MAS Proposes Enhanced Transaction Safeguards for Retail Clients by Financial Advisers

To raise industry standards and promote greater consumer trust in the financial advisory (“FA“) industry in Singapore, the Monetary Authority of Singapore (“MAS“) seeks feedback on proposed enhanced regulatory safeguards by FA firms to protect the interests of retail clients, particularly selected clients (“SCs“), who meet any two of the following criteria: (a) is 62 years of age or older; (b) is not proficient in spoken or written English; (c) has below GCE “O” or “N” level certifications (or the equivalent).

To safeguard the interests of clients, MAS introduced the Balanced Scorecard Framework (“BSC Framework“) in 2016. The requirements and guidance on the BSC Framework are set out in various MAS Notices and Guidelines. To assess the standards of FA representatives’ advisory and sales process, MAS conducted a mystery shopping exercise (“MSE“) in 2018/2019 and recently released its findings. To address the areas of deficiencies from its review of the effectiveness of the BSC Framework and MSE findings, MAS sets out its proposals to enhance pre- and post-transaction safeguards for retail clients in a consultation paper titled “Consultation Paper on Enhancing Pre and Post-Transaction Safeguards for Retail Clients”.

This Update highlights the following MAS’ key proposals in the consultation: 

• Strengthening the requirement to identify SCs;
• Requiring a Trusted Individual (“TI“) to be present for all investment recommendations made to SCs, as well as the criteria to quality as a TI;
• Reinforcing requirements relating to call-backs;
• Requiring an independent panel to be set up to review all investment recommendations made to SCs; and
• Requiring the Independent Sales Audit Unit of the FA firm to sample and review transactions involving higher risk clients.

The consultation ends on 3 August 2021.