MAS releases findings from its review of switching of investment products
Singapore, 4 December 2006...The Monetary Authority of Singapore (MAS) today released the key findings from its review of financial institutions' controls on improper switchingImproper switching occurs when financial advisory representatives advise their clients to switch products solely to generate commissions, without considering the clients' best interest. of investment products. The review covered 23 financial institutions (FIs) from the banking, insurance and capital market sectors. It assessed the extent to which FIs had put in place controls in accordance with the Guidelines on Switching of Designated Investment Products (22.4 KB) issued by MAS in October 2004.
2 Overall, the review found that most FIs have implemented some controls to monitor improper switching within their own firms. Generally, controls at the point of sale were more robust than controls to monitor switching after sale. The quality of the control measures also varied across FIs.
3 MAS has shared its findings with the FIs reviewed as well as the industry associations and has made the following recommendations for improvements:
i) FIs should ensure that disclosures on the costs and disadvantages associated with switching are clearly presented to clients in simple language. Such disclosures should also be made:
When clients switch between different types of investment products; and
When clients terminate their existing investment product with one FI to purchase a new investment product from another FI.
ii) FIs with sizeable operations should put in place more robust monitoring systems to identify unusual trends such as financial advisory representatives (representatives) with a high volume of switching transactions and representatives who engage in switching immediately after the FIs' monitoring period.
The key findings and recommendations from the review are contained in the Annex (159.3 KB) .
4 Mr Shane Tregillis, Deputy Managing Director (Market Conduct), MAS, said, "We encourage FIs to continue to enhance controls to monitor and deter improper switching by their representatives. Senior management should also implement the right incentive structures to encourage their representatives to act in the best interest of their clients."
5 Commenting on the role of consumers, Mr Tregillis noted "Consumers need to be very careful when switching investments. They need to be aware of the questions they should ask their representative and understand the cost of the switching transaction. Unless they are very knowledgeable, consumers should be very cautious in signing any forms declaring that their representative did not advise them to switch.