The Financial Advisers (Amendment) Bill 2012 and the Securities and Futures (Amendment) Bill 2012, which both had their first reading in October, provide the MAS with substantially more powers to tackle cases where it believes financial advisers, or those acting for other financial companies, have not acted in the best interests of investors.
In a speech given earlier today prior to the passing of both Bills, Tharman Shanmugaratnam, minister for finance, deputy prime minister and chairman of the MAS, said the Bills would enhance the MAS’s powers to investigate and take regulatory action and “strengthen safeguards for the investing public”.
Some of the more significant changes to the Financial Advisers Act mirror those the MAS is proposing to make to the Securities and Futures Act.
Specifically, the change will mean the MAS will have the power, for example, to revoke the licence of an individual as a representative on the public register in a wider range of situations, including where directions issued under the SFA have been breached or where the licensee or representative has not acted in the client’s best interests.
The MAS will also be able to enter premises without a warrant in certain circumstances and to apply for search warrants without having first to issue a production order “if there are reasonable grounds for suspecting that documents required as evidence would be concealed, removed, tampered with or destroyed”.
The MAS said this amendment would give it powers similar to those held by the securities regulators in Australia and the UK.
The second key amendment to the Financial Advisers Act will be to widen the scope of provision on false or misleading statements.
Specifically, the Bill widens the scope of an IFA firm’s obligations when communicating and dealing with customers. The MAS said it had been an offence under the existing Act to make a false or misleading statement only where the statement is made with intent to deceive.
The MAS said the amendments widen the scope in two ways:
“First it will cover all statements made by the firm in connection with its financial advisory services, such as statements relating to the features or risks of an investment product.
“Second, the Bill extends the law to cover negligent or reckless dissemination of false or misleading information, and not just statements made with the intent to deceive. It will make it an offence for a financial advisory firm to disseminate such information as long as it ought reasonably to have known that a statement is false or misleading.
“It will also be an offence to do so if the financial advisory firm has not cared to ascertain if a statement is true or false. These amendments do not seek to impose liability on financial advisory firms or their representatives if they have acted honestly, carried out the necessary due diligence and have reasonable basis for the statements that they make.”
Concluding his speech, Shanmugaratnam said: “MAS will continue to review its regulatory framework for the provision of financial advisory services to ensure that investors are treated fairly in their dealings with financial advisers, while allowing for competition and sustainable growth in the financial advisory industry.”