Reply to Parliamentary Question on regulatory measures to protect public investors against errant gold trading companies
QUESTION NO 1019
NOTICE PAPER 49 OF 2013
FOR WRITTEN ANSWER
Date: For Parliament Sitting on 4 February 2013
Name and Constituency of Member of Parliament
Mr Teo Siong Seng, Nominated MP
To ask the Prime Minister in addition to MAS's education efforts, whether there are plans to put in place regulatory measures to protect public investors against errant gold trading companies listed on the MAS Investor Alert List.
Answer by Mr Lawrence Wong, Acting Minister for Culture, Community and Youth on behalf of Mr Tharman Shanmugaratnam, Deputy Prime Minister and Minister in Charge of MAS:
1 As Mr Teo has noted, MAS has taken steps to educate Singaporeans on the risks of investing in gold buy-back schemes. Companies operating gold buy-back schemes, which are unregulated, are also listed on the MAS Investor Alert List (IAL).
2 DPM Tharman had previously explained in this House MAS’ approach to regulation. Schemes that involve investors acquiring direct ownership of physical assets, such as gold, land, art or wine, are presently not regulated. These physical assets are traded by various entities for commercial purposes. In the case of gold, these entities include jewellers, refiners, manufacturers and import-export firms. Trading in physical assets has therefore not been included within MAS’ regulatory ambit, which covers financial products.
3 But regulatory boundaries are not static. We have seen cases of physical commodities being marketed in schemes that purport to be an alternative financial investment. MAS is reviewing whether there is a need to refine its regulatory framework to account for changes in the investment landscape.
4 In its review, MAS will have to balance the cost of extending its regulatory ambit with the need to provide customers adequate protection. An overly-regulated environment will stifle legitimate businesses and innovations that may well be in consumers’ interests. We have to find the right balance.
5 MAS will also consider ways to limit the scope for entities to mislead or deceive consumers through false advertising. Some of these schemes being marketed as alternatives to traditional financial investments entice consumers through exaggerated claims of returns. MAS intends to work with the Advertising Standards Authority of Singapore (ASAS) and other government agencies to tighten the rules for advertising.
6 However, the best protection is still the consumer who takes care, and in particular questions how an operator intends to generate promised returns before deciding to part with his money.
7 MAS will continue to step up its efforts to alert consumers to potential pitfalls when dealing with unregulated investments or entities. Should consumers choose to deal with unregulated entities, they must be fully aware of the risks involved with the investment, the credibility and reliability of the persons they are dealing with, and their channels for recourse should anything go wrong.