The competition watchdog has imposed penalties of almost $1 million in total on 10 financial advisory (FA) firms for infringing the Competition Act. The decision is the first of its kind made against firms in the financial services industry.
The 10 were found to have engaged in an anti-competitive agreement in 2013 to pressurise their competitor iFast Financial to withdraw its offer of a 50 per cent commission rebate on competing life insurance products on the Fundsupermart.com website.
iFast is the parent of online unit trust distributor Fundsupermart.
The 10 companies, which have been hit with penalties totalling $909,302, are: Avallis Financial (previously known as First Principal Financial); Cornerstone Planners; Financial Alliance; Frontier Wealth Management; IPP Financial Advisers; JPARA Solutions; Professional Investment Advisory Services (PIAS); Promiseland Independent; Ray Alliance Financial Advisers; and Wynnes Financial Advisers.
Mr Toh Han Li, the chief executive of the Competition Commission of Singapore (CCS), said yesterday: "The Fundsupermart offer was an innovative one that allowed iFast to reach out to a wide client base through an established online platform, save on distribution costs, and pass on these cost savings to consumers through a significant commission rebate."
The Competition Commission of Singapore (CCS) noted in its report yesterday that eight financial advisory firms met on May 2, 2013, to discuss the Fundsupermart promotion offer.
The offer, which was launched on April 30, 2013, provided a 50 per cent commission rebate off life insurance products from providers sold through its website.
The eight firms - Avallis, Cornerstone, Financial Alliance, Frontier, JPARA, Promiseland, Ray and Wynnes - held the discussion at a management committee meeting of the Association of Financial Advisers.
Financial Alliance was appointed as their representative to pressurise iFast into withdrawing the Fundsupermart offer.
The firm spent the next two days urging iFast to withdraw its offer.
During this time, two other firms, IPP and PIAS, declared their support for Financial Alliance. IPP and PIAS also asked iFast directly to remove the offer.
iFast did in fact withdraw the rebate offer on the afternoon of May 3.
It continued to sell life insurance products and only reintroduced a new 30 per cent commission rebate for specific life insurance products on Fundsupermart's website last August.
Pressurising iFast into withdrawing the Fundsupermart offer prevented the life insurance market from shifting to a more competitive state, Mr Toh added.
"CCS will enforce the law, where necessary, to ensure that new and innovative players can access markets and compete fairly," he said.
The CCS said that 10 firms "contributed significantly" to iFast's revenues as they used its distribution platform so they were able to exert pressure on the the company.
PIAS and IPP received the highest penalties of $405,114 and $239,851 respectively.
The CCS took into account many factors, including each of the 10 firms' life insurance business turnover, as well as aggravating and mitigating factors.
Mr Vincent Ee, the managing director of Financial Alliance and president of the Association of Financial Advisers Singapore, said his firm embraces fair competition but believes that a commission rebate as an inducement is "inappropriate and acts against consumer interest".
IPP said that when it communicated with iFast on the rebate offer, it was acting as a corporate customer seeking clarification with iFast, which it deems as a long-term service provider. iFast was in possession of thousands of IPP clients' records to provide them the service.
The 10 firms can file an appeal within the next two months.
iFast Corporation chief executive Lim Chung Chun said: "We are definitely not pursuing legal action against the 10 FA firms. No reason for us to follow up on this."
Mr Seah Seng Choon, executive director of the Consumers Association of Singapore, said: "Such unprofessional behaviour aimed at keeping premiums artificially high and depriving consumers' access to lower cost insurance is clearly unacceptable. They distort market pricing and act against the interest of consumers at large."