Annual Report 2001/2002

Improved Conduct Practices for Financial Institutions

The Committee on Efficient Distribution of Life Insurance (CEDLI) was a private sector-led committee appointed by MAS in March 2000 to propose changes to raise standards, transparency and efficiency in the distribution of life insurance products. The CEDLI recommendations were jointly implemented by the Life Insurance Association of Singapore and MAS’ Insurance Department. Following the implementation of CEDLI’s recommendations on the needs-based sales process and training and competency requirements in January 2001 and April 2001, CEDLI’s recommendations on disclosure of distribution costs, charges and expenses were implemented in July 2001. In light of the enhanced disclosure requirements, MAS responded with the lifting of agency costs and commission limits with effect from January 2002.

The Committee on Enhancement of Standards in General Insurance was formed in August 2001. Private sector players from the general insurance industry embarked on a major review of industry practices. Comprising representatives from General Insurance Association of Singapore (GIAS), Singapore Insurance Brokers’ Association, and MAS, the Committee aims to better serve consumers in terms of service and protection by raising business practice standards in the general insurance industry through greater transparency and disclosure, higher standards of professionalism, and better efficiency and business processes. Two work groups were recently formed to operationalise the recommendations resulting from the first phase of the Committee’s work. The first work group will develop a Code of Practice that represents the minimum sales and customer service standards that general insurance players must adhere to. The second work group will formulate a set of training and competency standards for insurance companies’ staff and intermediaries who have contact with the customers.

The GIAS formed the Motor Insurance Task Force (MITF) to review the practices and conduct of the motor insurance industry in Singapore. The objective of MITF was to recommend a set of international best practice on sales and service standards for motor insurers in Singapore with the purpose of providing an enhanced level of service and dis-closure to the consumers. The MITF issued its final report in July 2001 with recommendations with respect to pricing methodology, claims cost management, disclosure, distribution, professional standards, consumer education and service standards. The GIAS has formed two committees to attend to the implementation of these recommendations. The recommendations are expected to be in place by the end of 2002.

In June 2001, MAS issued guidelines for the offer of hedge funds to the general public. To offer hedge funds to the public, managers must have the requisite expertise and the minimum subscription of $100,000 per investor. MAS will be reviewing the minimum subscription requirement for fund-of-funds as opposed to single hedge funds.

MAS specified a maximum period within which managers must pay out redemption proceeds to investors. In line with the practice in some established markets, MAS disallowed the charging of marketing and promotion expenses to unit trust funds. Advertising of funds can continue provided the costs are defrayed from the management fees of managers. Regulations for the offer of collective investment schemes to sophisticated investors were also released. To offer such schemes, offerors must apply to MAS. Offerors must satisfy MAS that the manager of the scheme is licensed in its home jurisdiction and is fit and proper.

[The Financial Sector] [Regulatory Initiatives] [Legislative Changes] [Financial Advisers Act] [Risk-Based Regulation] [Supervisory Initiatives] [Depositor Protection] [Corporate Governance and Disclosure] [Developing The Disclosure Regime] [Prudential Guidelines for Financial Institutions] [Improved Conduct Practices]

[Regulatory Initiatives] [Developmental Initiatives] [Market Infrastructure]

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