Industry watchers welcome changes to Securities Act

A DBS outlet at Suntec City.
A DBS outlet at Suntec City. PHOTO: ST FILE

Wide-ranging changes made to the Securities and Futures Act (SFA) are a positive move that will ramp up investor protection and improve market confidence, industry watchers said.

Parliament passed the SFA Amendment Bill on Monday to tighten the classification of accredited investors, a status necessary for them to be sold risky and sophisticated investment products.

Previously, those with over $2 million of personal assets could qualify to make such investments but new rules kicking in will limit the contribution of an individual's primary residence to $1 million, at most, of the $2 million.

Along with an additional mechanism to let investors choose and remain "unaccredited", it will now be harder for uninformed or illiquid investors to be exposed to risky investments.

DBS consumer banking and wealth management head Tan Su Shan said the changes are positive for two reasons. "Firstly, customers will be required to have higher disposable assets. Secondly, the new regulations will amplify the point to customers that they have a big role to play in making investment choices."

She said DBS has similar practices in place, so the new rules will not be an issue for the bank.

The Bill also deals with section 199 of the SFA, which prohibits materially false or misleading disclosures that may affect share prices. The Monetary Authority of Singapore will be able to take enforcement actions regardless of the price effect of these disclosures.

National University of Singapore associate professor and governance expert Mak Yuen Teen said this part will be "most important in raising investor confidence in the capital market".

"It has proven very difficult to enforce section 199, as we have seen in a number of cases where arguably material false or misleading disclosures have been made, but there have been no enforcement actions or successful actions pursued because it was difficult to prove that false or misleading disclosures have a material effect on price or decisions to buy, hold or sell securities," Mr Mak said.

With the amendment, it is easier to pursue enforcement actions in such cases, he noted.

A version of this article appeared in the print edition of The Straits Times on January 11, 2017, with the headline 'Industry watchers welcome changes to Securities Act'. Print Edition | Subscribe