MAS makes financial advice requirement optional

The decision follows MAS’ consultation on changes to Product Highlights Sheets and distribution safeguards for complex products

The Monetary Authority of Singapore (MAS) will remove the mandatory financial advice requirement for most investors buying complex products, as it shifts towards a more disclosure-based framework.

The decision follows MAS’ consultation on changes to Product Highlights Sheets and distribution safeguards for complex products.

Investors will be able to decide whether they want financial advice before investing, unless they fall within a group that MAS says requires additional protection.

Complex products include structured notes and derivatives. Investment-linked policies will also require a Product Highlights Sheet and be classified as complex products once the changes take effect.

MAS noted that the changes reflect how digitalisation has affected the way retail investors access information and make investment decisions.

Product Highlights Sheets will be enhanced to make the key features and risks of complex products clearer.

Financial institutions will also need to provide pre-transaction alerts before investors buy such products.

These alerts will remind investors to review product documents carefully, complete a learning module on complex products or seek financial advice where needed.

Investors who fail the Customer Knowledge Assessment must be warned that complex products may not be suitable for them.

MAS will also allow investors to receive a shorter version of the alerts for subsequent complex product transactions within the same month if they have already traded in such products during that period.

Stronger safeguards will remain for selected clients, including investors who meet at least two criteria relating to age, English proficiency and education level.

These investors will still need financial advice before investing in complex products unless they pass the Customer Knowledge Assessment and choose to opt out.

MAS will not proceed with its earlier plan to introduce a Product Knowledge Assessment as an alternative to the Customer Knowledge Assessment.

Instead, it will work with administrators of learning modules on complex products to improve investor education and knowledge evaluation.

Lim Tuang Lee, Assistant Managing Director (Capital Markets), MAS, said: These measures foster an accessible and dynamic market.

They acknowledge the growing sophistication of investors who can self-direct and analyse their own investments while catering to the needs of selected investors that may continue to require additional support and safeguards, he said.