Specified Investment Products (SIP)
MAS REQUIRES INTERMEDIARIES TO ASSESS INVESTMENT KNOWLEDGE AND EXPERIENCE OF RETAIL CUSTOMERS
28 July 2011… The Monetary Authority of Singapore (MAS) has introduced new requirements for intermediaries to formally assess a retail customer's investment knowledge and experience before selling certain investment products (Specified Investment Products SIPs) to the customer.
2 These new requirements will apply to the sale of Specified Investment Products (SIPs), which are all investment products other than those listed in the Annex1. These include listed Specified Investment Products SIPs such as futures and exchange traded funds, and unlisted Specified Investment Products SIPs such as investment linked insurance policies.
3 Under the new measures, intermediaries must conduct a Customer Knowledge Assessment to assess whether a customer has the relevant knowledge or experience to understand the risks and features of an unlisted Specified Investment Products SIP. In the case of listed Specified Investment Products SIPs, intermediaries have to conduct a Customer Account Review to ascertain whether the customer has the relevant knowledge or experience to understand the risks and features of complex structures or derivatives, before approving the customer’s account to trade such products. The intermediary will inform the customer if he is assessed not to possess the relevant knowledge or experience. If the customer still intends to proceed with the transaction, the intermediary must offer advice to the customer. MAS will not allow “execution only” service in such cases. Safeguards, such as a lower trading limit than what the intermediary would otherwise have imposed, will also be put in place before the customer is allowed to proceed with the transaction. Intermediaries must comply with the new requirements in their dealings with all customers, new and existing.
4 MAS has introduced these (Specified Investment Products) stronger measures and enhanced requirements to further safeguard customers’ interests. We aim to ensure that intermediaries recommend suitable investment products to customers, particularly those who may not have the relevant investment knowledge or experience.
5 The new Specified Investment Products requirements follow from MAS’ consultation paper on the Regulatory Regime for Listed and Unlisted Investment Products that was published on 28 January 2010, and MAS’ subsequent response to feedback received that was issued on 21 October 2010.
6 The Specified Investment Products requirements will come into effect on 1 January 2012 and will be introduced by means of a new Notice on the Sale of Investment Products [Notice No. SFA 04-N12] and a new Notice on Recommendations on Investment Products [Notice No. FAA-N16]. A transition period of five months will be provided for intermediaries to put in place the necessary processes to meet the requirements. In the meantime, intermediaries intending to sell Specified Investment Products SIPs should start adopting the proposed measures as good practice in conducting business with customers. MAS has also issued a guide to help consumers understand the requirements and what they can expect from their financial institutions when purchasing Specified Investment Products SIPs.
7 In line with the new requirements, all representatives who deal in or provide advice on Specified Investment Products SIPs must pass additional examinations on product knowledge and analysis. MAS is working with the Institute of Banking & Finance and the Singapore College of Insurance to introduce the additional examinations by end 2011.
See Annex for details list next.