Out-Law / Your Daily Need-To-Know

Proposed changes to Singapore’s platforms market ‘will empower consumers’

Out-Law News | 30 Jul 2014 | 12:05 pm | 1 min. read

Proposals to strengthen Singapore’s regulatory framework for investors will “empower consumers” by offering enhanced disclosure and information and providing retail access to “simple, lower cost products”, the head of the Monetary Authority of Singapore (MAS) has said.

MAS managing director Ravi Menon said a consultation paper published earlier this year would pave the way to “raising standards of financial advice to consumers” and “enhancing regulatory safeguards for retail investors in unconventional investment schemes”.

The consultation paper is based on recommendations from a ‘Financial Advisory Industry Review’ (FAIR), launched by MAS in March 2012, with the goal of raising the standards of practice in the financial advisory industry and improving efficiency in the distribution of life insurance and investment products in Singapore. 

Menon said: “Many retail consumers have ventured into unconventional and unregulated financial products promising higher yields. But these products may also entail risks that are not well understood by retail investors. MAS has therefore decided to extend to these unconventional products regulatory safeguards that apply to capital markets.”

Menon said one reason why consumers venture into “unconventional and often risky products” is that simple, lower cost products are not easily available. He said MAS is working to address this.

Based on a recommendation from FAIR, MAS plans to introduce a “direct channel” through which consumers can purchase insurance products that focus on meeting their protection needs, Menon said. “Such products will be cheaper as consumers do not need to pay for distribution costs. The features of these products will also be largely standardised, making them easier to understand and compare across products.”

In addition, by early 2015, consumers who do not require financial advice will be able to purchase term and whole life insurance products directly from insurers. MAS is expected to announce details by the end of July.

MAS is also working to improve access to fixed income products. Menon said: “We are seeing growing retail investor interest in fixed income products (such as) plain vanilla corporate bonds. While the risk-return profiles of such fixed income products are easier to understand they are not readily available to retail investors.”

Menon said proposals will be published for consultation in August 2014 on how disclosure requirements can be “streamlined for issuers satisfying certain criteria such as issuances of a certain size or with a track record”. The idea is to make it easier for issuers to offer bonds to retail investors “while maintaining sufficient safeguards”.

Menon said financial products “have become more innovative and complex to cater to investors along a wider spectrum of financial sophistication and risk appetites.” However, “while this is good, it does mean we need to empower consumers to navigate this complexity, understand the risk-return trade-offs, and compare and choose products most suitable to their financial objectives”.