MAS to Tighten Rules on Structured Investment Products

Fol­low­ing the fiasco of the fail­ure of the Leh­man Minibonds and DBS High Notes 5, Mon­et­ary Author­ity of Singa­pore (MAS) will be tight­en­ing the rules and imple­ment tough­er laws to pro­tect con­sumers. All new invest­ment products will have a 3–4 pages of sum­mary sheet called “Product High­light Sheet”  that answers 12 tough ques­tions that investors may have. These will include min­im­um invest­ment amount, fees and charges, the worst case scen­ario and  how the invest­ment can be exited. The fin­an­cial advisors are expec­ted to go through the sum­mary sheet with the investor in detailed too.

MAS will also require fin­an­cial insti­tu­tion to cat­egor­ize the “com­plex” invest­ment product. Com­plex invest­ment products will be defined as any product that has deriv­at­ives embed­ded in it. These products are in gen­er­al more dif­fi­cult to under­stand. There­fore, fin­an­cial insti­tu­tion is sup­posed to provide com­pre­hens­ive advice and to determ­ine if the per­son is suit­able for such product.

Lastly, bank tell­ers will not be allowed to refer the cus­tom­ers to the wealth/relationship man­ager to advise on the invest­ment product. The bank will have to stop giv­ing refer­ral fee to the bank tell­er to curb such rampant prac­tice pre­vi­ously.

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