Chapter 7 Adverse Events, Rule Violations and Disciplinary Action

7. Overview of Adverse Events, Rule Violations and Disciplinary Action

The Exchange's enforcement of this Rules is critical to the health of the Markets. This Chapter sets out the various powers available to the Exchange in connection with its obligation to operate a fair, orderly and transparent market. The Exchange's powers range from temporarily restricting Members' activities to referring the matter to the Disciplinary Committee. The Exchange may exercise various powers as set forth below under two (2) main scenarios — (a) upon the occurrence of an Adverse Event; or (b) where there is a Rule Violation by a Member, Approved Trader or Registered Representative. The powers exercisable by the Exchange upon the occurrence of an Adverse Event are designed to deal swiftly with an unforeseen event. Having exercised such powers as set forth in Rule 7.3, the Exchange may thereafter refer the matter to a Disciplinary Committee if it deems fit. In the event of a Rule Violation, the Exchange's powers are limited to the exercise of certain summary powers prior to the matter being referred to the Disciplinary Committee. In proceedings before the Disciplinary Committee, the Exchange lays a charge against the Member, Approved Trader or Registered Representative concerned, and acts as a prosecutor. To assist in determining if any Rule Violation has occurred, the Exchange also conducts inspections and investigations.

7.1 Adverse Events and Rule Violations

7.1.1 Adverse Events

The Exchange may exercise any of the powers set forth in Rule 7.3 if any of the following events occur, which adversely impacts on a Member, Approved Trader or Registered Representative's ability to meet its obligations under this Rules (collectively, "Adverse Events"):

(a) an Emergency;

(b) a Delivery Default;

(c) Force Majeure;

(d) the Clearing House declares an event of default as contemplated in Rule 7A.01A.1 of the Clearing Rules, or a Trigger Event as contemplated in Rule 7A.01C of the Clearing Rules, or in the event that the Connect ceases to operate;

(e) a Member, Approved Trader or Registered Representative is charged before a disciplinary body in any other exchange or regulated market or charged in any court of law in relation to market misconduct;

(f) a Member, Approved Trader or Registered Representative who trades in non-Exchange instruments such as over-the-counter instruments, foreign exchange instruments or other instruments, whether onshore or offshore, suffers an adverse event which impacts on the Member's ability to meet its financial obligations to the Exchange; or

(g) any other event which, in the Exchange's opinion, materially impacts or is likely to materially impact on a Member, Approved Trader or Registered Representative's ability to meet its obligations under this Rules.

Amended on 7 August 2012 7 August 2012 and 29 July 2022.

7.1.2 Rule Violations

All Rule Violations are chargeable before the Disciplinary Committee in accordance with the procedures set forth in this Rules. Rule Violations may also result in the exercise of various powers of the Exchange as set forth in Rule 7.2.

7.1.3 Concurrent Occurrence of Adverse Events and Rule Violations

An Adverse Event and a Rule Violation are not mutually exclusive and both events may occur concurrently such that any of the Exchange's powers set forth in Rules 7.2 and 7.3 may be invoked.

7.1.4 Rule Violation by Approved Trader or Registered Representative to be deemed Rule Violation by Sponsoring Corporate Member

Any Rule Violation by any Approved Trader or Registered Representative shall also be deemed to be a Rule Violation by the sponsoring corporate Member for the purpose of proceedings before the Disciplinary Committee. If an Approved Trader or a Registered Representative suffers an Adverse Event, the sponsoring corporate Member shall be deemed to have suffered an Adverse Event.

7.1.5 Notification Obligation

A Member, Approved Trader or Registered Representative shall immediately notify the Exchange upon the occurrence or threatened occurrence of any Adverse Event or Rule Violation. Upon such notification the Exchange may exercise any of its powers set forth in Rules 7.2 and 7.3 as it deems fit.

7.1.6 Notification of Exercise of Powers by the Exchange

Except as otherwise provided under this Rules, the Exchange shall:

(a) notify MAS or any other relevant regulatory body before it exercises any of its powers in relation to an Emergency; and

(b) notify the Member, Approved Trader or Registered Representative concerned in writing before it exercises any of its powers under this Chapter.

7.1.7 Public Announcement by Exchange

The Exchange shall notify all Members, Approved Traders, Registered Representatives and the general public via Circulars of the outcome of any proceedings before the Disciplinary Committee or Appeals Committee.

7.2 Exchange's Disciplinary Powers

7.2.1 Disciplinary Action

(a) If an investigation or inspection reveals that a Member, Approved Trader or Registered Representative has committed a Rule Violation, the Exchange may take any of the following forms of disciplinary action, namely:

(i) to charge the Member, Approved Trader or Registered Representative before the Disciplinary Committee;

(ii) to make an offer of composition to the Member, Approved Trader or Registered Representative, if the Rule Violation is indicated in the third column of Schedule A as a compoundable Rule Violation; or

(iii) to issue a letter of warning to the Member, Approved Trader or Registered Representative.

(b) If the Member, Approved Trader or Registered Representative does not accept the offer of composition or comply with the terms of the composition within the stipulated time as prescribed by the Exchange, the Exchange may refer the said Member, Approved Trader or Registered Representative to the Disciplinary Committee.

Amended on 16 May 2011 16 May 2011.

7.2.1A Composition by the Exchange.

(a) The Exchange may make an offer of composition to a Member, Approved Trader or Registered Representative who has committed a Rule Violation. The terms of the offer of composition include payment of a specified sum to the Exchange and may include the fulfillment of any accompanying terms that the Exchange may prescribe.

(b) Upon payment of the specified sum and fulfillment of the accompanying terms by the Member, Approved Trader or Registered Representative within the stipulated time, no further proceedings shall be taken against that Member, Approved Trader or Registered Representative for that Rule Violation.

(c) Acceptance of the offer of composition by the Member, Approved Trader or Registered Representative amounts to an admission of liability, and the Member, Approved Trader or Registered Representative will be deemed to have committed the conduct described in the charge.

(d) In respect of Rule Violations which the Exchange may offer composition, guidelines on the range of composition which the Exchange may offer to a Member, Approved Trader or Registered Representative who has committed a Rule Violation are indicated in Schedule A.

(e) The Exchange retains the discretion to offer composition to a Member, Approved Trader or Registered Representative of an amount which is lower or higher than the guidelines, except that the amount of composition that the Exchange may offer shall not exceed S$10,000 for each Rule Violation.

(f) Notwithstanding that a Rule Violation is indicated as being compoundable or may be compoundable under Schedule A, the Exchange retains the discretion not to make an offer of composition to the Member, Approved Trader or Registered Representative and instead, to charge the said Member, Approved Trader or Registered Representative before the Disciplinary Committee.

(g) If the Exchange has made an offer of composition, it will not commence disciplinary proceedings against a Member, Approved Trader or Registered Representative until after the stipulated period for the offer lapses.

For the purposes of determining whether a Rule Violation is classified as a first, second, third or subsequent offence under Schedule A, only previous violations under the same Rule will be taken into consideration.

Added on 16 May 2011 16 May 2011.

7.2.2 Investigative Powers

In determining whether to lay a charge before the Disciplinary Committee or to make an offer of composition, the Exchange may, without notification to any Member, Approved Trader or Registered Representative, commence investigations in accordance with Rule 7.4.

Amended on 16 May 2011 16 May 2011.

7.2.3 Restriction and Supervision of Member's Conduct of Business

(1) Subject to Rule 7.2.3(2) and in addition to the Exchange's summary powers set forth in Rule 2.15.2, if the Exchange is of the opinion that a Member has, or may have, insufficient assets or liquidity facilities for the conduct of its business, or that a review should be carried out in respect of the management policies or business conduct of a Member, the Exchange may require the Member to operate its business subject to such additional restrictions or conditions as the Exchange may impose, including:

(a) prohibiting the Member and its Approved Traders or Registered Representatives from entering into a new transaction or settling any transaction without the prior written approval of the Exchange;

(b) suspending the Member and its Approved Traders or Registered Representatives. Such Member and its Approved Traders or Registered Representatives remain liable to complete all Contracts outstanding at the time of suspension;

(c) requiring the Member's director(s) to step down from day-to-day conduct of the business affairs of the Member; and

(d) appointing a manager to manage the business of the Member. The Exchange shall fix the remuneration of the manager, which shall be paid by the Member. The Member is solely responsible for the manager's acts and defaults. The manager shall carry out directions given by the Exchange in relation to the conduct of the Member's business.

(2) Rule 7.2.3(1) shall only apply to a Bank Trading Member to the extent of its business that is governed by this Rules.

Amended on 25 August 2009 25 August 2009.

7.2.4 Restriction of Activities of Members, Approved Traders or Registered Representatives

(1) Subject to Rule 7.2.4(2), the Exchange may restrict the activities of any Member or its Approved Traders or Registered Representatives if the Member or its Approved Traders or Registered Representatives are charged before the Disciplinary Committee for any Rule Violation, or charged in any court of law in relation to conduct which would constitute:

(a) an offence under the Act or relevant applicable laws and regulatory requirements relating to the regulation or business conduct of markets and licenced entities;

(b) an offence involving fraud or dishonesty, whether in or out of Singapore;

(c) an offence relating to director's duties; or

(d) an offence under any relevant law or regulation which governs that Person's other business activities.

(2) Rule 7.2.4(1) shall only apply in relation to a Bank Trading Member to the extent of its Business Governed by this Rules.

Amended on 25 August 2009 25 August 2009 and 1 April 2014 1 April 2014.

7.2.5 Referral to Disciplinary Committee

If the Exchange suspends the privileges of a Member, Approved Trader or Registered Representative as contemplated in Rules 2.13.7, 2.14.3 or 2.15.2, or exercises any of the powers set forth in Rules 7.2.3 and 7.2.4, the Exchange shall refer the matter to the Disciplinary Committee within fourteen (14) calendar days of such action (the "Summary Referral"). The Summary Referral shall contain an account of (a) the Exchange's exercise of the summary powers; and (b) the grounds for taking action against the Member, Approved Trader or Registered Representative. The Exchange shall provide the Member, Approved Trader or Registered Representative with a copy of the Summary Referral at the same time that such document is provided to the Disciplinary Committee. The Summary Referral shall constitute a notice of charge as contemplated under Rule 7.7.2.

7.3 Exchange's Powers upon Occurrence of Adverse Events

Unless otherwise specified in this Rules, upon the occurrence of any Adverse Event, the Exchange may exercise any of the following powers as it deems fit:

7.3.1 Liquidation of Positions

The Exchange may limit trading to liquidation of positions only or order liquidation of all or a portion of the positions in a Member's House Account or Customer Account or both.

7.3.2 Fix Settlement Price

The Exchange may fix a settlement price for the liquidation of positions in any Contract, including a Connect Contract.

Amended on 29 July 2022.

7.3.3 Call for Additional Margins

The Exchange may require additional margins to be deposited with the Clearing House for any Contract, including a Connect Contract.

Amended on 29 July 2022.

7.3.4 Confine or Limit Trading

The Exchange may confine trading of any Contract to a specific price range or modify Trading Days or hours.

7.3.5 Alter Delivery Conditions

The Exchange may defer delivery or designate alternative delivery points or procedures or alter conditions of delivery with respect to deliverable Futures Contracts.

7.3.6 Call on Trading Member's Letter of Credit

If a Trading Member's act or omission results in a Clearing Member defaulting under Rule 7A.01A.1 of the Clearing Rules, the Exchange or the Clearing House, as the case may be, reserves the right to call on any of the Qualifying Letters of Credit posted by the Trading Member to meet its financial requirements set forth in Rule 2.5, and apply the proceeds toward the discharge of liabilities incurred by the Clearing Member to the Clearing House.

Amended on 7 August 2012 7 August 2012 and 29 December 2014 29 December 2014.

7.3.7 Other Actions as Deemed Fit

The Exchange may take such other actions against any Member, Approved Trader or Registered Representative as it deems fit to discharge its regulatory obligations under the Act to maintain a fair, orderly and transparent market.

7.3.8 No Liability

Without prejudice to the generality of Chapter 1, the Exchange, its related corporations, SGX RegCo, any person or entity referred to under Rule 1.7.4, and their respective directors, officers, employees, representatives and agents shall not be liable to any Trading Member or any other Person in respect of any damage, loss, cost or expense of whatsoever nature (whether direct, indirect, special or consequential, including without limitation any loss of business, revenue, goodwill, bargain or profit), suffered or incurred by such Trading Member or other Person, arising out of or in connection with, or arising out of or in connection with any thing done or not done as a direct or indirect consequence of, the exercise or non-exercise of the powers under Rule 7.3 or the determination of the satisfaction or non-satisfaction of any condition for the exercise of such powers.

Amended on 26 April 2013 26 April 2013, 15 September 2017 15 September 2017 and 3 June 2019 3 June 2019.

7.4 Investigations by the Exchange

7.4.1 Commencement of Investigations

The Exchange may conduct an investigation if:

(a) the Exchange is satisfied that any Rule Violation or violation of any other relevant applicable laws and regulatory requirements relating to the regulation of markets and licenced entities has been, or may have been committed;

(b) the Exchange receives a complaint involving any Member, Approved Trader or Registered Representative or any Member's director, officer, employee or agent;

(c) there is a dispute between Members, Approved Traders or Registered Representatives in connection with trading on any market; or

(d) in the Exchange's opinion, having regard to its obligation to maintain a fair, orderly and transparent market, the circumstances warrant an investigation.

Amended on 1 April 2014 1 April 2014.

7.4.2 Direction to Commence Investigation by MAS

The Exchange shall conduct an investigation if MAS so directs.

7.4.3 Requirement to Cooperate with Investigations

The Exchange may direct a Member, Approved Trader, Registered Representative or any Member's director, officer, employee or agent to:

(a) render all assistance as the Exchange requires, at the Exchange's premises or elsewhere; and

(b) provide the Exchange with information, books and records which, in the Exchange's opinion, may be relevant to the investigation,

and that Person shall comply with the Exchange's direction.

7.4.4 Prohibition Against the Furnishing of False Statements or Information to the Exchange

A Member, Approved Trader, Registered Representative, or any Member's director, officer, employee or agent shall not wilfully make, furnish or permit the making or furnishing of any false or misleading information, statement or report to the Exchange.

7.4.5 Appointment of Exchange Examiners

The Exchange may appoint any Person or Persons to assist in its investigation (the "Exchange Examiners"). The Exchange may delegate all or any of its powers under this Rule 7.4.5 to the Exchange Examiners. The Exchange Examiners shall report the results of their investigations to the Exchange.

7.4.6 Supply of Information

The Exchange may direct a Member, Approved Trader or Registered Representative to provide specified information relating to Members' Affairs, transactions relating to Customers and former Customers, and matters pertaining to any contract. Such direction shall be in writing and the Member, Approved Trader or Registered Representative shall provide the information to the Exchange within such period as is specified by the Exchange, being a period of not less than two (2) Business Days after receipt of the Exchange's direction. Information provided to the Exchange under this Rule shall be treated as Confidential Information and subject to the safeguards set forth in Rule 1.4.

7.5 Disciplinary Committee

Amended on 3 June 2019 3 June 2019.

7.5.1 Composition of Disciplinary Committee

The Disciplinary Committee shall comprise persons appointed by the SGX RegCo Board and shall not have a member who is, or who within three years of the proposed appointment date was, a director, officer or employee of:

(a) Singapore Exchange Limited; or

(b) any of Singapore Exchange Limited's Related Corporations.

Amended on 15 September 2017 15 September 2017 and 3 June 2019 3 June 2019.

7.5.2 Chairman and Deputy Chairman of the Disciplinary Committee

The SGX RegCo Board shall appoint the chairman and deputy chairman of the Disciplinary Committee. In the absence of the chairman, the deputy chairman will have all the powers of the chairman.

Amended on 15 September 2017 15 September 2017 and 3 June 2019 3 June 2019.