MAS Enhances Regulatory Safeguards for Investors
Singapore, 22 September 2015… The Monetary Authority of Singapore (MAS) will proceed with enhancements to its regulatory framework for safeguarding investors’ interests, taking into account feedback received on its consultation paper published on 21 July 20141. The key changes are as follows:
- Retail investors in non-conventional investment products will be accorded the same regulatory safeguards as investors in capital markets products.
- Investors who meet prescribed wealth or income thresholds to qualify as accredited investors (AIs)2 will have the option to benefit from the full range of regulatory safeguards that are applicable for retail investors.
2 Amendments to the Securities and Futures Act (“SFA”) to implement these changes will be tabled in Parliament in 2016.
Stronger safeguards for investors in non-conventional investment products
3 MAS will extend its capital markets regulatory framework to non-conventional investment products that share features similar to capital markets products. These are currently not subject to MAS’ regulations. In future, such non-conventional investment products will be regulated either as debentures or investment funds, depending on their features:
I. Precious metals buy-back arrangements which involve the sale of precious metals with guaranteed buy-back at an agreed price. Such arrangements are equivalent to collateralised borrowing and will be regulated as debentures under the Securities and Futures Act (“SFA”). The scope will be limited to arrangements involving gold, silver and platinum, as these are widely regarded as financial assets and are commonly used as collateral for such arrangements.
II. Collectively-managed investment schemes which are in substance similar to traditional regulated investment funds but do not pool investors’ contributions. Such schemes will be regulated as Collective Investment Schemes under the SFA. Schemes intended for retail investors will require authorisation from MAS and be restricted to investments in securities or other assets that are liquid (e.g. precious metals), or have stable income-generating ability (e.g. completed real estate).
4 Arrangements that exist before the legislative changes will not be affected, unless additional funds are raised from retail investors after the new laws are in place.
5 In considering any investment schemes, investors are encouraged to check the MAS website for the list of MAS-registered prospectuses, MAS-authorised retail investment funds3 and MAS-regulated financial institutions4. Investors can also find more information on assessing investment opportunities, and conducting checks on entities which they intend to deal with, through the consumer alerts published by MoneySENSE5, the national financial education programme.
Option for AIs to benefit from full range of safeguards applicable to retail investors
6 Under the current regulatory regime, investors who meet prescribed wealth or income thresholds are classified as AIs by default. They are accorded a lower level of regulatory protection as they are considered to be better able to protect their own interests. This may not be true for all investors who meet the prescribed wealth or income thresholds.
7 MAS will refine the regulatory regime to empower AI-eligible investors to choose the level of regulatory safeguards best suited to their individual circumstances:
- Financial institutions (FIs) will have to treat new customers who are AI-eligible as retail investors by default, unless the customers choose to “opt-in” to AI status.
- FIs can continue to treat existing customers who are AI-eligible as AIs, unless the customers choose to “opt-out” of AI status to benefit from the full range of capital markets regulatory safeguards available to retail investors.
AI-eligible customers who choose to “opt-in” to, or retain their, AI-status may be those that are willing to forgo the benefits of stronger regulatory safeguards available to retail investors, in return for the ability to more easily access a wider range of complex and risky products.
8 Mr Lee Boon Ngiap, Assistant Managing Director, Capital Markets, MAS, said, “The measures will strengthen regulatory safeguards for retail investors. Regulatory safeguards, however, are not a substitute for investor responsibility. All investments carry risk, so investors should buy only products that they understand and have a level of risk that they are comfortable with. In addition to seeking advice from regulated financial advisers, we encourage investors to visit the MoneySENSE website, which has a wealth of financial educational information to help investors manage their money and better understand financial products.”
9 Details of MAS’ response to feedback received on the above proposals can be found here. MAS is still reviewing feedback on the remaining proposal to introduce a complexity-risk ratings framework for investment products and will issue a separate public response later.