WhyItMatters

More protection for investors

The Monetary Authority of Singapore.
The Monetary Authority of Singapore.PHOTO: ST FILE

The latest measures to bring previously unregulated investments linked to gold buyback and real estate schemes under the fold of the Monetary Authority of Singapore (MAS) was certainly welcome news to retail investors.

Some would say it is long overdue, with memories of scams involving precious metals, raw land and property with no recourse, still fresh in the minds.

But what protection do the measures provide to the man in the street? Once the regulations are in place, such schemes cannot be sold to retail investors without the MAS first authorising or recognising them. Sellers will have to make their scheme details and business plans known to the authorities and, in some cases, register prospectuses.

They will also have to disclose material information to consumers so that they can make well-informed decisions.

These requirements will make it harder for such schemes to offer lofty promises and claims to retail investors that they cannot deliver.

Under the new rules, some schemes can no longer solicit funds from the public but can do so only from investors who are deemed more sophisticated.

Consumers can expect to be given licensed financial advice from trained advisers on some of these products and be brought through an advisory process where a reasonable basis for recommending them is established. They may also seek recourse when these investments fall through.

The public is encouraged to check the MAS website for the list of MAS-registered prospectuses, authorised retail investment funds and regulated financial institutions.

Overall, the new measures will enhance consumer protection but investors have to continue to play their part by beefing up their financial literacy and being cautious when considering investments.

Legislation on the new measures will be tabled in Parliament next year. The MAS is also considering establishing a complexity/risk ranking framework for retail investment products, so watch this space.

A version of this article appeared in the print edition of The Straits Times on September 24, 2015, with the headline 'More protection for investors'. Print Edition | Subscribe