Come 1 Jan 2012, intermediaries have to formally assess a retail customer's investment knowledge and experience before selling certain products. This is to comply with the new regulations from The Monetary Authority of Singapore (MAS). Advisers who sell Specified Investment Products (SIPs) will also have to pass additional examinations on product knowledge and analysis.
The affected investment products are:
1. Excluded Investment Products (EIP) such as shares, unit trust and insurance
2. Listed SIPs such as exchange-traded fund (ETF) and futures; and3. Unlisted SIPs such as investment-linked insurance policies
Therefore, if a client wants to invest in any unlisted SIP, he will have to pass the Customer Knowledge Assessment (CKA) to ascertain that he has the relevant knowledge or experience to understand the risks and features of the product. On the contrary, if he decides to invest in listed SIPs, he will have to pass the Customer Account Review (CAR) to ensure he understands the risk of complex structures or derivatives before he is allowed to trade such products.
A client is not allowed to trade the specified product if he fails to pass the test. However, if he insists to go ahead with a transaction, the financial planner must offer advice to them. In such cases, the MAS will not allow "execution only" services.
Over the long run, this will benefit the community as more awareness is being created. While the financial industry welcomes any measures to safeguard the interests of the investors, MAS must also exercise caution not to hamper our competitiveness as a financial hub.
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