SINGAPORE — Several Members of Parliament from the Workers’ Party (WP) have filed parliamentary questions (PQs) surrounding the Singapore Sovereign Wealth Funds (SWFs) for the upcoming Parliamentary sitting on 28 November, in light of the writing down of Temasek Holdings’ US$275 million into bankrupted cryptocurrency exchange FTX.

Mr Leon Perera, MP for Aljunied GRC is asking if the Government will consider creating a bipartisan Standing Select Committee of Parliament that meets regularly to question the boards of the GIC and Temasek on their performance, strategies, and risk management approaches, on a confidential basis.

This is given that the Government does not direct the two SWFs over their individual investment decisions but holds their boards accountable for their performance.

Mr Perera is also asking if the Government will consider adding the two SWFs which are Fifth Schedule entities to the audit ambit of the Auditor-General’s Office and oversight by the Public Accounts Committee, on the condition that commercially sensitive elements in any audit report be made available to legislators but redacted from published reports.

Fifth Schedule entities refer to key statutory boards and Government companies that are listed in the Fifth Schedule under the Singapore Constitution.

Examples of Fifth Schedule entities are the Central Provident Fund (CPF) Board, Monetary Authority of Singapore (MAS), Housing Development Board (HDB), GIC and Temasek Holdings.

Mr Gerald Giam, MP for Aljunied GRC is asking if there are guidelines or restrictions on statutory boards and entities listed in the Fifth Schedule with regard to investing in cryptocurrency-related assets.

If so, he asks what are those guidelines or restrictions; and whether all statutory boards and scheduled entities have fully adhered to those guidelines.

Associate Professor Jamus Lim, MP for Seng Kang GRC is asking whether the Ministry of Finance (MOF) tracks the extent of concentration of investments by the two SWFs’ investment vehicles either by geography or asset class and whether there are thresholds that trigger warnings of excessive portfolio risks to the Ministry.

He also asks whether MOF issues guidelines to the two SWFs on acceptable limits for exposure to different asset classes, including alternative assets such as cryptocurrency and cryptocurrency exchanges, given their distinct investment and development mandates.

On top of these, Asst Prof Lim further asks if similar suggestions to that of MAS’s proposed measures to reduce cryptocurrency trading risks, have been promulgated to government-related investment entities, such as the two SWFs.

Posting on his Facebook page, Asst Prof Lim commented (https://www.facebook.com/jamusjlim/posts/pfbid029MqSsY 4XsnKMzRBjdRuzjoNx6AsqvnFZUQsE7dBHNn71vwjosNYgqQ qt1wYXj8uHl? __cft__[0]=AZWT3N9Uc4Qz06obd_MLnmypLNZ8LZNJXCbqnA R4_- II3y8bDo1GO5eG1TiAYOV8e0gUumefWZe90LHpjAT9NXybtrQ_lK0rtRhlVJ-WU2tB_-1t2v3wBb5rlfMuIXk5-dBF1- KAR_RtAVpI5HFCmSn&__tn__=%2CO%2CP-R) that the collapse of the FTX has resulted in a severe loss for Temasek, which took significant exposure to the cryptocurrency exchange.

He noted that MPs have historically been limited in how they are able to pose PQs regarding investments by Singapore’s SWFs.

“In general, we’ve been told by the clerks that such queries must respect standing order 19(1), which states that questions have to fall within ministers’ official functions to be admissible; since the government has repeatedly insisted that both GIC and Temasek operate independently from the government, questions about the plans, processes, and targets of GIC/Temasek cannot be entertained.” wrote Asst Prof Lim.

However, given the importance of the questions for the public interest, Asst Prof Lim wrote that WP felt it was important to pose some questions on the episode while respecting the limitations of what they are able to credibly ask via PQs.

Temasek’s investment into bankrupted cryptocurrency exchange

Temasek issued a statement (https://www.temasek.com.sg/en/news-and-resources/newsroom/statements/2022/statement-FTX) last Thursday (17 Nov) to announce that it will be writing down its US$275 million into the cryptocurrency exchange FTX in light of FTX’s bankruptcy filing.

The SWF noted that the thesis for its investment in FTX was to invest in a leading digital asset exchange providing it with protocol agnostic and market neutral exposure to crypto markets with a fee income model and no trading or balance sheet risk.

It added that its due diligence efforts were focused on the associated regulatory risk with crypto financial market service providers, particularly licensing and regulatory compliance (i.e. financial regulations, licensing, anti-money laundering (AML)/ Know Your Customer (KYC), sanctions) and cybersecurity.

“We recognise that while our due diligence processes may mitigate certain risks, it is not practicable to eliminate all risks.” said Temasek.

Temasek defended its investment into FTX by saying, “Our investment discipline, centred around intrinsic value and our risk-return framework, guides our due diligence for new investments and ongoing engagement with our investee companies.

“We do recognise the inherent risks of investing in early stage companies and take a very measured approach to such investments by applying an illiquidity risk premium on the cost of capital,” it added. “In addition, we also add on a venture risk premium for the early stage they are in.”

However, in light of the new FTX CEO’s findings and assessment (https://www.theonlinecitizen.com/2022/11/19/ftxs-new-ceofinds-a-slew-of-corporate-controls-failures-lack-of-trustworthyfinancial-information-but-temasek-found-none-in-8-mths/) of FTX’s former management, many have wondered how Temasek went about its due diligence process before investing US$275 million into the company.

Source: https://www.theonlinecitizen.com/2022/11/22/workers-party-mps-file-parliamentary-questions-on-swfs-as-temasek-write-down-of-its-275m-investment-into-ftx/