MAS consults on proposed amendments to notices and guidelines to enhance pre- and post-transaction safeguards for retail clients

27 August 2024

On 31 July 2024, the Monetary Authority of Singapore (“MAS”) published a consultation paper to seek feedback on proposed amendments to the following notices and guidelines to enhance pre- and post-transaction safeguards for retail clients: 

  • Notice on Recommendations on Investment Products (“FAA-N16”) 
  • Notice on Requirements for the Remuneration Framework for Representatives and Supervisors (“Balanced Scorecard Framework”) and Independent Sales Audit Unit (“FAA-N20”) 
  • Guidelines on the Remuneration Framework for Representatives and Supervisors (“Balanced Scorecard Framework”), Reference Checks and Pre-transaction Checks (“FAA-G14”)

The consultation closes on 30 August 2024.

MAS issued a consultation paper on 22 June 2021 to seek feedback on proposals to enhance pre- and post-transaction safeguards for retail clients (“First Consultation Paper”). The consultation closed on 3 August 2021, and MAS published its response to the feedback on 24 August 2023. The consultation paper published on 31 July 2024 seeks to effect the proposed changes set out in the First Consultation Paper. 

Notice on Recommendations on Investment Products (FAA-N16) 

MAS is consulting on amendments to FAA-N16 to: 

  • introduce requirements on pre-transaction checks (i.e. documentation reviews and call-backs) by financial advisory (“FA”) firms by moving the relevant paragraphs of FAA-G14 to FAA-N16; 
  • introduce the requirements for representatives to (i) check for and document a client’s Selected Client (“SC”) status, and (ii) make a formal declaration that the assessment of whether a client is an SC has been duly performed; 
  • introduce the requirement for a Trusted Individual (“TI”) to be present when investment recommendations are made to SCs, and the criteria to qualify as a TI; 
  • mandate the types of information that should be covered during a client call-back; and 
  • introduce the requirements for FA firms to audio record pre-transaction call-backs to SCs and clients of Selected Representatives (“SRs”), and to provide a copy of the audio recording to clients upon clients’ request. 

MAS is also consulting on other proposed amendments and clarifications relating to pre-transaction checks and safeguards for selected clients. 

Notice on Requirements for the Remuneration Framework for Representatives and Supervisors (“Balanced Scorecard Framework”) and Independent Sales Audit Unit (FAA-N20) 

MAS is proposing to amend to FAA-N20 to update the scope of post-transaction checks performed by the independent sales audit (“ISA”) unit. As pre-transaction call-backs must be recorded under the revised FAA-N16, the ISA unit will be required to perform a review of the recordings (or a summary document where the call-back is not recorded) under FAA-N20. 

Guidelines on the Remuneration Framework for Representatives and Supervisors (“Balanced Scorecard Framework”), Reference Checks and Pre-transaction Checks (FAA-G14) 

MAS is consulting on amendments to FAA-G14 to: 

  • remove the existing guidance on pre-transaction checks as these have been moved to FAA-N16; and 
  • update the guidance on documentation reviews, which are performed as part of the post-transaction checks.

Transitional period 

In view of feedback from FA firms on the need to make changes to their internal processes and systems, MAS will provide a transitional period of nine months from the effective date of the amended notices and guidelines. MAS encourages the industry to start early preparations to implement the revised measures. 

Reference materials 

The consultation paper is available on the MAS website www.mas.gov.sg.