New legislation to be enacted for Financial Advisers
7 July 2000, Singapore. The Monetary Authority of Singapore (MAS) announced today its intention to streamline the regulation of financial advisers. The announcement was made a day after MAS disclosed that it will be drawing up a single licensing framework to regulate the activities of dealers of securities and futures, fund managers and underwriters. Both changes are part of MAS' review of its licensing regime for securities and futures intermediaries.
Today's announcement concerns firms that offer financial planning advice, and/or arrange contracts on clients' behalf. Financial advisers do not represent specific service providers such as fund managers or underwriters. They typically offer comprehensive financial planning services and distribute a range of investment products. Currently, they have to be licensed or registered under more than one statute, according to the type of financial products or services they provide. The new regime, targeted to take effect by the first quarter of 2001, will allow them to offer an array of financial products and services under a single licence.
Speaking at the 1st Anniversary Dinner of the Securities Investors Association of Singapore, MAS Chairman Deputy Prime Minister Lee Hsien Loong said that there are significant benefits to consolidating the legislation regulating financial advisers. It would establish a consistent set of regulatory requirements and allow uniform professional standards to be maintained. Further, it would encourage the emergence of personal financial intermediaries as a class of financial intermediaries who provide financial advice regardless of the type of investment product.
MAS will draw up legislation to regulate this new class of Financial Advisers. The new regime will cover the provision of personal investment and financial planning advice in respect of personal investment products, as well as the marketing and arranging of contracts on behalf of the end-buyer. Life insurance brokers will come under the same regulation, in place of the existing Insurance Intermediaries Act.
To minimise regulatory overlap, fund managers and dealers that are licensed under the Securities Industry Act, as well as banks, insurance companies and their agents will be exempted from licensing under the proposed legislation. However, all exempted entities, whether banks, securities, or insurance companies will be subject to the same standards of market conduct and practices as those imposed on the class of Financial Advisers.
MAS will be seeking comments from industry on the detailed changes. To ensure consistent and reasonable professional standards, MAS also disclosed that it will consult the industry to determine the minimum qualifications to be required of Financial Advisers and draw up a common code of conduct that will apply to all Financial Advisers.
Collective effort in investor education
In his speech, DPM Lee highlighted the importance of investor education in a liberalised financial environment where there is increased competition and more choices in terms of financial products and their providers. "Singaporeans will benefit from a wider range of products and investment possibilities that promise competitive returns. However, they will also need to exercise greater care in making their investment choices. They cannot assume that the regulators will sieve out high-risk investments, and that everything available is safe and appropriate to them", DPM Lee stressed.
DPM Lee observed that investor education should be a collective effort by all the players in the industry. MAS will continue to focus on setting appropriate guidelines on disclosures and prevent market misconduct. MAS will also support initiatives by IMAS, SIAS and SGX in investor education. When the associations or the Exchange have worked out details of their investor educa-tion programmes, MAS will be open to helping out with co-funding from the Financial Sector Development Fund.
Statutory requirement for disclosure of information
"Listed companies must establish high standards of reporting and disclosure," DPM Lee said. He revealed that the law will be amended to make continuous disclosure a statutory requirement for listed companies. "This means that non-disclosure or late disclosure of material information will be a breach of the law that will carry a judicial penalty, and not just be a breach of SGX's listing requirements," said DPM Lee.
DPM Lee said financial planning is beneficial to investors as well as the financial industry as a whole. "As Singapore develops further as a financial centre, we must also develop an educated and informed investor community. Then we can launch into a virtuous cycle, where discerning investors exert market discipline on service providers and listed companies, who in turn compete to outperform one another, and to upgrade their products and services," concluded DPM Lee in his .