Martin Lee @ Sg
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Changes to Regulatory Regime for Listed and Unlisted Investment Products

Earlier this year, MAS published a consultation paper to seek feedback from the public on some changes to the regulatory regime for listed and unlisted investment products.

MAS has just released their feedback to this consultation.

Currently, there are certain measures in place:

  • ‘Know Your Client’ process for Clients
  • Documentation and Record Keeping
  • Representatives are required to take the CMFAS exams before they can sell investment products
  • Disclosure of product information through prospectus
  • No false or misleading statements in advertisements
  • FAs are encouraged to adopt good practices when sales are conducted with customers with limited knowledge
  • Cooling off period for CIS and life policies

Under the proposed enhancements, we will have:

1. Enhanced product due diligence with sign-off by senior management prior to distribution of new products
2. Enhanced documentation of basis of recommendation
3. Enhanced quality of information collected
4. Additional CMFAS exams on advanced product knowledge
5. Representatives to undergo training on new product prior to sale
6. Product Highlights Sheet in plain language
7. Fair and balanced advertisements
8. Timely and meaningful ongoing disclosure for unlisted debentures
9. Assessment of customers’ knowledge or experience for complex products
10. Policies and Procedures on sale of products
11. Prohibition of referrals by bank tellers
12. Cooling off period for unlisted debentures

One major change is the requirement for customers to take some form of Customer Knowledge Assessment before he can invest in an unlisted product.

Where the customer is assessed under the Customer Knowledge Assessment not to possess the relevant knowledge or experience, the intermediary must provide advice on whether the product is suitable for the customer if the product is to be sold to the customer.

In other words, if you are a DIY investor and do not pass the assessment, you will not be able to buy without advice.

I foresee a lot of implementation problems with these requirements because MAS has mandated that such customer knowledge assessments are only valid for one year. Which means that after some time, you will need to re-take them even if you need to buy similar unlisted investment products.

For listed investment products (eg derivatives) , there will be a Customer Account Review to determine whether you are suitable to buy the investment. If not, you will need to go through an online tutorial. If you decide not to take the tutorial, your account can still be approved with safeguards in place.

Franky, I find all these an unnecessary exercise as ultimately, I predict almost everyone’s account will still get approved. The only thing is that you might have less recourse should something go wrong as now we can tell you “We have already taught you via the online tutorial” or “You refused to take the online tutorial”.

Other than the following products listed below (which are considered Excluded Investment Products), all other listed and unlisted investment products will need to follow the above mentioned requirements:

• Shares
• Fully-paid depository receipts representing shares
• Subscription rights pursuant to rights issues
• Company warrants
• Units in business trusts
• Units in real estate investment trusts
• Debentures (other than asset-backed securities & structured notes)
• Life insurance policies (other than investment-linked life insurance policies)
• Contracts or arrangements for the purpose of foreign exchange trading (other than derivatives of foreign exchange contracts and leveraged foreign exchange trading)

For a summary of the upcoming changes, you can refer to this Annex:

Regulatory Regime for Listed & Unlisted Investment Products

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2 comments
The Watchman says 8 years ago

Yes, life insurance must be included and subject to the Customer Knowledge Assessment to determine whether the customers need advice or not and not evaded by agents to push products for high commission.
This is good because someone has to put his or her head on the line. Let’s see how it will work and how daring the insurance salesmen will get.

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The Watchman says 8 years ago

It is good because currently the Ah Peks, Ah Sohs and the toilet cleaners are aslo treated as savvy life insurance and investment buyers and NOT sold. They buy becuse these consumers seem to know what they are buying and grouped under option 3 in the KYC.
As many as 90% of consumers are considered savvy customers by insurance agents and they buy with eyes wide open. They are very smart investor. I wonder if the Customer Knowledge Assessment(CKA) is applied on them how many will pass the test. I can say confidently ZERO.. So you see what these insurance agents are really.
It is timely and we must apply pressure on MAS to include life insurance product as NEIPs that require CKA too. These are the par products that screwed up a lot of consumers if you consider the lapses in early years and early termination.
The day of reckoning is here …. for the insurance salesmen and women and conmen and women.

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