Under the current regime, ‘accredited investors’ are given the lowest level of protection by the regulator because they are considered to be better able to protect their own interests compared to those with less wealth.
However, the Monetary Authority of Singapore (MAS) – which released a statement on Tuesday – said this may not suit all investors who meet the prescribed wealth or income thresholds.
Currently, an individual must have personal assets exceeding S$2m ($1.4m, £900,000, €1.3m) or an annual income of at least $300,000 to qualify as an accredited investor.
Under fresh regulation, financial institutions will have to treat new customers who meet the AI criteria as retail investors, unless the client decides to opt-in to AI status.
Alternatively, existing AI customers will need to opt-out of AI status to benefit from the full range of regulatory safeguards available to retail investors.
The MAS pointed out that some AI investors may be willing to sacrifice the benefits of stronger regulatory safeguards to allow them easier access a wider range of complex and risky products.
Lee Boon Ngiap, assistant managing director of capital markets for the MAS, pointed out however that regulatory safeguards are not a substitute for investor responsibility.
“All investments carry risk, so investors should buy only products that they understand and have a level of risk that they are comfortable with,” he said.
Stronger safeguards for customers investing in ‘non-conventional’ products, such as collectively-managed investment schemes, will also be implemented in Singapore next year.
This means retail investors in non-conventional investment products will be granted the same regulatory safeguards as investors in capital markets products, and will be regulated either as debentures or investment funds under the Securities and Futures Act.
Once the new rules come into force next year, collectively-managed investment schemes will be regulated as collective investment schemes (CIS).
The MAS said any arrangements which exist before the legislative changes will not be affected, unless additional funds are raised from retail investors after the new laws are in place.
The MAS advised investors to check the MAS website for the list of registered products. Nhiap also advised investors to seek advice from regulated financial advisers.
These new measures follow feedback from a consultation in July.