MAS' investor alert list (IAL) – What happens to the companies after they get on the list?

by Lim Hui Ming (Division Head, Alternative Wealth Management, CoAssets) & Ngoi Weng Kit (Marketing Executive)
As an online funding platform licensed by the Monetary Authority of Singapore (MAS), we constantly keep a keen eye on developments in the Singapore funding market. As a platform, we at CoAssets, frequently come across companies that try to raise funds directly from members of the public. While most of them do it legally, occasionally see some who do it in a less than compliant manner.
Whenever investors ask us whether a potential deal is good, the first thing we will ask them to do is to check the MAS’s Investor Alert List (IAL). The IAL is a list of unregulated persons who, based on information received by MAS, may have been wrongly perceived as being licensed or regulated by MAS. The list is not exhaustive and is updated regularly by the regulators.
While MAS does not assert that the companies on the IAL are dubious, the question some investors may have is what happens to companies on the list? How many of them continue to operate and how many have stopped operation?
To help answer some of these questions, we conducted some research to find out more. At this point, we wish to highlight that the data for this article is based on information extracted from MAS’s website in May 2019. This article is not meant to be conclusive and it is written to provide readers with some of our observations.
Observation 1: Overseas companies VS Local companies – equal treatment by the regulator
Based on data downloaded in May 2019, we found that there was a total of 477 companies on the IAL. 242 of the companies were locally registered while 235 were incorporated overseas. – this works out to be about an equal distribution of local and overseas companies. From this information, it tells us that the regulator is equally stringent when it comes to overseas companies that come to Singapore to conduct regulated financial activities.
This is understandable as MAS’s main focus is to protect Singaporean investors. Hence, as long as companies, whether overseas or locally incorporated, try to raise funds in Singapore, they will be subjected to the same regulatory framework.
Observation 2: Locally incorporated companies on the IAL
With reference to the 242 local companies, a search was done with the Accounting and Corporate Regulatory Authority (ACRA). As at May 2019, 52 companies on the list was active and 190 companies had ceased operations – this works out to be a winding-up rate of 78.5%. It is worth noting that the winding-up rate may potentially be higher – this is because some of the 52 active companies may not currently have operations or maybe in the process of being wound up.
Simplistically speaking, the figures seem to imply that investors who invest in companies on the IAL have a 78.5% chance of seeing the company cease operations. Depending on when they invest and the terms of the investments, it indicates a high likelihood that most investors would not be able to get their money from an IAL company back.
It is also interesting to observe that quite a number of companies listed on the IAL were not operating in accordance with what was registered with ACRA. To provide an anecdotal example, there was a local IAL company that dealt with cryptocurrency transactions but was registered as a firm that was in the ‘Development of Web Portals’. Thus, some investors may want to use such inconsistency as a potential “red flag”.
Observation 3: Foreign incorporated companies on IAL
Out of the 225 overseas companies, a similar search was done and we found that 182 of them were inactive. This works out to be a winding-up rate of 81.0% – which is comparable to the local figures of 78.5%. In terms of foreign incorporate companies, some of them were found to have licenses to operate in their home countries. Importantly, this means that not all financial licenses issued by overseas regulators are fungible and accepted by MAS. Therefore, investors may wish to be careful when they deal with companies that claim to be regulated abroad and check if they are licensed to conduct regulated financial activities in Singapore as well.
Observation 4: Spike in IAL companies in 2016 and 2017
Out of the total of 477 companies, we were able to deduce the date of listing for 329 and there was insufficient data to make a determination for the remaining 148 firms. Based on the 329 companies, as per Figure 1, there appears to be a spike of companies being added onto the IAL in 2016 and 2017.

Coincidentally, it was around this time when the MAS, Securities Investors Association and national financial education programme MoneySENSE ran the “Santa Quay” campaign where a fictional investment property scheme was used as a way to educate investors of potential scams.
Putting things in the correct perspective, readers may wish to note that MAS mainly relies on public feedback to identify companies that conduct unlicensed financial activities. A company would only be put on the IAL after MAS has conducted a thorough investigation and sufficient documentary evidence was collected. Thus the spike in 2016 and 2017 seems to suggest that the media outreach during that period was effective, as more investors were becoming aware and the whistle blew on suspicious companies.
Conclusion
While the IAL is definitely a very useful resource to help investors identify potential “bad actors” in the fundraising and alternative investment space, the list is by no means exhaustive. Investors are strongly encouraged to conduct their own due diligence to understand the company and the product before making an investment.
Apart from checking the IAL, investors may also want to check if the company is licensed by MAS for its regulated activities. In addition, investors may want to understand how the companies/products generate their returns and the various risks associated with the investment. Lastly, investors should also look at protection or recourse in the unfortunate event of investment failure.
While following these simple guidelines does not mean that investors will always be successful in their investment, at the very least, it should considerably lower the likelihood (and heartache) of a bad investment.