Financial Services Regulatory Singapore Client Alert July 2015 Public Consultation on Market Conduct Rules for Marketing and Distribution Arrangements of Financial Institutions at Retailers and Public Places On 23 July 2015, the Monetary Authority of Singapore ("the MAS") issued a Consultation Paper proposing Market Conduct Rules for Marketing and Distribution Arrangements of Financial Institutions at Retailers and Public Places ("Consultation Paper"). To mitigate potential market conduct risks posed to consumers, including harassment of consumers, confusion of the retailer’s role, enticement and mishandling of proceeds, the MAS is proposing a set of Market Conduct Guidelines and prior notification requirements to be imposed on: Who? The following financial institutions ("FIs"): banks, non-bank credit card and charge card licensees, holders of capital markets services licence, licensed financial advisers, insurance companies and their intermediaries; and What? In relation to the following products: banking products and services, including credit cards, charge cards and unsecured facilities, capital markets products and services, life insurance and general insurance, including accident and health insurance. However, closed-door events such as seminars organised in an auditorium by invitation or subject to registration, as an example, would be excluded from the supervisory approach proposed in this Consultation Paper. We highlight the notable proposals in the Consultation Paper below. The MAS is inviting comments and views by 24 August 2015, including on whether the proposed requirements should be extended to other classes of FIs or products. Please see this link for further details: Consultation Paper. The key proposals are as follows: 1. Market Conduct Guidelines The proposed Market Conduct Guidelines would set out MAS' expectations on the controls and safeguards that FIs should put in place to address potential market conduct risks arising from marketing and distribution arrangements and would make the board and senior management of the FIs accountable for ensuring that such proper controls are in place. The proposed safeguards are as follows: For further information please contact Stephanie Magnus +65 6434 2672 firstname.lastname@example.org Liew Ying Yi +65 6434 2531 YingYi.Liew@bakermckenzie.com Baker & McKenzie.Wong & Leow 8 Marina Boulevard #05-01 Marina Bay Financial Centre Tower 1 Singapore 018981 www.bakermckenzie.com Regulatory / Compliance Firm of the Year (Singapore) 2010 - 2014 Asian-MENA Counsel 2 Client Alert June 2015 Proposed Safeguards 1. Callbacks. FIs should conduct call-backs to all customers prospected at retailers and public places before or within the free-look or cooling-off period, to ensure that customers have understood their transactions conducted at such locations. FIs are expected to implement this safeguard for the sale of life, general and accident and health insurance products, and collective investment schemes. 2. Mystery shopping and site visits. FIs should conduct regular mystery shopping and site visits to monitor and ensure that the marketing, sales and advisory practices of representatives at retailers and public places are conducted in line with internal standards and procedures as well as the Market Conduct Guidelines. FIs are not required to implement this safeguard for the sale of general insurance products where the insurance purchased is related to the product or service that the customer is buying, e.g. sale of travel insurance at a travel fair. 3. Monitoring complaints. FIs should separately track and monitor complaints arising from their marketing, sales and advisory activities at retailers and public places. Complaints statistics should also be reported to senior management on a regular basis. 4. Register. FIs should maintain a register containing information on their marketing and distribution arrangements at retailers and public places. 5. Professional manner. FIs and their representatives should conduct and present themselves in a professional manner at all times when prospecting for and dealing with customers at retailers and public places. 6. No undue pressure. FIs and their representatives should only prospect for customers in the immediate vicinity of the FI’s sales booth. They must not cause annoyance by being unreasonably persistent or by placing undue pressure on members of the public to purchase any financial products or services. 7. Upfront disclosure. FIs should ensure that their representatives clearly disclose upfront their identities and the FI that they are representing when they prospect for customers. Where representatives of an FI market third-party products, they should disclose and explain to customers the relationship between their FI and the third-party product provider. 8. Proper sales training. FIs should ensure that their representatives undergo training on proper sales and advisory conduct at retailers and public places. 9. Good compliance record. FIs should ensure that their representatives who are assigned to or stationed at retailers and public places have a good compliance record. 10. Remuneration. FIs should ensure that the remuneration and incentives paid to representatives for financial products and services sold at retailers and public places are not higher than the remuneration and incentives for financial products and services sold at other locations or channels 11. Gifts. FIs should ensure that any gift offered to customers by FIs and/or the retailer does not influence the decisions of customers to purchase any financial products and services. FIs should also ensure that the details of gifts are not prominently displayed or actively promoted to influence customers’ purchase decisions. 12. Sales booth space. FIs should ensure that the space allocated for their sales booth is adequate and conducive for representatives to conduct a proper sales and advisory session. 13. Payment controls. FIs should have adequate controls in place to ensure that payments collected from customers at retailers and public places are properly handled and securely kept. 14. Disclosure of relationship with retailer. For FIs who market their financial products and services at retailers only, they should clearly disclose to consumers the relationship between the FI and the retailer, and each party’s roles and responsibilities. 15. No misleading co-branding. (For FIs who market their financial products and services at retailers only), they should ensure that their co-branding efforts with the retailer (if any) are not misleading or create any confusion among consumers as to the roles and responsibilities of the FI and the retailer. 3 Client Alert June 2015 2. Notification Requirements The MAS proposes to require FIs to notify MAS and submit information on their marketing and distribution arrangements at retailers and public places on a quarterly basis. An outline of the information to be submitted is as follows: Arrangements with duration shorter than one quarter. FIs will be required to furnish information on their plans to conduct marketing and distribution activities at retailers and public places in the next calendar quarter at least two months prior to the start of the next calendar quarter; and the actual activities that have been conducted in the preceding calendar quarter. Arrangements with duration one quarter or longer. FIs will be required to furnish information on any new arrangements at least two months prior to the start of the calendar quarter in which such arrangements will commence. Thereafter, they will need to notify MAS of any changes to the arrangement. Additional information. The MAS also proposes that FIs submit the following information in their quarterly submissions: o Details of market conduct complaints for marketing and distribution of products and services (e.g. inappropriate advice/misrepresentation/disclosure issues, aggressive sales tactics, unauthorised transactions, and issues on fitness and propriety of licensees), including the number of such complaints as well as the proportion of such complaints relative to the total number of market conduct complaints received by the FI; o Top five financial products or services sold at all marketing and distribution arrangements at retailers and public places in the preceding quarter; and o Details of any mystery shopping exercises, compliance visits and internal audits conducted in the preceding quarter. The consultation period ends on 24 August 2015. Please contact us if you have any comments or queries. Our Financial Services Regulatory Team Stephanie Magnus Principal Stephanie.Magnus @bakermckenzie.com Eunice Tan Senior Associate Eunice.Tan @bakermckenzie.com Selwyn Lim Associate Selwyn.Lim @bakermckenzie.com Liew Ying Yi Associate Yingyi.Liew @bakermckenzie.com Serene Chew Associate Serene.Chew @bakermckenzie.com ©2015 Baker & McKenzie. All rights reserved. Baker & McKenzie.Wong & Leow is a member of Baker & McKenzie International, a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a “partner” means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an “office” means an office of any such law firm.