Three Arrows Capital’s senior execs get 9-year ban from MAS following regulatory violations

In June 2022, it was reported that Singapore-based Three Arrows Capital failed to pay its debts so it had to undergo liquidation.

Later in January 2023, the founders of Three Arrows Capital resurfaced, seeking US$25 million to fund its new venture called GTX.

Now, Three Arrows Capital is back on the hot seat again as the Monetary Authority of Singapore (MAS) has imposed nine-year prohibition orders (POs) against its former senior executives Zhu Su and Kyle Livingston Davies, for multiple violations of the Securities and Futures Act 2001 (SFA) and Securities and Futures (Licensing and Conduct of Business) Regulations (SFR).

This stern action by MAS comes as a result of a series of regulatory breaches committed by Three Arrows Capital and its top management.

The POs, which came into effect on September 13, 2023, bar Zhu and Davies from engaging in any regulated activity and prohibit them from participating in the management, directorship, or substantial shareholding of any capital market services firm governed by the SFA.

MAS uncovered more violations

MAS initiated its investigation into Three Arrows Capital after reprimanding the firm in June 2022 for several infractions, including providing false information to MAS, failing to report changes in directorship and shareholdings, and exceeding the permissible assets under management threshold for a registered fund management company.

Further inquiries by MAS revealed additional violations of the SFA and SFR committed by Three Arrows Capital between August 2020 and January 2022.

Firstly, Three Arrows Capital failed to notify MAS of employment of representative. During the period from August 2020 to September 2021, TACPL employed Cheong Jun Yoong Arthur as a portfolio manager without timely notification to MAS, contravening SFR requirements.

Secondly, Three Arrows Capital provided false information to MAS. In January 2022, TACPL inaccurately informed MAS that Cheong had not conducted regulated activities during his tenure. In reality, Cheong had engaged in fund management activities for TACPL between August 2020 and September 2021.

Lastly, Three Arrows Capital failed to implement adequate risk management framework. TACPL neglected to establish an appropriate risk management framework to identify, monitor, and address risks associated with its cryptocurrency and digital asset investments, as required under the regulations.

Zhu, the CEO and Director of Three Arrows Capital, and Davies, the Chairman and Director, were held responsible for the company’s regulatory breaches as its top executives. MAS’ investigation concluded that they had failed in their duty to ensure Three Arrows Capital’s compliance with regulatory obligations, leading to the imposition of the nine-year POs.

Loo Siew Yee, Assistant Managing Director (Policy, Payments & Financial Crime) of MAS, expressed the seriousness with which MAS views such misconduct by senior management in fund management firms.

“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 Zhu’s and 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,” she said.

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