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MAS proposes strengthening safeguards for investors

Among the proposals is providing the option of full regulatory safeguards to non-retail investors and rating all investment products according to its complexity and risk, says the Monetary Authority of Singapore.

SINGAPORE: The Monetary Authority of Singapore (MAS) on Monday (July 21) proposed several measures aimed at offering better investor protection, in light of the growing number of complex investment products available on the market.

The proposed changes, which were outlined in a consultation paper, include extending current regulatory safeguards to investors in non-conventional investment products, the regulator said in its statement.

Under its proposed framework, the regulator is considering providing wealthier investors the option to benefit from the full range of capital markets regulatory safeguards available to ordinary retail investors. Non-retail investors - whether accredited, institutional or expert - are considered to be better informed and better able to access resources to protect their interests, and hence require less regulatory protection, the statement said.

Specifically, MAS is proposing the option of providing accredited investors (AIs) the full range of regulatory safeguards as a retail investor, unless they specifically "opt-in" for AI status in order to gain access to a wider range of complex and risky investment products.

Under the Securities and Futures Act (SFA), an AI is someone whose net personal assets exceed S$2 million or whose income in the preceding 12 months is not less than S$300,000, according to the statement.

The two categories of non-conventional products MAS is specifically looking at are:

  • Buy-back arrangements involving the exchange of precious metals
    Such arrangements are equivalent to collateralised borrowing, and will be regulated as debentures under the SFA.

  • Schemes that have the elements of a regulated collective investment scheme but do not pool investors' contributions
    The proposal is to regulate such schemes as collective investment scheme under the SFA. Collective investment schemes include unit trusts and real estate investment trusts.

MAS did not give specific examples of non-conventional collective investment schemes in its statement, although it is understood these would include investment plans that involve land banking.

RATING OF INVESTMENT PRODUCTS BEING CONSIDERED

MAS said it is also considering rating all investment products, and making it a requirement that these ratings are disclosed to potential investors.

Under the proposed framework, all products sold to retail investors will be rated according to the complexity of their structure and the risk of loss of initial investment principal.

Product issuers will be required to disclose these ratings in product offering documents and marketing materials, along with information on the historic price volatility or credit rating of the product, MAS said.

The Securities Investors Association of Singapore (SIAS) says the proposed changes will benefit the market.

"Those investors who are shying away from investing, whether it is alternative products or other schemes, will now have a better chance of knowing whether or not they they can take the risk, and whether or not they should be going in to invest," said President and CEO of SIAS David Gerald. "I think it would attract more investments, it will attract more retail investors to the market."

The public consultation over the proposed changes will take place over a six-week period from July 21 to Sep 1 this year.

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