In the past ten years, there had been many companies that offered all kinds of investment opportunities to the public. Companies like Profitable Plots, Genneva Gold, Oil Pods,…The list goes on.
Even though the public are sold what are essentially investment products, these are mostly unregulated as they are considered as non capital markets products which does not fall under the purview of MAS and their current regulations.
After years of lobbying from the public and countless collapse of unregulated investment products leaving retail investors stranded, MAS has finally come up with a proposed framework for the regulation of currently unregulated investment products.
To see the proposed changes, you can download the consultation paper here:
Consultation Paper on Proposals to Enhance Regulatory Safeguards for Investors in the Capital Markets
I took a quick look at the paper and immediately liked some of the suggestions of MAS. These fall under three main areas.
The first area involved making changes to some definitions which will immediately make most of the unregulated products like land banking and precious metals buy-back schemes fall under regulations.
For example, changing the definitions of Collective Investment Schemes (CIS) will result in many of the schemes like land banking, forestry and all kinds of schemes having to comply with the CIS code and a requirement for the operators to be licensed as a fund manager.
That will set a fairly high bar as the requirements for the current fund management regime is quite tedious. I think most of the unregulated investment schemes that are currently around will find it hard to meet the existing requirements.
However, MAS did mentioned that they will consult separately on some changes to the fund management regime, so it remains to be seen what are going to be the new requirements.
The second area is the proposal for a complexity-risk ratings framework to help investors understand the risk/reward profile of an investment.
The third area is to refine the investment classes of accredited, expert and institutional investors.
One change is that accredited investors will need to opt-in to be considered as an accredited investor. This means that accredited investors will be given a choice of being treated as a retail investor and thus getting the same regulatory protection that retail investors currently enjoy.
Even though it took a long while coming, I’m happy that MAS is finally going to regulated unregulated investments. The consultation and fine-tuning process will probably take a while and I think it might be around two years before the new framework is implemented.
Oh well, better late than never.
