Wendell Wong                                    Priscylia Wu
Director, Dispute Resolution             Associate, Dispute Resolution
T: (65) 6531 2496                                T: (65) 6531 2729
E: wendell.wong@drewnapier.com  E: priscylia.wu@drewnapier.com

On 22 September 2014, the Securities and Exchange Commission (“SEC”) announced an expected award of more than US$30million to a whistleblower living outside the United States of America, who provided key original information that led to a successful SEC enforcement action against an on-going fraud. To date, this award is the largest made by the SEC’s whistleblower program.

In Singapore, there is presently no overarching legislation dealing with the issue of whistleblowers, how they should be protected and/or whether they should be accorded leniency in sentence on account of their early disclosure of offences. However, there are separate legislations offering protecting to whistleblowers in individual areas. In addition, where the whistleblower was a participant in the offence, case law provides that voluntary surrender and co-operation with the police or prosecution may accord some mitigating value in the court’s decision on sentence.

Whistleblowers of securities offences in Singapore are not protected by any legislation at present. It is perhaps timely that legislation affording protection and/or leniency to this group of whistleblowers be considered.

Securities offences sanctioned by the Securities and Futures Act (Cap. 289) (“SFA”) include (i) insider trading, (ii) false trading / market rigging, (iii) making of false or misleading statements, and (iv) the failure to disclose material information.

Singapore’s securities market has moved from a merit-based regulation where the regulator decides what is disclosed to the market to a disclosure-based regime which empowers investors to make informed decisions based on publicly-available information. The disclosure-based regime demands an effective market enforcement regime which swiftly and firmly deals with any transgressions in order to preserve investor confidence in Singapore’s capital markets. An effective market enforcement regime will require that any and all transgressions be disclosed to the relevant authorities as soon as possible so that they can be swiftly dealt with.

Legislation protecting whistleblowers and/or affording leniency will be a step forward in facilitating an effective market enforcement regime.

The epitome of protection and incentives for whistleblowers may be the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) enacted in 2011 in response to the 2008-09 financial crisis in the United States of America. The Dodd-Frank Act not only provides whistleblowers with confidentiality of identity, but also incentivises whistleblowing with monetary benefits of 10-30% of the money collected in a case where the whistleblower provides high-quality, original information that results in an SEC enforcement action with sanctions exceeding US$1 million. Singapore may not wish to go so far as to provide actual monetary incentives to whistleblowers who come forward with high-quality information. Apart from practical issues such as how the incentive programmes should be structured and where the funds for the monetary incentives may be sourced, such inducements could result in credibility issues if the evidence of a whistleblower is crucial for a conviction in any criminal proceedings which may result from the disclosure.

In this regard, Singapore may wish to look at Australia’s Corporations Act 2001, which provided the model for many provisions in the SFA when the Securities and Futures Bill was first drafted in 2001. Part 9.4AAA of Australia’s Corporations Act 2001 was implemented in 2004 to provide protection for whistleblowers who disclose information indicating that the company or an officer/employee of the company has or may have contravened a provision of the Corporations legislation. Part 9.4AAA is designed to prohibit employers from victimising the whistleblower who reports a suspected breach in good faith and on reasonable grounds. However, Part 9.4AAA does not protect whistleblowers from liability for any illegal act or wrongdoing in which they were involved and the whistleblowers can still be subject to criminal prosecution in relation to that act or wrongdoing.

While Part 9.4AAA may seek to prohibit the victimisation of whistleblowers, the dynamics in a company will never be the same once it is known that an individual has blown the whistle on the management and/or colleagues. No legislation can deal with the complex inter-personal workplace relations issues arising as a consequence of a disclosure.

Local legislation dealing with whistleblowing in other white-collared offences may perhaps be more insightful.

Legislations protecting whistleblowers in Singapore include section 36 of the Prevention of Corruption Act (Cap. 241) which restricts disclosure of the identity of informers.

Another such legislation is section 89 of the Competition Act (Cap. 50B) which ensures the preservation of secrecy of all matters relating to the identity of persons furnishing information to the Competition Commission of Singapore (“CCS”). CCS has also gone one step further to administer a Leniency Programme available to businesses that are part of a cartel agreement. The Leniency Programme allows these businesses to apply to CCS for an immunity or a reduction of up to 100% of the financial penalties where the business gathers and provides CCS with the necessary information and evidence relating to the cartel.

Legislation ensuring that the identity of informers are protected (as in the Prevention of Corruption Act and Competition Act) may be a cautious first step in encouraging individuals possessing highly useful information to come forward. Such individuals are typically officers, employees or parties related to the company with information which they have obtained as a result of their internal position.

The whistleblowers’ internal position also mean that they may require a higher level of encouragement to come forward as whistleblowers may fear possible reprisals from their colleagues or employers upon their disclosure of incriminating information and/or evidence.

A bolder reform Singapore can consider, above simply protecting the identity of informers, may be a leniency programme (not unlike the Leniency Programme administered by CCS) for whistleblowers who participated in the very act or wrongdoing they seek to disclose. This leniency programme will expressly provide whistleblowing as a mitigatory factor where the whistleblower provides information which will allow the police to commence an investigation into a securities offence or add significant value to an on-going investigation.

The advantages of whistleblowing are largely acknowledged and include the facilitation of successful prosecution of offences which are otherwise difficult to detect. Given Singapore’s interest in preserving investor confidence in Singapore as a leading and world-class capital market which requires an effective market enforcement regime able to swiftly and firmly deal with any transgressions, a reform of the whistleblower protection and adoption of a leniency programme in the SFA is timely and progressive.

1 SEC Press Release “SEC Announces Largest-Ever Whistleblower Award”

2 Sentencing Practice in the Subordinate Courts (LexisNexis, 3rd Ed, 2013) at p 149-150

3 SFA, section 218 Id, section 197

5 Id, section 199

6 Id, section 203

7 Singapore Parliamentary Debates (5 October 2001) vol 73 at cols 2127-2128 (BG Lee Hsien Loong, Deputy Prime Minister)

8 Id at cols 2135

9 White House, Wall Street Reform: The Dodd-Frank Act

10 Supra n 1.

11 Paul Latimer, “Whistleblowing in the Financial Services Sector (Part 2)” (2004) 23 University of Tasmania Law Review 176 at p 187

12 Australia Corporations Act 2001 (C2015C00003), section 1317AA

13 Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act (2004) Explanatory Memorandum at para 5.381

14 Id at para 5.386

15 Supra n 11, at 199 and 204

16 CCS, Applying for Leniency

17 CCS, Procedures under the leniency programme

18 Paul Latimer and A J Brown, “Whistleblower Laws: International Best Practice” (2008) 31 UNSWLJ 766 at 775

19 CCS, Eligibility for leniency application

20 Supra n 1; Supra n 16

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