Parliamentary Replies
Published Date: 16 November 2004

Reply to PQ on Switching, Structured Deposits and Credit Card

Question No 721
Notice Paper No. 203 of 2004
For Oral Answer

Date: For Parliament Sitting on 16 Nov 2004

Name and Constituency of Member of Parliament
Ms Penny Low, MP for Pasir Ris- Punggol GRC


Question 721

To ask the Senior Minister (a) what is the expected impact of the recent tightening of rules on malpractices in the financial industry with respect to churning, credit card/credit line auto-approvals and structured investment products on (i) the industry and (ii) the consumers; and (b) what are the recourse that the investing public can engage, should there be any suspicion of such malpractices.

Note: The above Question was originally directed to the Prime Minister and Minister for Finance (vide Q.*721 in Notice Paper No. 203 of 2004).

1  Ms Low refers to a number of Guidelines recently issued by MAS to improve business conduct standards in the financial advisory industry.

2  The Guidelines on Switching were released after MAS' inspections of the industry revealed that financial advisers paid insufficient attention to monitoring the switching activities of their representatives. The Guidelines provide guidance to the industry on the controls, processes and procedures MAS expects financial advisers to implement, so as to monitor and deter improper switching or churning activities. The Guidelines include enhanced disclosure requirements to ensure that consumers are fully informed of the costs and implications of switching.

3  The Guidelines on Structured Deposits were introduced because structured deposits are unlike conventional deposit products. They have an investment element. They may be complex and not immediately understood by the consumer.  The Guidelines will ensure consistency in sales and advisory process standards across the industry in respect of structured deposits.  Under the Guidelines, advisers are required to ensure that all marketing materials disclose key information in a clear and adequate manner, and do not include false or misleading statements.  Representatives selling these products must be qualified and have a reasonable basis for making recommendations.  Banks have also been prohibited from labelling structured products as deposits if they do not meet the definition of a deposit under the Banking Act.

4  MAS' credit card regulations preserve the Government's objective of discouraging the excessive use of credit for consumption purposes.  While the regulations permit card issuers to issue additional cards to existing principal cardholders without first having received an application, card issuers are not allowed to hold the cardholder liable for any amount charged to the additional card until he has conveyed his acceptance of the card either verbally or in writing.  Furthermore, there must be no increase in the aggregate amount of credit granted.

5  The financial industry has to ensure they have adequate systems and procedures in place to ensure compliance with all relevant rules, regulations and guidelines. MAS will monitor compliance through on-site inspections and off-site supervision. But it is in the interests of financial firms themselves to conduct their activities with fairness, transparency and integrity to secure the trust and confidence of consumers in the industry.

6  Consumers will benefit from improved business conduct standards across the financial industry. But consumers must also play their part. MAS has published consumer guides on switching and structured deposits. Consumers should equip themselves with the information they need to better understand the financial products and services being offered, and learn to ask the right questions of their financial adviser, so they can make well-informed investment decisions.

7  If a consumer feels that a financial institution has behaved in a manner that is improper or unfair, he should raise a complaint directly with the financial institution concerned. MAS expects all financial institutions in Singapore to have in place an internal dispute resolution process to handle complaints from consumers in a fair, consistent and prompt manner.

8  If consumers are dissatisfied with the financial institution's response, they can approach one of the independent industry-based dispute resolution schemes for assistance. In the case of disputes with a bank, they can approach the Consumer Mediation Unit, or CMU. In the case of disputes with an insurance company, they can turn to the Insurance Disputes Resolution Organisation, or IDRO.  By the first half of next year, consumers will be able to bring all disputes, regardless of the type of financial institution or product involved, to a single one-stop centre known as the Financial Industry Dispute Resolution Centre, or FIDReC for short.

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