Singapore’s MAS Issues Nine-Year Prohibition Orders Against Founders of Three Arrows Capital
The Monetary Authority of Singapore (MAS) has issued nine-year Prohibition Orders (POs) against Mr. Zhu Su and Mr. Kyle Livingston Davies, the founders of Three Arrows Capital (TACPL). The POs, effective from 13 September 2023, prohibit both individuals from engaging in any regulated activities and from participating in the management, directorship, or substantial shareholding of any capital market services firm under the Securities and Futures Act 2001 (SFA).
A String of Regulatory Contraventions
MAS’ decision comes after a series of regulatory breaches by TACPL and its leadership. In June 2022, MAS reprimanded TACPL for multiple infractions, including providing false information to the regulatory authority, failing to notify MAS of key personnel changes, and exceeding the allowable assets under management threshold for a registered fund management company.
Following this reprimand, MAS launched further investigations into TACPL, Mr. Zhu, and Mr. Davies. The additional contraventions discovered between August 2020 and January 2022 have now led to the issuance of the POs:
1. Failure to Notify MAS of Employment of Representative: During the period of August 2020 to September 2021, TACPL employed Mr. Cheong Jun Yoong Arthur as a portfolio manager responsible for fund management activities. However, in violation of the SFA, TACPL failed to inform MAS within the required timeframe about Mr. Cheong’s employment.
2. Provision of False Information to MAS: In January 2022, TACPL provided false information to MAS by stating that they hadn’t notified the regulatory body about Mr. Cheong’s employment because he did not engage in any regulated activities. Contrary to this, Mr. Cheong had actively conducted fund management activities on behalf of TACPL between August 2020 and September 2021.
3. Failure to Implement Appropriate Risk Management Framework: Perhaps most critically, TACPL was found to be lacking an adequate risk management framework to identify, monitor, and address risks associated with its cryptocurrency and digital asset investments. This deficiency in risk management was a severe breach of regulatory requirements.
As the Chief Executive Officer and Director of TACPL, Mr. Zhu Su and the Chairman and Director, Mr. Kyle Livingston Davies, bore primary responsibility for ensuring TACPL’s compliance with regulatory requirements under the SFA and Securities and Futures (Licensing and Conduct of Business) Regulations (SFR). The investigation conducted by MAS clearly revealed that they had failed to fulfill their duties and were directly responsible for TACPL’s multiple breaches.
MAS’s Strong Stand on Regulatory Compliance
In response to these developments, Ms. Loo Siew Yee, Assistant Managing Director (Policy, Payments & Financial Crime) at MAS, stated, “Senior management of fund managers are required to implement robust risk management measures to protect the interest of investors. MAS takes a serious view of Mr. Zhu’s and Mr. Davies’ flagrant disregard of MAS’ regulatory requirements and dereliction of their directors’ duties. MAS will take action to weed out senior managers who commit such misconduct.”
This action by MAS underscores the regulatory authority’s commitment to maintaining the highest standards of financial integrity and protecting the interests of investors in the Singaporean financial market. The issuance of nine-year Prohibition Orders against the founders of Three Arrows Capital sends a strong signal that regulatory breaches will not be tolerated, and those responsible will face stringent consequences for their actions.
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