On July 21 2014, the Monetary Authority of Singapore (the “MAS”) issued a consultation paper entitled “Consultation Paper on Proposals to Enhance Regulatory Safeguards for Investors in the Capital Markets” (the “Consultation Paper”)1 , in which a number of important regulatory changes impacting the offer of investment products are proposed.
This briefing provides an overview and summary of the regulatory changes proposed by the MAS.
Overview of Consultation Paper
The MAS is consulting on proposals in the following three key areas:
1. Regulating non-conventional investment products
In recent years, there has been an increase in the number of non-conventional products that are offered to retail investors in Singapore as alternative investments. The MAS has noted that some of these products exhibit essentially the same characteristics as regulated capital markets products, but are structured in a manner that take them outside the regulatory scope of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”) and the Financial Advisers Act, Chapter 110 of Singapore (the “FAA”). These typically involve investors taking a direct interest in physical assets (as opposed to a securitized interest with the physical asset as the underlying).
With the intention that the current regulatory safeguards under the SFA and FAA should also be extended to investors in such non-conventional products, the MAS has proposed to bring under its regulatory purview:
(i) buy-back arrangements involving gold, silver and platinum (“Precious Metals”); and
(ii) collectively-managed investment schemes in respect of property that display all characteristics of a regulated collective investment scheme, other than the pooling of investors’ contributions.
2. Introducing complexity-risk ratings framework for retail investment products
The MAS has also proposed to:
(i) introduce a framework by which all investment products can be rated for their complexity of structure, and the risk that investors may lose some or all, or more than their principal investment amount; and
(ii) require product issuers to rate their retail investment products and disclose these ratings in regulated offering documents and through other stipulated channels.
3. Refining non-retail investor classes, introducing opt-in regime for accredited investors
The MAS has proposed refinements to the existing non-retail investor classes to enhance investor protection, as well as to streamline and rationalize the investor classes. These include the introduction of an opt-in regime for accredited investors, under which a person who qualifies as an accredited investor will, by default, be treated as a retail investor unless such person elects to be treated as an accredited investor.
Summary of key changes proposed in the Consultation Paper
Invitation for comments Please refer to the Consultation Paper for the complete set of proposals as well as the list of consultation questions. The deadline for comments and feedback to be submitted to the MAS is September 1, 2014.