help we also to help our members we also collaborated with our regulator to launch the trade surveillance practice guide in august
• 26:30 - 27:00 2019. um this helps them because from their perspective it might be difficult to understand where the regulator is coming from so through the handbook and guide we want to bridge this knowledge gap by sharing greater insights on what may constitute errant behavior and also because we feel that these handbooks and practice guides will also benefit the market other market participants and to help them to understand that such activities are considered unlawful behavior
• 27:00 - 27:30 and so they can be also found on the sgx website so in all i think um well some members may not have automated trade surveillance system well they have other tools that will also help them to conduct their straight surveillance okay excellent um now um i i guess i you know in in this discussion uh you know one one of the themes that i find common is that um sort of some of some of them some of the
• 27:30 - 28:00 measures i know that um versus malaysia sgx and hong kong exchange take are sort of in a way aimed at improving governance culture in the capital markets and john touched on this earlier i would like to explore this a little bit further john can you talk a little bit about how uh you're you're trying to drive a better governance and culture in capital markets yeah absolutely um if you look at our
• 28:00 - 28:30 enforcement objectives which are in the policy statement i mentioned earlier there are four of the objectives and two of them are completely on point one of them is to influence compliance culture and one of them is to enhance corporate governance so it absolutely is the bread and butter of what we do and and everything that we try to do the way that we do that is through our enforcement work and that includes the sections that we publish and that also includes the guidance materials that we put out on our website that includes
• 28:30 - 29:00 the bulletin that i mentioned earlier um we're always trying to help people understand what is expected of them and to lift the bottle so they are absolutely absolutely at the heart of what we do um i mean dwelling on culture for a second culture is one of these things it's become it's been around for obviously the word's been around for a long time but i think increasingly over the last few years it's become quite a fast word and quite a lot of people talking about culture a lot of people sort of say well what does that mean
• 29:00 - 29:30 and then sometimes that gets met with other buzzwords like oh it's all about tone from the top and so on i'm not trying to say any that's wrong i think it all makes perfect sense but actually in some ways my focus on it is a bit more it's something that you can't really write down you can't really have a checklist for it it's more about a feel um and when we start investigating uh something that looks like it's gone wrong we normally get that feel pretty quickly um as to what's on the other end when we're sending out our requests for information when we're communicating
• 29:30 - 30:00 with issues we're communicating with directors we normally get a feel pretty quickly of what the culture is like um there are some mistakes will happen and there are some who will accept that they've happened they'll show that they've learned from it they'll show that they want to move on and you can see that they've stepped up if they've ever made mistakes in the past that they're if they're on the right path they're trying to do the right thing there are others on the other hand of course who are evasive defensive um refuse to admit that anything even despite overwhelming evidence to
• 30:00 - 30:30 the country has gone wrong uh don't accept that there's any room for improvement think that they've done everything that they're supposed to do that then if something has gone wrong it can be a bit of a red flag can be a bit of an alarm bell will require closer scrutiny and that's just when things have gone wrong of course i mean the other thing that we look for typically in almost every investigation we bring we'll be asking people about their controls be asking people about the oversight that they've applied and we've been asking about what they've
• 30:30 - 31:00 done to basically ensure that they remain uh compliant with the rules uh are people being properly briefed um and that goes all the way down to the most junior staff i mean everyone's got a role to play are people staying on top of rural development while people stay on top of you know making sure they're receiving the training that they need is all the information flowing the way it's supposed to flow um are people empowered to speak up if you've got someone spotting something go wrong did they have a chance to say something
• 31:00 - 31:30 and almost again almost every case that we look at if something has gone wrong we look at it and think wow someone must have seen that earlier someone must have spotted it why is it taking it this long for someone to say something or for us to find out about it and that again is a suggestion that possibly the culture and the right isn't in the right place and and that could say start right from the from the most junior level where someone just goes you know hang on i'm being asked to do this but that doesn't really fit with what we normally do or without policies maybe i
• 31:30 - 32:00 should say something have they got the ability to turn to someone who will be a receptive ear and say yeah you're right thank you for raising that where whether or not it goes anywhere because that's the sort of thing that can stop something really serious going on so yeah very much our enforcement actions are focusing on trying to get people to lift that bar uh so so so you you raised uh enforcement actions um that was something i wanted to ask you about because we've noticed a lot more enforcement activity from hkx this year
• 32:00 - 32:30 can you sort of give us a give us an idea why this why this is the case yeah sure i mean we certainly have been busier this this year than uh in the past i think uh the volume of cases that we've got um has gone up um so we're we've got a lot of things to to follow up on um the reason for it uh is i think there's probably several reasons um one is i think in part um
• 32:30 - 33:00 things slowed down a little bit during covert um in terms of if you look at these say the sanctions that we've been publishing there weren't so many in the second half of last year but this year there's been um a record number i mean we've been publishing sanctions um almost every week it seems um that in part i think is just down to a bit of timetabling i wouldn't necessarily read too much more into that otherwise i wouldn't read too much more into the idea of um you know david or um
• 33:00 - 33:30 economic economically difficult times are often associated with an increase in misconduct or fraud or things coming to light even if they've already been below the radar i that may well also be true but i wouldn't read too much into that for the purposes of what we're doing i think actually a lot of it comes from uh increased defence i think um within the exchange here in hong kong we've got not just the enforcement department who are looking at issuers and directors but we've also got a
• 33:30 - 34:00 substantial a listed issuer regulation department and they've been doing a great job at um looking at everything that comes out from the issue is looking at the disclosures and following up with their enquiries and i think they've been picking up a bit more uh they've they've found more and they've been able to then send more to us i think that partially that's through increased use of technology um so i mean again i think the message there is that we're more likely to find things if things are going we're more likely to find up and find them early and then
• 34:00 - 34:30 that's more likely therefore to be sensory to us in enforcement for follow-up when appropriate and one of the other reasons why the number of cases that you'll have seen published um the disciplinary cases that we've published have gone up this year is because we've changed our or i should say we've renewed our focus on cooperation or people who don't cooperate i mentioned that was one of our uh the third the third priority the one i didn't really talk about earlier um over the course of last year we
• 34:30 - 35:00 changed disciplinary procedures to allow non-cooperation cases so cases where someone we're asking questions and people are just not providing the cooperation that they're required to provide under the rules we changed our processes for dealing with those cases to make it faster and easier to call these people out and so there's a substantial number i mean a noteworthy number of cases that have been published this year if you look at the sanctions you'll see
• 35:00 - 35:30 that people who are not cooperating are being called out and they're typically receiving from the very highest levels of the sanctions available to us for the simple reason that if you're not willing to talk to the regulator then what place should you have in a regulated market so um the part of the number if you're just looking at your number terms is to deal with that but that also say ties in very closely with our priorities and we want to make sure that people realize they can't just ignore it they can't let it go away because if they do then their name's going to be put out
• 35:30 - 36:00 there for everyone to see that they they don't talk to the regulators they don't provide the the um the information that they're required to provide they don't follow the rules um that's useful i think for our market is also useful for people overseas who want to see that too i i think that's a useful message for for our listeners as well um sort of the need for cooperation uh if there is anything that is uh suspect or goes wrong um and again i suppose it's it also speaks to this to this whole idea of of culture uh azar
• 36:00 - 36:30 um i i'd like to i know we spoke before um in previous conversations about some of your engagement uh with with uh with firms in the market can you speak about some of the work you're doing to improve the culture of firms that are operating in malaysia's capital markets sure over the last three and using years we also have carried out the various initiatives to communicate
• 36:30 - 37:00 properly and collaborate with the stock blocking companies aiming at improving the compliance culture with self-regulation the first initiative is engagement with brokers we engage continuously engaging our brokers key personnel including the aim of dealing in a compliance you know appreciate also their dealers our key focus areas of the engagement includes market misconduct corporate governance and corporate culture and also cyber security so the second initiative that we have
• 37:00 - 37:30 undertaken to promote this self-regulation is issuance of debit zones in relation to surveillance we have issued two that is not to progress one expedition on trading and the second one is the solution on monitoring of electronic trading these two documents provide practical guidance for the broadcasting of trading and recommended best practices which are supplemented by various illustrations aimed to facilitate effective solution monitoring of the drinks and also market conduct this initiative
• 37:30 - 38:00 is important because it's enhanced towards self-regulation by the brokers the third initiative is basically upskilling our frontliners the brokers are our front line of defense and we have spent a lot of effort in leveling up their abilities and capabilities to manage and also to supervise the master our market surveillance booster we have organized various training and forum for progress management in snap who directly or indirectly involved in front office monitoring and trip
• 38:00 - 38:30 surveillance this program was conducted to provide better understanding of front office volunteering exclusion and how to detect a little training users with this initiative we have observed a change in culture towards self-regulation where brokers have been self-reporting creatures and taking productive action to rectify the breaches and put in place internal control measures to prevent recurrence the broker also have provided us keep off and given the suspicion of information on hospital market manipulation
• 38:30 - 39:00 our brokers have also implemented front office monitoring function where 85 of them have implemented automated front office monitoring which covered about 96 of our trading day in the market they also have no material industry white creatures by the brokers since 2017 so these are the examples of business conduct and culture improvement that we have seen which could have been attributable to our initial people
• 39:00 - 39:30 thanks very much azar um i i'd like to also ask jennifer something along the same lines uh because it i guess in previous uh conversations uh we've had with sgx uh we've noticed sort of a focus on uh sort of a comment a community approach a collaborative approach when it comes to engagement with your members uh can you talk a bit about this jennifer sure i think i covered some of these earlier in terms of the
• 39:30 - 40:00 trade surveillance handbook the dashboards as well as the the trade surveillance practice guide so yes we do have regular engagement sessions with our members as well this could be between the exchange and the members or it will also include the regulators at times and such sessions at during such sessions topics such as any trending misconduct that they could look out for
• 40:00 - 40:30 we could show them case studies and also when if we do detect any potential trading behavior that could become a problem we will also have ad hoc meetings to update them or to watch out for such behavior on a day-to-day basis we also engage our members regularly to discuss specific trading behavior by their clients so definitely since we we regard our members as our gatekeepers we we do engage them really
• 40:30 - 41:00 really very closely thanks a lot and it's really i just want to say it's really interesting to to kind of hear the uh the way that the that all three of these markets hong kong singapore and malaysia are sort of approaching uh these issues in slightly different ways but essentially overall looking to elevate standards in the markets um john speaking of of um of elevating standards i suppose i know that hkex has recently expanded
• 41:00 - 41:30 its disciplinary disciplinary powers to hold accountable individuals that are responsible for misconduct or breaches of listing rules do you want to share with us a little bit about this yes sure we we um as i mentioned it i think earlier on in the session we've been through uh a process over the last year or so of consulting the public with a view to updating the listing rules
• 41:30 - 42:00 around disciplinary powers and sanctions and that's now been concluded and the new rules came into effect uh earlier this month which we're delighted about so thank you to everyone who participated in that consultation and for allowing us to get where we got to today um the the new rules uh particularly allow us to help focus on individuals um there's limited value i'm not saying it's a waste of time but there's a limited
• 42:00 - 42:30 value on focusing just on corporates as i think we all know in the enforcement space um every corporate has to can only do something wrong because of individuals who are behind it now primarily that's going to be the directors and historically the focus of the exchange and its enforcement action has been primarily on the issuers and their directors but there are other people who are involved and that very much ties in with our focus on making sure people understand their responsibility
• 42:30 - 43:00 so the new listing rules um allow us uh much more with much more clarity to deal with not just directors but also others who have a responsibility and have a role to play and who have failed so that might include senior managers uh that might include advisors um and uh it very very much depends on the circumstances as our directors are gonna remain very much in in the front row um but where we've seen misconduct effectively being orchestrated by others
• 43:00 - 43:30 who are not directors then we've now got the right toolbox to deal with that so that's um a real benefit of it the other major change has been to broaden the range of sanctions that we have available um we have our sanctions are primarily uh reputational so it's it's a name and shame approach for the most part um but we now have a broader range from which to choose in order to deliver those sections which we hope is going to provide extra clarity to the market
• 43:30 - 44:00 on how we see things on different levels of severity of misconduct and having an appropriate regulatory response for those and so we're we're happy to have got to where we've got to now and uh and i'm sure it was a it was quite a process to get to this point as well um we we have about five minutes left um i i'd like to give you all a chance to to give a you know your key messages to the listeners uh but first uh azar if you don't mind i'd like to just quickly pick up on
• 44:00 - 44:30 something you you said earlier you're mentioning sort of a a concern about a cyber risk um can you can you sort of share a little bit about how that um how why that's a concern and in what respect social media population of mobile devices and online and space brokers have changed the landscape of marketplace at the same time the lgft
• 44:30 - 45:00 program trading has also increased over the years so in this regard we was also aware that these changes come with new risks in this case is the threat of cyber attacks on cybercrime last year i think we all know that you know there was a news on the doors attack that has taken down one of the stock exchange website for six days where the exchange would not pose a market announcement and training and exchange also was also stopped for four days similarly there's also a mounting risk
• 45:00 - 45:30 of hackers taking over brokers and also investors account so this one we call the the new phenomenon with regards to this cyber crime uh you know surrounding the capital market so in short capital market is not only exposed to market abuse of crime but it's also facing a risk of cyber attack and cybercrime so for regulators like us we need to continue up the game on technology and innovation towards enhancing our detection and preventive measures and at
• 45:30 - 46:00 the same time we also need to continue enhance and improve our cyber security for industry so that's my take yeah thanks okay no thank you very much because i moderated a session on cyber cyber crime on wednesday so so it's a very interesting topic to me um so just a few minutes left i wonder if we can just um finish off with with allowing each of you to get to deliver some of your key messages that you'd like our listeners
• 46:00 - 46:30 uh to hear can we start with you jennifer final messages sure well um no market in the world has completely eradicated market abuse and crime and we recognize that all market participants have a role to play to reduce it so while we cannot totally prevent what we can do and have been doing is to educate and deter educate participants as to what kind of
• 46:30 - 47:00 trading behavior is frowned upon educate our members how to detect errant behavior so they can disrupt such activities early enforcement actions and other tools act as prevention and deterrence in the form of swift actions and effective enforcement outcomes and all participants not just the regulators and members have a role to play in upholding a fair orderly and transparent marketplace thank you jennifer so yeah education
• 47:00 - 47:30 um you know making sure firms know how to detect and disrupt uh thank you um john would you like to go next i'll be at risk of repeating exactly what jennifer just said um i think the most important thing for everyone to keep in mind because it might require a change in mindset is there may be plenty of people who are tuned into this you know it's fraud and financial crime they think but that is something that is quite interesting that bad people do and it happens over there and and that's
• 47:30 - 48:00 that um the message to the people for in my case for the people who are working out or around listed issuers in hong kong is you have a role to play to stop that bad stuff happening right you may not be a bad person yourself but you've got to remember that you've got duties and responsibilities to make sure that you create a safer possible environment so that no bad things can happen and i think it's too easy unfortunately
• 48:00 - 48:30 for very well-minded people to just think this is something that only happens elsewhere this won't happen in my company or this is something that someone else will deal with it i just want everyone everyone who's in that position just stop and say well actually how can you be so sure often when things go wrong they take people by surprise they didn't see it coming and then we start looking we see that actually not enough was done so the message is think about that now do whatever you need to do now then the bad things don't happen and then we don't have to come calling
• 48:30 - 49:00 as well okay excellent john so the the sense of responsibility um azar you get the last word what are your key messages for our listeners today yeah so captain orderly business protection is not just a responsibility of regulators but is responding for all the stakeholders in the market we need the brokers the dealers the listed issuers
• 49:00 - 49:30 the directors but also even the shareholders so everyone have a role to play uh protecting the market from market admissions yeah i think that that's my party notes thank you okay thank you very much um and with that we are out of time i'd like to thank our panelists uh john witts at hong kong exchange jennifer theo at sgx redco and azar at
• 49:30 - 50:00 bursa malaysia um thank you very much for joining us today uh and i look forward to speaking to you again soon um next up we have a panel discussing aml risks in capital markets which i think is an area that perhaps doesn't get enough focus i hope you three can can stay on and listen into that thanks very much