Fostering a Sound and Reputable Financial Centre

Enhancing Safeguards for Retail Customers

In March 2009, MAS issued a Consultation Paper on the Review of the Regulatory Regime Governing the Sale and Marketing of Unlisted Investment Products. MAS subsequently issued a second Consultation Paper on the Regulatory Regime for Listed and Unlisted Investment Products in January 2010, with revised proposals to enhance safeguards for retail customers in relation to listed and unlisted investment products.

Under the revised proposals, MAS will impose an obligation on financial advisers and brokers to assess a retail customer’s investment knowledge or experience before selling investment products to the customer. Customers who do not have the relevant knowledge or experience in specific unlisted investment products must be given financial advice before purchasing the products. For listed investment products, additional safeguards will be required of brokers when approving trading accounts for customers who lack the relevant knowledge or experience in derivatives.

Some other key initiatives that MAS will undertake include the introduction of a new Capital Markets and Financial Advisory Services examination module for product knowledge about certain investment products. Representatives of intermediaries intending to sell such products will be required to pass this examination module. MAS will also require issuers of all debentures (in the form of asset-backed securities and structured notes), collective investment schemes and subfunds of investment-linked life insurance policies to prepare Product Highlights Sheets that clearly disclose key features and risks of products to investors.

MAS will be implementing the proposals through legislative amendments to the Securities and Futures Act, the Financial Advisers Act, and relevant regulations, notices and guidelines.