On 31 July 2024, the Monetary Authority of Singapore (“MAS“) published the “Consultation Paper on Proposed Legislative Amendments to the Requirements for Enhancing Pre and Post-Transaction Safeguards for Retail Clients” (“Consultation Paper“). The Consultation Paper seeks comments on proposed amendments to two MAS Notices and one set of Guidelines to effect changes proposed in the earlier MAS Consultation Paper on Enhancing Pre- and Post-Transaction Safeguards for Retail Clients issued on 22 June 2021 (“2021 Consultation“). MAS issued its response to feedback on the 2021 Consultation here.
The 2021 Consultation proposed measures to raise industry standards and promote greater consumer trust in the financial advisory (“FA“) industry in Singapore. This consisted of enhanced regulatory safeguards to be imposed on FA firms to protect the interests of retail clients, particularly selected clients (“SCs“). SCs are clients who meet any two of the following criteria:
(a) are 62 years of age or older;
(b) are not proficient in spoken or written English; and/or
(c) have below GCE “O” or “N” level certifications (or the equivalent).
The current Consultation Paper seeks comments on the proposed revisions to the MAS Notices and Guidelines set out below. There will be a transitional period of nine months from the effective date of the amended MAS Notices and Guidelines.
(a) MAS Notice on Recommendations on Investment Products (“FAA-N16”)
- Shifting the requirements on pre-transaction checks (i.e. documentation reviews and call-backs) by FA firms to FAA-N16 from the MAS Guidelines on the Remuneration Framework for Representatives and Supervisors (“Balanced Scorecard Framework“), Reference Checks and Pre-transaction Checks;
- New requirements for representatives to (i) check for and document a client’s SC status; and (ii) make a formal declaration that the assessment of the client’s SC status has been duly performed;
- Requiring a Trusted Individual (“TI”) to be present when investment recommendations are made to SCs. The amendment will also set out the criteria to qualify as a TI;
- Mandating the types of information that should be covered during a client call-back; and
- Requiring FA firms to audio record pre-transaction call-backs to SCs and clients of Selected Representatives (“recording requirement“).
(b) MAS Notice on Requirements for the Remuneration Framework for Representatives and Supervisors (“Balanced Scorecard Framework”) and Independent Sales Audit Unit (“FAA-N20”)
- Updating the scope of post-transaction checks performed by the Independent Sales Audit unit. This will include a review of the recordings made pursuant to the proposed recording requirement under FAA-N16.
(c) MAS Guidelines on the Remuneration Framework for Representatives and Supervisors (“Balanced Scorecard Framework”), Reference Checks and Pre-transaction Checks (“FAA-G14”)
- Removing the existing guidance on pre-transaction checks as these have been moved to FAA-N16; and
- Updating the guidance on documentation reviews, which are performed as part of the post-transaction checks.
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