The Guidelines on Fair Dealing (“Guidelines”) was introduced in 2009 under the Financial Advisers Act and apply to the marketing and distribution of investment products, and the provision of financial advisory services. The Guidelines are focused on retail customers but there is expectation to apply the principles to other types of customers. On 14 December 2022, MAS issued a consultation paper on proposals to enhance the Guidelines. MAS has responded and the updated Guidelines take effect immediately.
A summary of the key responses is as follow.
- Applicability
- Apply to all FIs, financial products and services (including incidental services), and customers
- Consider how best to achieve the outcomes in the Guidelines in a proportionate manner
- In the case of Foreign Offices and Foreign Related Corporations, the principles and outcomes in the Guidelines apply except where they are exempted from specific conduct requirements under the Exemption Frameworks for Cross-Border Business Arrangements
- Process to assess applications to purchase financial products and services
- Conduct an objective assessment
- When rejecting applications or accepted with additional conditions, provide adequate explanation to help customers better appreciate the rationale
- Expectations on manufacturers
- Aligning the design of a product or service to the needs and financial interests of the target segment
- Assessing its performance under different market conditions or scenarios and therefore its likely benefit or value to customers
- Conduct tests before launch and monitor customer feedback after launch
- Provision of information to customers
- All advertisements should be approved by the FI’s senior management or designated person(s)
- Instead of illustrating expected investment returns net of fees, FIs will be expected to explain to customers how the various fees and market conditions impact the customers’ net returns on the investment
- Use of contractual clauses with unilateral right to revise the terms and conditions (ie. Right of review (“RoR”))
- Internal framework in place governing the approval to exercise RoR clauses
- Disclose to customers the specific circumstances that FI would exercise RoR clauses during the normal course of its business
- RoR clauses should not be exercised lightly
- Where there is potentially an adverse or material impact to customers from exercising an RoR clause, seek approval, consider measures to mitigate the detriment, and disclose early to customers
For the full details of the consultation responses, please refer to the MAS website https://www.mas.gov.sg/publications/consultations/2024/consultation-paper-on-revisions-to-guidelines-on-fair-dealing
The revised Guidelines is available in https://www.mas.gov.sg/regulation/guidelines/guidelines-on-fair-dealing—board-and-senior-management-responsibilities-for-delivering-fair-dealing-outcomes-to-customers
Disclaimer: The information, views or opinions expressed are provided for general information and should not be relied upon as legal or professional advice.