Dear Editor,
MAS Highlights Rules for Banks Selling Investment Products
We refer to Ms Agnes Sng Hwee Lee’s letter calling on MAS to impose regulations pertaining to sales practices for investment products sold by banks to consumers (“Relook consumer banking practices”, 4 April 2020).
Ms Sng raised the concern as to whether bank officers were recommending suitable investment products. Her specific suggestion of a cooling off period is actually covered by existing rules on sales practices. Under the Financial Advisers Act (FAA), all financial institutions including banks must implement safeguards to ensure the suitability of investment products including insurance policies that are marketed to their customers. These safeguards include:
• Before marketing an investment product, banks are required to assess the nature and identify customer segments for which the product is suitable. They are required to ensure that their staff take into account the customer’s investment objectives, financial situation and needs and only recommend suitable products.
• Banks must disclose to customers all material information on an investment product (e.g. potential risks and benefits, fees and charges, as well as restrictions on withdrawal, surrender or claim).
• Before a sale can be completed, supervisors of the financial advisers are required to check and ensure the advisory process has been properly conducted by the adviser, and the recommended products are suitable for the customer.
• After the sale, consumers are entitled to change their minds, and cancel the purchase decision within a cooling off period. For unit trusts and unlisted debentures, it is 7 days from the point of investment; for life policies, it is 14 days from the date of receipt of policy documents. This affords consumers an opportunity to reconsider any investment decision made.
MAS has and will take supervisory actions against financial institutions and their representatives who fail to comply with these rules.
Ms Sng also suggested that bank officers recommending investment products be called “relationship managers” instead of “financial advisers”. From MAS’ supervisory reviews, the titles attached to bank officers do not make a substantive difference to the sales process. Our approach is to place specific responsibilities on banks to implement the safeguards mentioned above and ensure that persons providing investment advice or investment recommendations meet specific qualifications including knowledge requirements and are authorised by MAS.
Retail investors must also play their part. They should not commit to buy an investment product if they do not understand the features and risks, or have not read the documents furnished. They can take the product documents home to review before making a decision. MoneySense, the national financial educational programme (www.moneysense.gov.sg ), has useful information on what the public should look out for when considering an investment.
Jerome Lee
Director (Corporate Communications)
Monetary Authority of Singapore