On 5 March 2013, the Monetary Authority of Singapore (the “MAS”) issued a consultation paper seeking feedback on the recommendations of the Financial Advisory Industry Review Panel (the “FAIR Panel”) that the Fair Panel released in a report on 16 January 2013. While agreeing in principle with the FAIR Panel recommendations, the MAS added its own recommendations and sought feedback on the FAIR Panel recommendations as well as its own recommendations (collectively the “FAIR recommendations”).
The FAIR recommendations will raise the standards and professionalism of the financial advisory industry, and encourage greater efficiency in the distribution of life insurance and investment products. It will also create a more competitive market for insurance products and empower consumers to make informed decisions through better access to information.
On 30 September 2013, the MAS issued its response to the feedback received from the public consultation.
In the latest development, on 2 October 2014, the MAS issued a consultation paper (the “Consultation Paper”) seeking feedback on draft legislative provisions and amendments to the Financial Advisers Act (the “FAA”) and Insurance Act (the “IA”) as well as draft changes to the relevant MAS Notices and Guidelines to implement the FAIR recommendations. The proposed draft changes are set out in the Annexes to the Consultation Paper. The consultation closes on 3 November 2014.
The MAS is also working to implement other FAIR recommendations that are not set out in the Consultation Paper, including those that do not require legislative provisions and amendments, as well as others which the MAS will be consulting with the industry separately. The MAS aims to implement the full suite of FAIR initiatives in 2015.
Changes to be implemented under the Consultation Paper
Some of the areas addressed in the Consultation Paper are as follows:
- Putting in place a continuing professional development framework for financial advisory representatives (“FA Reps”)
- Minimum base capital, financial resources and professional indemnity insurance coverage for licensed financial advisers (“LFAs”)
- Corporate track record for LFAs
- Minimum experience of CEO for LFAs and staffing requirements for LFAs
- Independent compliance function for LFAs
- FA activities of registered insurance brokers
- Non-FA activities conducted by LFAs and FA Reps
- Use of introducers by FA firms
- Commission payout structure of regular premium life insurance products
- Balanced scorecard framework for remuneration of FA Reps and supervisors
- Banning product-related incentives for FA firms, FA Reps and supervisors
- Facilitating comparison of and cheaper access to life insurance products via an online web aggregator which the MAS targets to launch in the first quarter of 2015
- Powers to provide for transitional arrangements and specify how existing contracts should be affected
Draft changes to FAA to authorise inspections by foreign regulatory authorities
Currently, the MAS’ powers to allow foreign regulatory authorities (“FRAs”) (or their appointed agents) to inspect financial institutions in Singapore do not extend to FA firms. The MAS proposes to align the FAA with other Acts under its purview by providing for such powers. Such inspections will allow FRAs from the parent jurisdictions that have regulatory oversight of the FA firm in Singapore to carry out their supervisory functions.
The following materials are available from the MAS website www.mas.gov.sg: