Singapore, 30 July 2002. The Monetary Authority of Singapore ("MAS") today issued proposed Guidelines on the Use of the Term 'Independent' by Financial Advisers under the Financial Advisers Act (No. 43 of 2001) ('FAA').  The FAA will come into force by the end of this quarter. 

2 The use of the term 'independent' is governed by Regulation 34 of the draft Financial Advisers Regulations ('FAR'). In response to earlier industry consultations on the draft FAR, a number of industry participants had given their views on the proposed regulations pertaining to 'independence'.  MAS took into account this feedback in drawing up the proposed guidelines on 'independence'.  The consultation process that will now get underway gives industry participants an opportunity to offer comments on the draft guidelines.

3 The draft guidelines on the use of the term 'independent' set out that:

• only financial advisers who can clearly demonstrate that they do not have financial or commercial links with product providers that are capable of influencing their investment recommendations should use the term 'independent' and;
• before using the term 'independent', financial advisers should be satisfied in light of their own particular circumstances that they are in compliance with Regulation 34 of the draft FAR.

4 MAS' proposed rules on 'independence' are broadly in line with recent legislative reforms in the UK and Australia. The MAS expects only a small number of financial advisers in Singapore will be able to use the term 'independent', given current market practices and the early stage of development of the financial advisory industry.

5 The current draft consultation adopts a principles-based approach rather than a detailed prescriptive approach in determining when it might be appropriate for a financial adviser to use the term 'independent'. However MAS is seeking feedback on the draft guidelines including, in particular, whether given the diversity of business and financial arrangements, it is desirable and possible to adopt a more prescriptive approach in the guidelines to give greater clarity to market participants.

6 The draft Guidelines on the Use of the Term 'Independent' by Financial Advisers is available on MAS' website. 

7 Industry participants have until 17 Aug 2002 to submit their comments on the draft guidelines. They may send their comments to faa@mas.gov.sg or write to the Financial Advisers Unit, Securities & Futures Department.

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Background

Under the draft FAR, financial advisers are not allowed to call themselves 'independent' unless they:

1. Do not receive any commission or other benefit from a product provider which may tend to create a product bias or pay any commission to or confer other benefits upon its representatives, which may tend to create a product bias;
2. Operate free from any direct or indirect restrictions relating to any investment product which is recommended; and
3. Operate without any conflicts of interest created by any connection to or association with product providers.