Published Date: 15 November 2012
1 Mr Speaker Sir, I beg to move, That the Bill be now read a second time.
2 The House has just debated the Securities and Futures (Amendment) Bill 2012. The changes we have adopted are complemented by the proposed amendments in the Financial Advisers (Amendment) Bill 2012.
Enhancing MAS’ supervision and enforcement powers
3 First, the Bill introduces amendments which mirror those in the Securities and Futures (Amendment) Bill 2012 relating to:
(i) the enhancement of MAS’ powers to investigate and take regulatory action; and
(ii) the extension of MAS’ powers to make prohibition orders.
Strengthening safeguards for the investing public
4 Second, the amendments will strengthen safeguards for the investing public.
Widening scope of provision on false or misleading statements
5 The Bill widens the scope of an FA firm’s obligations when communicating and dealing with customers. Currently, it is an offence under the Act to make a false or misleading statement only where the statement is made with an intent to deceive. Further, it only applies to statements relating to the amount payable for an investment product, such as the premium or benefits under an insurance policy, or to the effect of a provision in a contract for an investment product.
6 The scope of this provision will be expanded in two ways. First, it will cover all statements made by the FA firm in connection with its financial advisory services, such as statements relating to the features or risks of an investment product.
7 Second, the Bill extends the law to cover negligent or reckless dissemination of false or misleading information, and not just statements made with the intent to deceive. It will make it an offence for an FA firm to disseminate such information as long as it ought reasonably to have known that a statement is false or misleading. It will also be an offence to do so if the FA firm has not cared to ascertain if a statement is true or false. These amendments do not seek to impose liability on FA firms or their representatives if they have acted honestly, carried out the necessary due diligence and have reasonable basis for the statements that they make.
8 Clause 7 of the Bill, will also make it an offence under the Financial Advisors Act to engage in any conduct to defraud or deceive any person in connection with the provision of any financial advisory service. This provision mirrors similar provisions in the Securities and Futures Act, and will subject the conduct of FA firms to the same standard as that expected in the context of securities and futures.
Extending civil liability regime
9 The Bill will also extend the provisions on civil liability to breaches of an FA firm’s business conduct obligations - specifically, the obligations to furnish product information to investors and to avoid making false or misleading statements. This will enable investors to obtain compensation from FA firms for any loss or damage suffered as a result of breaches of these obligations.
10 However, while the Bill extends the civil liability of an FA firm, it also encourages investors to resolve disputes with FA firms through channels other than court action. The Bill will enable the Court, in making an order in a civil action commenced by an investor, to have regard to whether the investor has made reasonable efforts to minimise his loss and resolve the dispute with the FA before commencing the court action. This includes the use of alternative dispute resolution processes like mediation, or adjudication through the Financial Industry Disputes Resolution Centre (FIDReC).
Conclusion
11 To conclude, MAS will continue to review its regulatory framework for the provision of financial advisory services to ensure that investors are treated fairly in their dealings with FAs, while allowing for competition and sustainable growth in the financial advisory industry.
12 In April this year, MAS set up the Financial Advisory Industry Review (FAIR). The FAIR panel will make recommendations aimed at enhancing the quality of financial advice, and ensuring a more competitive and efficient system for the distribution of life insurance and investment products in Singapore. Legislative changes arising from the recommendations of the FAIR panel, where accepted by MAS, will be introduced in Parliament subsequently.
13 Sir, I beg to move.