New MAS Rules in year 2012 to Protect Investors

Post by **Dennis Ng** » Tue Dec 20, 2011 12:31 pm

Frankly, whatever new rules MAS implements, does NOT really help any person to reach Financial Freedom.

Investors do NOT need more rules to protect them, what they need is to increase their Financial Knowledge, with that, they can protect themselves, as they will NOT listen blindly due to ignorance.

I guess the best thing you can do for your friends is to ask them to attend my seminars and get educated.

Cheers!

Dennis Ng

New MAS rules to protect investors in the spotlight

Buying a mutual fund in Singapore may not be a cakewalk anymore.

Under new investor-protection rules that take effect Jan 1, investors must possess certain educational qualifications related to finance or have relevant work or trading experience to buy funds directly.

Those who fail to meet the Monetary Authority of Singapore’s (MAS) requirements must take a series of on-line tutorials on the Singapore Exchange website, and answer the questions correctly in order to qualify to buy the funds, in what could be a first for investors anywhere in the world.

Thousands of Singaporeans lost money investing in supposedly low-risk Lehman Brothers-linked ‘Minibonds’ in 2008. The new rules follow a review by the country’s monetary authorities.

The regulations have been sharply criticised by some fund managers who fear a loss of business.

‘Asking investors to pass a test to invest could be a deterrent to investing,’ said Francois Mouzay, head of fund development and services in Asia-Pacific for BNP Paribas Investments Partners.

‘To put myself in the shoes of a retail client in Singapore - If I had to certify a lot of things in order to invest, I’d probably think it better to keep my savings in a term deposit,’ he added.

Under the new regulations, investors can continue to buy funds even if they fail the SGX test. But they have to first sit down with a financial adviser who is required to assess the person’s financial knowledge and ability to handle risk.

Retail investors said the test could be discouraging for those seeking exposure to markets.

‘It cuts out newbies. You can’t protect them that way,’ said Hazel Lim, a 29-year-old property agent, adding investors would then buy stocks directly which would be riskier.

Ms Lim, who has been an investor in funds for five years, said she was unaware of the test.

Singapore, which has rapidly developed its financial industry in recent years, is home to 783 mutual funds that oversee about US$70 billion, according to data tracked by Lipper, a Thomson Reuters company.

Overall, Singapore- based fund managers had S$1.4 trillion in assets under management at the end of 2010, according to MAS.

The new requirement may not significantly increase investor protection, said Tan Kin Lian, a former insurance cooperative chief executive who helped investors win compensation from banks and brokers after the Minibonds fiasco.

‘The regulations will raise the cost of financial products and force people to go through financial advisers or stock brokers who may not understand the product,’ he said.

‘The assessment (of investment products) should be made at a higher level by experts first,’ he added. ‘If a doctor recommends a type of medicine, he would be relying on the Health Science Authority or some other authority to first test the medicine.’

The new requirement, which also affects sales of investment-linked insurance products, exchange-traded funds (ETFs) and stocks listed outside Singapore, has created ripples throughout the city-state’s financial services industry.

Fundsupermart, Singapore’s largest online portal for investors to buy and sell funds, has changed its system to prevent some clients from buying funds directly, for instance.

‘Previously we were a DIY (do-it-yourself) platform. But because of this, we’ve set up our own client advisory team so we can speak to clients on a one-on-one basis and give them advice and then enter the trades for them,’ general manager Wong Sui Jau said.

In response to questions from Reuters, the central bank said it was also raising the standards expected of financial advisers to ensure they had the skills to explain products to customers.

It added that funds, ETFs and other financial instruments were categorised as specified investment products (SIPs) based on their complexity rather than level of risk.

MAS has ‘carefully considered the cost-benefit of the new requirements, and are of the view that the potential benefits in terms of enhanced protection to retail investors in the sale and advisory process for SIPs outweigh the costs, particularly in light of today’s volatile market,’ a central bank spokesman said. - Reuters

Renny · Post by **Renny** » Wed Dec 21, 2011 1:04 am

i think my fund manager friend will lose his job soon liao

Renny · Post by **Renny** » Wed Dec 21, 2011 1:07 am

Those who fail to meet the Monetary Authority of Singapore’s (MAS) requirements must take a series of on-line tutorials on the Singapore Exchange website, and answer the questions correctly in order to qualify to buy the funds, in what could be a first for investors anywhere in the world.

from what i see, financial advisers can simply give their clients the model answer

Post by **Dennis Ng** » Wed Dec 21, 2011 7:38 am

Renny wrote:

Those who fail to meet the Monetary Authority of Singapore’s (MAS) requirements must take a series of on-line tutorials on the Singapore Exchange website, and answer the questions correctly in order to qualify to buy the funds, in what could be a first for investors anywhere in the world.
from what i see, financial advisers can simply give their clients the model answer

That's right. There are always ways and loopholes one can use.

That's why from my 8 years experience as a Financial Planner, I think no matter what additional rules MAS implements, it'll NOT really help.

The only thing that will truly help is Financial Education ie. consumers increase their financial literacy and then perhaps they can simply make direct investments eg. into stocks, ETF, instead of through Unit Trusts and ILPs advised by Financial Planners.

Agnestancht · Post by **Agnestancht** » Wed Dec 21, 2011 9:58 pm

Hi all,

All investors must passed the test before invest even for those who use online platform?

ngtfook · Post by **ngtfook** » Wed Dec 21, 2011 10:46 pm

Agnestancht wrote:Hi all,

All investors must passed the test before invest even for those who use online platform?

Hi, Please check with your broker if you are not sure. They will able to help you on this. RayNg

Hi,

Take notice that MAS new ruling on retail investor on SIP product will take effect from 1Jan2012. For those who did not pass the new ruling will not be able to trade CFD and other investment product. Do check with your broker accordingly.

RayNg

MAS REQUIRES INTERMEDIARIES TO ASSESS INVESTMENT KNOWLEDGE AND EXPERIENCE OF RETAIL CUSTOMERS

http://www.mas.gov.sg/news_room/press_r ... omers.html
28 July 2011…
The Monetary Authority of Singapore (MAS) has introduced new requirements for intermediaries to formally assess a retail customer's investment knowledge and experience before selling certain investment products to the customer.

2 These new requirements will apply to the sale of Specified Investment Products (SIPs), which are all investment products other than those listed in the Annex1. These include listed SIPs such as futures and exchange traded funds, and unlisted SIPs such as investment linked insurance policies.

3 Under the new measures, intermediaries must conduct a Customer Knowledge Assessment to assess whether a customer has the relevant knowledge or experience to understand the risks and features of an unlisted SIP. In the case of listed SIPs, intermediaries have to conduct a Customer Account Review to ascertain whether the customer has the relevant knowledge or experience to understand the risks and features of complex structures or derivatives, before approving the customer’s account to trade such products. The intermediary will inform the customer if he is assessed not to possess the relevant knowledge or experience. If the customer still intends to proceed with the transaction, the intermediary must offer advice to the customer. MAS will not allow “execution only” service in such cases. Safeguards, such as a lower trading limit than what the intermediary would otherwise have imposed, will also be put in place before the customer is allowed to proceed with the transaction. Intermediaries must comply with the new requirements in their dealings with all customers, new and existing.

4 MAS has introduced these stronger measures and enhanced requirements to further safeguard customers’ interests. We aim to ensure that intermediaries recommend suitable investment products to customers, particularly those who may not have the relevant investment knowledge or experience.

5 The new requirements follow from MAS’ consultation paper on the Regulatory Regime for Listed and Unlisted Investment Products that was published on 28 January 2010, and MAS’ subsequent response to feedback received that was issued on 21 October 2010.

6 The requirements will come into effect on 1 January 2012 and will be introduced by means of a new Notice on the Sale of Investment Products [Notice No. SFA 04-N12] and a new Notice on Recommendations on Investment Products [Notice No. FAA-N16]. A transition period of five months will be provided for intermediaries to put in place the necessary processes to meet the requirements. In the meantime, intermediaries intending to sell SIPs should start adopting the proposed measures as good practice in conducting business with customers. MAS has also issued a guide to help consumers understand the requirements and what they can expect from their financial institutions when purchasing SIPs.

7 In line with the new requirements, all representatives who deal in or provide advice on SIPs must pass additional examinations on product knowledge and analysis. MAS is working with the Institute of Banking & Finance and the Singapore College of Insurance to introduce the additional examinations by end 2011.
_________________
Price is what you pay; Value is what you get

ilovecck · Post by **ilovecck** » Wed Dec 21, 2011 10:49 pm

I actually check with my brokage firm today (Phillips). I have look closely into it, but basically there is 2 test u have to take. Its like a questionare when u first log into their platform. The first one you can take unlimited time and the second if u fail the first time, they say "Ur remiser will asisit you"

ilovecck · Post by **ilovecck** » Wed Dec 21, 2011 10:52 pm

ilovecck wrote:I actually check with my brokage firm today (Phillips). I have look closely into it, but basically there is 2 test u have to take. Its like a questionare when u first log into their platform. The first one you can take unlimited time and the second if u fail the first time, they say "Ur remiser will asisit you"

edit: I mean I havent look closely into it but this is what the phone operatot told me. Truth be told, I actually didnt use the platform frequently, I remember seeing the questionare once but I skip it and went straight to carry out my trade.

Agnestancht · Post by **Agnestancht** » Thu Dec 22, 2011 1:50 pm

Hi,

Thanks for the info.