Response to "Do Away With Switching Fees" (Streats, 1 November 2004)
I refer to the letter 'Do away with switching fees' (Streats, 1 Nov 04).
2 MAS does not interfere in commercial decisions by fund managers. It is neither practicable nor desirable for MAS to prescribe the terms and conditions, including fees, that govern commercial transactions. To do so would inhibit enterprise and restrict choices.
3 Instead, our regulatory framework aims to safeguard the interest of consumers by emphasizing timely disclosure of all relevant information and sound business conduct standards.
4 Under the Securities and Futures Act, all fees for investing in unit trusts, including switching fees, must be disclosed in offering documents. In addition, the Financial Advisers Act (FAA) requires financial advisers to only recommend investment products that are suitable for consumers. It is an offence under the FAA for a financial adviser or its representatives to engage in switching activities that are detrimental to the interest of consumers.
5 MAS' recently issued guidelines on the switching of designated investment products provide direction to financial advisers on the controls, processes and procedures that should be in place to monitor and deter undesirable switching activities. We have also published a consumer alert explaining what switching is and what consumers can do to protect their interests. The alert is available on the MAS consumer website.
6 Investors should consider carefully whether the costs associated with a switch would outweigh any potential benefits.