The Monetary Authority of Singapore (MAS) on Wednesday announced that it will reduce the number of investment products subject to its new investor protection rules, following consultation with the local financial industry.
Under the new rules that took effect January 1 this year, investors must possess certain educational qualifications related to finance or have relevant work or trading experience to buy funds directly.
Those who fail to meet the MAS’s requirements had to take a series of online tutorials on the Singapore Exchange website, and answer the questions correctly in order to qualify to buy the funds, a first for investors anywhere in the world.
The regulations were criticised by some fund managers in the city-state fearing a loss of business.
In its new announcement, the central bank said that starting October this year, the investor protection rules will no longer apply to certain products as it refines the prescribed list of excluded investment products (EIPs).
The reclassification will include EIP-equivalent investment products listed on foreign exchanges, certain Collective Investment Schemes (CIS) and sub-funds of investment-linked life insurance policies (ILPs).
Intermediaries that can identify EIP-equivalent investment products listed on foreign exchanges will be allowed to treat these products as EIPs. An intermediary that is unable to determine whether a foreign-listed investment product is an EIP will be required to treat the product as an specified investment product (SIP).
“MAS notes that foreign-listed investment products, including EIPs, may carry a different set of risks and different levels of protection for investors from those offered locally. MAS will therefore require intermediaries to warn retail customers of the possible risks prior to the customer’s first purchase of a foreign-listed investment product from October 2012 and to obtain the customer’s acknowledgement on the risk warning disclosure,” the central bank said.
Meanwhile, a CIS will be classified as an EIP if its investment mandate permits investments only in EIPs, and prohibits it from engaging in securities lending or repurchase transactions
“The manager of such a CIS will be required to seek unitholders’ approval and ensure that the relevant SIP requirements have been complied with for each retail unitholder, before making any change in the investment mandate of the CIS that could cause it to become an SIP,” MAS added.
Singapore, which has rapidly developed its financial industry in recent years, is home to 783 mutual funds that oversee about US$70.0 billion, according to data tracked by Lipper, a Thomson Reuters company.
Overall, Singapore-based fund managers had S$1.4 trillion in assets under management at the end of 2010, according to MAS.