Tuesday 22 July 2014

Singapore regulator plans new rules to shield investors

The Monetary Authority of Singapore (MAS) yesterday proposed a set of regulations to boost investor protection, with new rules for investments linked to land banks, gold and other physical assets - following several scams that have left retail investors high and dry.

Its latest move, laid out in a consultation paper, means investment schemes linked to land-banking and other physical assets such as most precious metals, will no longer be made available to retail investors.

MAS also wants all retail investment products to be rated on their complexity and risk - a decision that David Gerald, president of the Securities Investors Association (Singapore), said would provide needed guidance for retail investors. "It's better late than never," he added.

The central bank plans to tweak its definition of collectively managed investment schemes (CIS) to include schemes that involve pooled profits and remove investors from the daily control of the investments. This will apply to land-banking, which would then be classified as a CIS.

All CIS must meet standards set out in the CIS Code, which ensures that the assets involved are liquid. Since land cannot be deemed liquid, unlike securities, it would no longer be offered to retail investors.

The above article comes from The Business Times and is really great news.

The current (highly unsatisfactory, in my opinion) situation is described by blogger Martin Lee:

Singapore’s approach is slightly different. It specifics a list of financial instruments that are regulated. This includes the usual investments like shares, unit trusts and life insurance. These regulated products can only be sold by licensed representatives who meet the prescribed requirements. Anyone who is not licensed but tries to give individual advice on them will be contravening the regulations (The irony is that you do not violate anything if you conduct a seminar to few hundred people on the same topic).

If a product falls outside this list, it is considered not regulated by MAS. The current position is that any product that does not fall under the scope of MAS is not up to them to regulate and hence they will not stop companies from selling such products. For example, land is considered a real asset so any sale is like a property purchase on a willing buyer and seller basis.

Martin Lee writes also about the proposed changes in the consultation paper.

This blog has also warned several times for unregulated schemes, some of which have collapsed or are likely to collapse in the near future.

Comments on the consultation paper can be submitted latest by September 1, 2014. I hope for a quick implementation of the new framework and subsequent enforcement of all kind of dodgy investment schemes. It is long overdue.

Malaysia (Securities Commission and Bank Negara Malaysia) also should take note, they are dealing with the same situation.

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