The Financial Advisers (Amendment) Bill 2003
Second Reading Speech by Mr Lim Kng Kiang, Minister, Prime Minister's Office & Second Minister for Finance and Deputy Chairman, Monetary Authority of Singapore
Mr Speaker Sir, I beg to move, "That the Bill be now read a second time".
2 Sir, the Financial Advisers Act ("FAA") was passed concurrently with the Securities and Futures Act ("SFA") in October 2001 as part of a major revamp of Singapore's capital markets regulatory framework. The FAA consolidates in a single piece of legislation the rules for financial advisers and their representatives when giving financial advice on investment products, marketing collective investment schemes and arranging contracts of life insurance policies. These rules were previously found in separate legislation - the Futures Trading Act, the Insurance Intermediaries Act and the Securities Industry Act. These Acts have now been repealed. The FAA establishes a consistent regulatory treatment for financial advisory services across the financial services industry.
3 Sir, the FAA will be amended in two phases. This will parallel the legislative review of the SFA. The first phase has culminated in this Bill where MAS has proposed some technical modifications. The second phase, which involves more in-depth policy reviews, is scheduled to be completed in the second half of 2004.
4 MAS conducted a public consultation of the Bill in April 2003. MAS' detailed reply to the comments received in the course of the public consultation is published on its website. Sir, I shall now highlight the key amendments that are proposed in the Bill.
Exclusion of Life Reinsurance
5 Clause 2 amends the definition of "life policy" in section 2(1) to exclude any contract of reinsurance because life reinsurance activities are already regulated by MAS under the Insurance Act (Chapter 142). With this amendment, a person conducting any activity involving contracts of reinsurance is only subject to the requirements of the Insurance Act. The FAA will not apply.
Representatives of Financial Advisers must be Natural Persons
6 The Bill clarifies that only natural persons can act as representatives of financial advisers. This ensures proper accountability by the principal for the conduct of the representative. Corporate entities will not be permitted to act as representatives of financial advisers.
Greater Scope for MAS to issue Written Directions
7 General or specific written directions are legally enforceable. Clause 19 amends section 58 to empower MAS to issue written directions to representatives of exempt financial advisers. This amendment will harmonise the application of section 58 for representatives of licensed financial advisers and representatives of exempt financial advisers. While representatives of exempt financial advisers are not required to hold a representative's licence, the business conduct rules of the FAA apply to them.
8 To enable MAS to respond quickly to time-sensitive industry developments or requests from industry participants, the amended section 58 also expands the scope that written directions can cover. I have earlier noted a similar amendment in the Securities and Futures (Amendment) Bill.
9 Sir, the following are also amendments that are common to the Securities and Futures (Amendment) Bill and this Bill.
Communications containing Recommendations on Securities
10 Financial advisers will no longer be required to sign circulars or other communications that contain recommendations on securities. MAS has received feedback from the industry that the requirement for a signature is administratively difficult. MAS has decided that the requirement can be removed without compromising investors' interest because financial advisers will remain accountable for their recommendations. The number of years that such documents have to be retained will be reduced from seven years to six years.
Opportunity to be Heard and Appointment of Officers
11 The Bill's proposed amendments to the provisions relating to "the opportunity to be heard" and "MAS' powers to appoint its officers to grant or revoke exemptions" mirror those proposed in the Securities and Futures (Amendment) Bill.
12 To conclude, the Bill draws on MAS' operational experience in administering the FAA and feedback from the industry to make a few technical refinements to the Act. To ensure that the FAA remains responsive to the industry and investors, MAS has started work on the policy reviews for the second phase of amendments to the FAA and will begin consulting on these later this year.
13 Mr Speaker, Sir, I beg to move.