SINGAPORE - Safeguards for retail investors have been stepped up under changes to the Securities and Futures Act passed by Parliament on Monday (Jan 9).
The amendments to the law, tighten the classification of accredited investors and strengthen the governance and enforcement powers of the Monetary Authority of Singapore(MAS).
The changes are significant and timely, particularly in enhancing regulatory safeguards for retail investors and improving the transparency of the capital markets, Minister for Education (Higher Education and Skills) Ong Ye Kung told the House.
One key change makes it harder for individuals to qualify as accredited investors. The current rules define those with over $2 million of net personal assets as accredited investor, which is a status needed to be sold sophisticated investment products.
"The Bill tightens the way net personal assets is calculated, such that the net equity of an individual's primary residence can only contribute up to $1 million of the $2 million threshold," said Mr Ong, who is a board member of the Monetary Authority of Singapore(MAS).
"MAS also intends to introduce… an opt-in regime for the accredited investor class. So even if an investor qualifies as an accredited investor, intermediaries cannot automatically treat him as such," he added.
These changes are expected to keep unaware or illiquid investors from being inadvertently exposed to risky products. Rules on this front have been scrutinised amid allegations that the spate of high-yield bonds that defaulted last year were sold to uninformed investors.
Another key part of the amendments will standardise the maximum penalty awarded in cases involving market misconduct to be either $2 million or three times the amount of benefits gained or losses avoided, whichever is greater.
This is an enhancement of the current rules, which cap the penalty at three times the benefits gained or losses avoided, subject to a minimum of $50,000.
"So where the benefits gained or losses avoided are small, the civil penalty is effectively $50,000, and may not adequately reflect the culpability of the offender," Mr Ong said.
Meanwhile, the MAS will designate the Singapore Interbank Offered Rate and the Swap Offer Rate. This means MAS will regulate the entities that manage these key financial benchmarks to ensure a credible rate-setting process.
Mr Saktiandi Supaat (Bishan-Toa Payoh GRC) and Ms Foo Mee Har (West Coast GRC) supported the move to ramp up protection of retail investors against potential malpractices in the financial industry.
But Ms Foo urged the MAS to maintain a balanced regulatory approach to ensure the rules do not stymie Singapore's growth as a competitive financial centre.
Mr Henry Kwek (Nee Soon GRC) added that regulations should be backed by more efforts to promote financial literacy among the public.