Under the new Regulatory Regime for Listed and Unlisted Investment Products, retail financial investors will be required to prove that they know what they are getting into before they can buy certain investment products.
However, the burden of the new regime falls on financial institutions, which must ensure that their clients have financial knowledge or experience before conducting business with them, said the Monetary Authority of Singapore (MAS).
The new regime covers popular unit trusts, exchanged traded funds (ETFs) and structured deposits, but does not include shares, depository receipts that represent shares, company warrants, right issues, plain vanilla bonds or debentures, REITs, business trusts, foreign exchange contracts and life insurance policies.
For the sale of unlisted investment products, financial advisers need to perform a customer knowledge assessment prior to a sale, in order to evaluate if customers have the experience or knowledge to understand the product’s features and risks, said the MAS.
The assessment should determine if the client has any finance-related background relevant to the product, investment experience or work experience related or similar to the products.
For trading of listed products, the remisier needs to perform a customer account review prior to opening an account. The review aims to find out if the customer wishing to trade the listed security has the pertinent knowledge or experience to understand the derivatives’ features and risks, prior to the approval of the customer’s account for trading the products.
Remisiers could ask those who do not have the relevant qualifications if they want to take an Internet-based tutorial on products, said MAS.
While current clients are not exempted from the review, remisiers will be given a transition period to meet the requirement.
The tougher regime is due to be imposed as soon as possible.