To ask the Senior Minister whether his Ministry will take steps to regulate the sale of club memberships, as is done in Australia and Malaysia, so that sellers provide buyers with full information about the number of memberships, transfer fees, facilities, proprietor's financial resources and commitments, and other factors that will affect the value of such memberships and the ability of buyers to re-sell their memberships.
Note: The above Question was originally directed to the Minister for Trade and Industry (vide Q.*64 in Notice Paper No. 74 of 2005).
Answer Prof Ivan Png asks if we will regulate sale of club memberships to require fuller disclosure of information.
2. For members' clubs registered under the Societies Act, there is less scope or likelihood of fraud from the sale of memberships as all the proceeds are collectively owned by the members.
3. I believe Prof Png was referring to proprietary clubs, as he referred to disclosure of information of a proprietor's financial resources and commitments. The Consumer Protection (Fair Trading) Act ("CPFTA") introduced in March 2004 specifically covers the sale of memberships in such clubs. It prohibits the making of false claims, misleading consumers through the omission of information and other unfair practices. Consumers may seek compensation from the club of up to $20,000 if the club is found to have contravened the CPFTA.
4. MAS does not intend to require that the offer of club memberships be regulated under the Securities and Futures Act ("SFA") and Financial Advisers Act ("FAA"). The disclosure requirements that are imposed under these Acts are intended for financial products. Strict disclosure requirements are placed on the sale of financial products so as to improve market efficiency and promote investor confidence in the financial markets.
5. Some people purchase social club memberships for investment reasons. However, most people purchase club memberships to enjoy the facilities and services provided by the club. Regulation of the sale of club memberships under the SFA or FAA would impose unnecessary additional costs on the sellers and indirectly, on the buyers. Given that there already are safeguards under general law (for example, the CPFTA which applies to proprietary clubs), the cost of additional regulation under the SFA or FAA would not be justified.
6. However, clubs may choose to structure themselves as companies and offer shares with membership privileges. Such share offers would be subject to prospectus requirements under the SFA. Clubs are free to offer memberships in this way if they see a competitive advantage in subjecting themselves to higher and legally-binding disclosure requirements.