MAS outlines new safeguards for retail investors
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Retail investors will enjoy a boost in protection with new rules for investments linked to gold and other physical assets. The enhancements also allows flexibility for accredited investors (AIs) to decide on the level of regulatory protection they want to be entitled to.
The enhancements to its regulatory framework for safeguarding investors’ interests were announced by the Monetary Authority of Singapore (MAS) on Tuesday. They take into account feedback received on its consultation paper published in July last year.
AIs include individuals whose net personal assets exceed S$2 million or whose income in the preceding 12 months is not less than S$300,000.
MAS said that consumers should enjoy the regulatory safeguards for non-conventional investment products that are similar to existing capital markets products. The non-conventional investment products – previously not in MAS’ regulatory scope – will be regulated either as debentures or investment funds, depending on their features.
Precious metals buy-back arrangements involving gold, silver and platinum with guaranteed buy-back at an agreed price will be regulated as debentures. This is because they are widely regarded as financial assets and are commonly used as collateral for such arrangements.
Collectively-managed investment schemes intended for retail investors will require authorisation from MAS and be restricted to investments in securities or other assets that are liquid (for example precious metals), or have stable income-generating ability such as completed real estate.
Arrangements that exist before the legislative changes will not be affected, unless additional funds are raised from retail investors after the new laws are in place.
“AIs include individuals whose net personal assets exceed S$2 million or whose income in the preceding 12 months is not less than S$300,000.”
In the high net worth space, (AIs) will have the option to benefit from the stronger and full range of regulatory safeguards available to retail investors.
As part of the changes, financial institutions will have to treat new customers who are AI-eligible as retail investors by default, unless the customers choose to “opt-in” to AI status. The latter could be those who wish to retain their easier access to a wider range of complex and risky products.
For existing AIs, FIs can continue to treat them as AIs, unless they choose to “opt-out” of AI status to benefit from the full range of capital markets regulatory safeguards available to retail investors.
Mr Lee Boon Ngiap, assistant managing director, capital markets, MAS, said that while the regulatory measures will strengthen regulatory safeguards for retail investors, they are “not a substitute for investor responsibility”.
“All investments carry risk, so investors should buy only products that they understand and have a level of risk that they are comfortable with. In addition to seeking advice from regulated financial advisers, we encourage investors to visit the MoneySENSE website, which has a wealth of financial educational information to help investors manage their money and better understand financial products,” he said.
MAS is still reviewing feedback on the remaining proposal to introduce a framework to rate retail investment products on their complexity and risk, and will issue a separate public response later.
Questions & Answers
Q.What type of non-conventional investment products will now fall under MAS's regulatory scope?
What type of non-conventional investment products will now fall under MAS's regulatory scope?
Non-conventional investment products previously outside MAS's scope, such as those linked to gold and other physical assets, will now be regulated. They will be classified either as debentures or investment funds, depending on their specific features.
Q.How will precious metals buy-back arrangements be regulated under the new rules?
How will precious metals buy-back arrangements be regulated under the new rules?
Precious metals buy-back arrangements involving gold, silver, and platinum, especially those with a guaranteed buy-back at an agreed price, will now be regulated as debentures. This is due to their common use as financial assets and collateral.
Q.What happens to existing arrangements that were in place before these legislative changes?
What happens to existing arrangements that were in place before these legislative changes?
Arrangements that already existed before the legislative changes came into effect will not be impacted by the new rules. However, if additional funds are raised from retail investors after the new laws are implemented, they will then be affected.
Q.How do the new rules affect accredited investors (AIs) and their default treatment by financial institutions?
How do the new rules affect accredited investors (AIs) and their default treatment by financial institutions?
Financial institutions must now treat new customers who are AI-eligible as retail investors by default, unless these customers actively choose to 'opt-in' to AI status. Existing AIs can remain as such or 'opt-out' for full retail safeguards.
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