Enhancing Safeguards for Retail Customers
In October 2010, MAS issued its response to feedback received on the Consultation Paper on the Regulatory Regime for Listed and Unlisted Investment Products. MAS will proceed to impose an obligation on intermediaries to assess a retail customer's investment knowledge and experience before selling investment products to the customer. Customers who lack the relevant knowledge or experience in unlisted specified investment products must be given financial advice before purchasing the products. For listed specified investment products, safeguards will be required of intermediaries when approving trading accounts for customers who lack the relevant knowledge or experience in derivatives. Some other key initiatives that MAS will undertake upon completion of ongoing discussions with the industry include the introduction of three new Capital Markets and Financial Advisory Services examination modules for product knowledge about certain investment products. Representatives of intermediaries intending to sell such products will be required to pass the relevant examination modules.
In October 2010, MAS also issued the Guidelines on Ongoing Disclosure Requirements for Unlisted Debentures (Ongoing Disclosure Guidelines) and the Guidelines on the Product Highlights Sheet (PHS Guidelines). The Ongoing Disclosure Guidelines aim to provide guidance to issuers of unlisted debentures on when and how to provide ongoing disclosure, and will apply to all issuers of unlisted debentures with tenures of 12 months or more. The PHS Guidelines set out the form and content of the Product Highlights Sheet to provide guidance to issuers and their professional advisers in preparing the Product Highlights Sheet. The PHS Guidelines will apply to new offers of debentures in the form of asset-backed securities and structured notes (including exchange-traded notes), unlisted collective investment schemes (CIS) and exchange-traded funds which have prospectuses lodged with MAS.
MAS also consulted on draft amendments to the Financial Advisers Regulations to prohibit bank tellers from referring customers to representatives for the purchase of investment products. New provisions that require financial advisers to carry out a due diligence exercise to ascertain whether a new product is suitable for the financial advisers' targeted clients before offering the new product were also proposed. MAS is currently engaging the various industry participants on the implementation of the above proposals and expects to introduce these measures in the coming year.
MAS issued a consultation paper in May 2010 as part of its comprehensive review of the Code on Collective Investment Schemes (Code). The Code sets out best practices in the management, operation and marketing of CIS. The proposed amendments aim to ensure that the regulatory regime for CIS, in particular the investment guidelines, keeps pace with product innovation and industry developments, as well as regulatory developments in major fund jurisdictions.
Following close consultation with industry associations and market practitioners, MAS issued its response to the feedback received and the revised Code on 8 April 2011. The amendments include introducing a list of permissible investments, strengthening safeguards on the use of financial derivatives, enhancing guidelines on funds' securities lending activities and standardising the methods used to calculate any performance fees imposed. The revised Code will come into effect on 1 October 2011.
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