Under the recently implemented regulation, devised in the wake of the Lehman Brothers “mini-bond” incident and similar cases, an intermediary selling an investment product must first assess a customer’s investment knowledge and experience. The measures were brought in to ensure inexperienced investors were not sold products they did not understand.
The regulation was introduced after industry consultation and the MAS said, after further feedback from the industry, it has decided to widen the scope of the prescribed list of Excluded Investment Products (EIPs). Funds excluded from the new customer knowledge assessment (CKA) regulation now include EIP-equivalent investment products listed on foreign exchanges, certain Collective Investment Schemes and sub-funds of investment-linked life insurance policies.
The MAS said the reclassification will take effect from October this year.
CKAs are intended for use when the investment product an intermediary is selling contain derivatives or have complex terms and features – recognised by the MAS as Specified Investment Products. Under the current regime, all foreign-listed investments are classified as SIPs because intermediaries in Singapore had informed the MAS that they could not determine the complexity of products listed overseas.
However, the MAS said the industry has now informed it that it expects to resolve this issue by implementing a system for foreign-listed investment products and that intermediaries will be able to identify and “tag” foreign-listed investment products as EIPs or SIPs and will be responsible for ensuring the accuracy of the tagging. This new system is expected to be ready by October.
The MAS said from October, intermediaries able to identify EIPs and SIPs accurately from foreign-listed funds, will be able to sell them as such.
On CIS funds, the MAS said from October it will reclassify a CIS as an excluded fund, if its investment mandate invests only in EIPs and prohibits it from engaging in securities lending or repurchase transactions. The MAS added the fund manager of the CIS will be required to seek unitholders’ approval and ensure the relevant SIP requirements have been adhered to for each retail unitholder.
The decision to widen the scope with regards to CIS funds was again taken following feedback from the industry, specifically fund managers, who said there may be a need to develop CIS products which do not engage in securities lending or derivatives.
For more information regarding CKAs or the sale of investment funds in Singapore you may visit the MAS website