MAS consults on proposals to strengthen the regulation of the saleand marketing of unlisted investment products
Singapore, 12 March 2009...MAS is consulting the public on proposals to further safeguard consumers’ interests and promote higher industry standards for the sale and marketing of unlisted investment products.
2 The proposals were formulated based on MAS' review of the sale and marketing of unlisted investment products after the current global financial crisis led to the failure of several structured notes in Singapore. Some of the main proposals are as follows:
(i) Issuers will be required to prepare a short, user-friendly Product Highlights Sheet to promote more effective disclosure. In addition, requirements for ongoing disclosure and fair and balanced advertising will be strengthened.
(ii) FIs will be required to undertake an enhanced product due diligence process before selling new investment products.
(iii) Representatives will be required to enhance the quality of information obtained from their customers. They will be required to provide customers with more details in their basis for recommendation and set out more clearly in a formal document why the products are suitable for them.
(iv) A new category of “complex investment products” will be introduced, and subject to enhanced regulatory requirements. FIs will only be able to sell a complex investment product to customers when they give customers advice on whether it is suitable for them. The prospectus, Product Highlights Sheet, and all marketing and advertising materials of complex investment products will carry health warnings.
(v) MAS’ powers to investigate and take regulatory action will be strengthened through several measures, including the introduction of a civil penalty regime under the Financial Advisers Act (FAA).
3 Many of these proposals will require legislative amendments. MAS will issue the Guidelines on “Fair Dealing – Board and Senior Management Responsibility for Delivering Fair Dealing Outcomes to Consumers” by end March 2009. The Guidelines will make clear MAS’ expectations of what the board and senior management of FIs should be doing to achieve fair dealing outcomes for consumers.
4 In formulating these proposals, MAS has taken into account public comments, investors’ complaints, and its reviews of the systems and processes of the FIs, along with developments in other jurisdictions. MAS has also tapped the views of market practitioners, industry associations, as well as of the Consumers Association of Singapore and the Securities Investors Association (Singapore).
5 Shane Tregillis, Deputy Managing Director, Market Conduct, MAS said, "MAS' proposals will further safeguard consumers' interests and promote higher industry standards. While we are enhancing our current regulatory regime, regulation by itself is never a complete answer. We expect FIs to go beyond mere compliance with regulatory requirements. FIs should learn from recent events and the board and senior management should embed a strong culture of dealing fairly with their customers throughout the whole organisation. FIs should make use of this opportunity to fundamentally rethink business models based on a commission-driven, short-term product sales culture. Only by dealing fairly with and providing real long-term value for their customers can financial institutions truly rebuild consumer confidence and trust."