MAS plans crackdown on dodgy investment products

Under new proposals, MAS may have more power to investigate company figures, take regulatory action and demand compulsory advising before the sale of products.

These were part of proposals raised in MAS’ consultation paper recently. Other proposed rulings are introducing a definition of “complex investment products”, risk rating of retail investment products, “health warnings” for complex investment products; remuneration structures for the sale of investment products and appointing an approved trustee for unlisted debentures.

These will apply to both listed and unlisted products. Financial advisers and brokers will be forced to formally assess a retail customer’s investment knowledge or experience before selling investment products to the customer. Customers who do not have the relevant knowledge or experience in specific unlisted investment products must be given financial advice before being able to purchase the product. For listed investment products, additional safeguards will be required when brokers approve trading accounts for customers who are assessed not to possess the relevant knowledge or experience in derivatives.

Other rules that may be imposed are expanding the scope of the CMFAS examination module (for unlisted “complex investment products”) to cover other non-excluded investment products, requiring issuers of debentures which are asset-backed securities and structured notes, collective investment schemes and sub-funds of investment-linked life insurance policies to prepare Product Highlights Sheets.

The proposals are still open to public feedback, and the consultation period will end on 12 March 2010.