On 29 April 2015, the Monetary Authority of Singapore (the “MAS”) announced that, taking into account feedback from the industry, it is relaxing the requirement for assessment of investment knowledge and experience of retail customers in respect of the sale of investment funds which invest only in simple products such as shares or gold, but may use derivatives for efficient portfolio management including the hedging of risks. These investment funds will include some exchange traded funds (“ETFs”) listed on the Singapore Exchange Securities Trading Limited (the “SGX-ST”).
By way of background, the MAS requires intermediaries for the sale of products prescribed as Specified Investment Products (the “SIPs”) to assess whether a retail customer (being an individual who is not an accredited investor, institutional investor or an expert investor) has the relevant knowledge or experience to understand the risks and features of such products before offering the products to him. Investment products that contain derivatives or have complex terms and features are classified as SIPs. Previously, all investment funds which used derivatives were classified as SIPs.
With effect from 29 April 2015, investment funds which make limited use of derivatives will be made more accessible to retail investors. These funds are prescribed as “Excluded Investment Products” (“EIPs”) and may now be sold to retail investors without an assessment of these investors’ investment knowledge or experience.
Investors may check with their brokers or financial advisers for a list of ETFs listed on the SGX-ST that are classified as EIPs and other unlisted investment funds that are classified as EIPs. The ETFs that will be converted to EIPs will be predominantly cash-based, namely, the ETF funds will buy into the underlying securities to track the benchmark indices.
To further promote ETFs as investment products, the Singapore Exchange Limited (the “SGX”) will waive ETF clearing fees for both institutional and retail investors for a promotional period of 1 June 2015 to 31 December 2015. In order to encourage institutional investors to report over-the-counter ETF transactions to the SGX for greater transparency, there is also a waiver of clearing fees for ETF block trades for a period of about three years, between 2 February 2015 to 31 December 2017.
- MAS media release dated 29 April 2015 entitled “Easier Access to Simpler Funds for Retail Investors”
- SGX press release dated 29 April 2015 entitled “Diversification made simple through SGX ETFs”
- MAS Notice SFA 04-N12 - Notice on the Sale of Investment Products
- MAS SFA04-N12 (Amendment) 2015
- MAS Notice FAA-N16 - Notice on Recommendations on Investment Products
- MAS Notice FAA-N16 (Amendment) 2015