Guidelines on Fair Dealing – Quick Guide for Consumers
Introduction
On 3 April 2009, MAS issued the Guidelines on Fair Dealing – Board and Senior Management Responsibilities for Delivering Fair Dealing Outcomes to Customers (“Guidelines on Fair Dealing”) to promote fair dealing by financial institutions when they conduct business with their customers.
The Guidelines on Fair Dealing emphasised the responsibilities of the Board and Senior Management of financial institutions to deliver fair dealing outcomes when providing financial advisory services to customers.
This quick guide provides an overview of the outcomes the Guidelines on Fair Dealing seek to achieve, what you should look out for when dealing with financial institutions, and what you can do if you have a problem with a financial institution.
Q1: How do the Guidelines on Fair Dealing affect me?
The Guidelines on Fair Dealing aim to achieve the following five fair dealing outcomes:
- Customers have confidence that they deal with financial institutions where fair dealing is central to the corporate culture.
- Financial institutions offer products and services that are suitable for their target customer segments.
- Financial institutions have competent representatives who provide customers with quality advice and appropriate recommendations.
- Customers receive clear, relevant and timely information to make informed financial decisions.
- Financial institutions handle customer complaints in an independent, effective and prompt manner.
There is a deliberate focus on outcomes in the Guidelines on Fair Dealing as customers are concerned about their experiences when dealing with financial institutions, and whether the investment products and services they buy provide real value.
Q2: Were financial institutions not expected to deal fairly with consumers previously?
The Guidelines on Fair Dealing supplement the Financial Advisers Act (“FAA”) in improving fair dealing standards across the financial advisory industry. They are not intended to supersede or replace existing legal requirements in the FAA. The requirement for fair dealing is not new as there are existing provisions as well as various notices and guidelines under the FAA that support this supervisory objective.
The Guidelines on Fair Dealing call for financial institutions to move beyond mere compliance with rules on processes prescribed under the FAA by placing emphasis on achieving fair dealing outcomes for customers. They seek to inculcate a culture of fair dealing throughout the financial institution. They are about a cultural shift in the way in which the financial institution conducts its business and relationships with its customers. This cultural shift requires committed leadership by the Board and Senior Management.
Q3: How would the issuance of the Guidelines on Fair Dealing affect MAS’ supervision of financial institutions?
The five fair dealing outcomes provide clear benchmarks for MAS and the industry for assessing the success of financial institutions in promoting good market conduct practices.
MAS will consider the financial institutions’ ability or failure to observe the Guidelines on Fair Dealing in our overall supervision of the institutions.
If MAS detects breaches of its laws or regulations, MAS will take appropriate regulatory actions. In accordance with MAS’ normal practice, there is a due process to be followed. MAS does not comment on ongoing investigations or dealings with financial institutions. When MAS takes formal market conduct regulatory actions, this information is published on MAS’ website.
Q4: What should I look out for when dealing with financial institutions before I purchase an investment product?
i. Ask questions and understand the product recommended to you and why it is suitable for you. Find out what the benefits and risks are. Click here for a list of questions you should ask yourself and the person recommending a product to you. Take time to shop around for, and compare other products that offer similar benefits and risks.
ii. Look out for warnings that indicate that a product may be complex or that you may lose some or your entire investment amount. Do not buy the product if you do not fully understand the product or are not comfortable with the risks.
iii. Be careful of verbal promises and guarantees of high returns. Remember that if something sounds too good to be true, it probably is. Understand the risk-reward characteristics of that particular product. Ask the financial institution or its representative to refer you to the relevant clauses in the product documents that describes the verbal representations made.
iv. Ask the financial institution or its representative to indicate how your investment could be affected in various scenarios, especially in the worst possible case. For example, find out the conditions that could affect your investment returns or cause you to lose all or part of your investment principal. In the case of life insurance plans, do find out the exclusions and conditions that could result in a claim not being payable.
v. Find out where you can get timely updates on the product and its prevailing value. Do also find out the avenues for providing feedback, lodging complaints and how the financial institution ensures that all complaints are handled independently, effectively and promptly.
vi. Ask the financial institution to explain the measures it has put in place to achieve the five fair dealing outcomes. For instance, you can ask the financial institution to explain how its remuneration structure aligns your interests with their interests, what checks have been conducted to ensure that investment products are only marketed to suitable customer segments, and how the financial institution ensures that its representatives are properly trained to provide quality advice to customers.
vii. Remember that you have every right to decide not to purchase a product. Even though financial institutions need to have a reasonable basis when recommending an investment product to you, you too need to consider the advice and recommendation carefully. Do not be induced by gifts or discounts, or be pressured to make a purchase decision. Say “No” if you do not fully understand the product, disagree with the advice provided, or have doubts about the product or your dealings with the financial institution.
Q5: How can I seek redress if I feel that a financial institution has failed to deliver the fair dealing outcomes?
You should first approach the financial institution concerned. This gives the financial institution the opportunity to obtain relevant information, make an assessment of the matter and explain itself. MAS expects financial institutions to have a robust process to handle customers’ complaints independently, effectively and promptly.
If you are not satisfied with the financial institution’s reply, you may wish to approach the Financial Industry Disputes Resolution Centre (“FIDReC”). FIDReC is an independent institution which aims to provide consumers with a one-stop avenue for resolving disputes in the banking, insurance and capital market sectors. Among FIDReC’s Adjudicators are retired judges, senior counsel, lawyers and retired industry professionals. Where possible, FIDReC will give you an assessment of your case and mediate to resolve your dispute as an alternative to legal recourse. If you are not satisfied at the outcome at FIDReC or find that your case cannot be handled at FIDReC, you may wish to consider other options for recourse, including seeking legal advice.
If you are of the view that a particular financial institution does not operate with a culture of fair dealing, you should choose to take your business to other financial institutions that do promote a culture of fair dealing. This is the most effective way to create market discipline for financial institutions to focus on and demonstrate a strong commitment to fair dealing.
Click here for more information on what you can do if you have a problem with a financial institution.
Q6: Will MAS be issuing other guidelines or legislation to ensure that the FIs operate fairly?
On 12 March 2009, MAS published the Consultation Paper on Review of the Regulatory Regime Governing the Sale and Marketing of Unlisted Investment Products for public feedback. The consultation period ends on 23 April 2009. The consultation paper sets out proposals to enhance the current regulatory regime to enable MAS to better achieve its supervisory objectives. The proposals aim to further safeguard consumers’ interests and promote higher industry standards for the sale and marketing of unlisted investment products. The proposals are intended to reinforce the five fair dealing outcomes set out in the Guidelines on Fair Dealing.
MAS will update the Guidelines on Fair Dealing, where appropriate, to incorporate feedback and comments received from the public on the consultation paper published on 12 March 2009, its reviews of the systems and processes of financial institutions, along with developments in other jurisdictions.
In MAS’ regular review of the regulatory regime and relevant legislation, MAS will continue to seek the views of market practitioners, industry associations, as well as of the Consumers Association of Singapore and the Securities Investors Association (Singapore).
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