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Source:
www.mas.gov.sg |
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Second Reading Speech By Mr Tharman
Shanmugaratnam, Minister for Education and Deputy Chairman, Monetary
Authority of Singapore |
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Mr Speaker Sir, on behalf of the
Senior Minister, I beg to move, "That the Bill be now read a second time". |
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Sir, this Bill seeks to amend the Financial
Advisers Act ("FAA") concurrent with the amendments to the Securities and
Futures Act ("SFA") that have been moved today. It aims to ensure that the
regulation of Financial Advisers remains business friendly, while still
maintaining high standards that promote the fair treatment of customers. |
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The MAS has taken into account the feedback
received from the industry and the public following public consultation on the
draft Bill that was conducted in April 2004. |
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Financial advisers play an important role in
financial markets, particular in servicing the retail markets. They are a key
conduit by which a wide range of investment products - ranging from
securities, to collective investment schemes, to life insurance policies - are
introduced and marketed to investors. |
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The FAA was introduced to provide a regulatory
framework for such market intermediaries that would support high levels of
professional standards across the industry. |
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Sir, I shall now highlight the key amendments that
are proposed in the Bill. |
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Excluding Generally Circulated Advice from
Reasonable Basis Requirement |
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First, Clause 15 allows MAS to exclude generally
circulated advice from the reasonable basis requirement. Financial advisers
are required under the FAA to have a reasonable basis for their
recommendations. They must take into account each client's investment
objectives, financial situation and particular needs when giving advice or
making a recommendation on an investment product. |
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The reasonable basis requirement should not
however be applicable in situations where the advice provided is not targeted
at any specific person. Such "generally circulated advice" may for example be
made via marketing brochures or given at seminars and workshops. The criteria
for what constitutes generally circulated advice will be set out in
Regulations. |
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Extending the Scope of MAS' Inspection to
Exempt Entities |
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Second, the Bill allows the MAS to inspect exempt
entities. Exemptions from licensing and business conduct requirements are
currently given to entities that pose minimal risks1. |
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Limitations are imposed on the scope of financial
advisory services such entities can undertake. For instance, they are not to
undertake any marketing of collective investments scheme or arrange any life
insurance contract. |
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Currently, MAS does not have explicit powers to
inspect such exempt entities to ensure that they keep to the limitations
imposed. To enhance its regulatory oversight and for consistency with the SFA,
Clause 12(f) empowers MAS to inspect these exempt entities. |
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Extending MAS' Powers to issue Prohibition
Orders |
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MAS currently has the power to issue a Prohibition
Order against undesirable persons to bar them from providing financial
advisory services in Singapore. |
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The Act currently sets out certain criteria upon
which MAS may issue such an Order. These include where MAS suspends or revokes
the licence held by the person, where MAS has reason to believe the person is
contravening the FAA or where the person has been convicted of an offence
under the FAA or of an offence involving fraud or dishonesty in Singapore or
elsewhere. |
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Clause 20 expands the circumstances under which
MAS may issue a Prohibition Order to instances where a person has been
convicted of any offence in respect of financial advisory activities in a
foreign country. |
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Clarifying Aggrieved Parties' Right to Appeal |
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The Bill also clarifies the right to appeal of
aggrieved parties. The FAA currently provides for a right of appeal to the
Minister if parties are aggrieved by MAS' administrative decisions, such as
the rejection of an application for a licence or the revocation of a licence. |
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There is ambiguity as to whether third parties may
appeal to the Minister against these decisions2. Clause 11
clarifies that only the applicant for the grant, renewal or variation of a
licence or a person whose licence is revoked or suspended may appeal to the
Minister3. |
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Easing the Restriction on Granting Unsecured
Credit |
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Sir, the Bill also introduces amendments that
mirror those in the Securities and Futures (Amendment) Bill 2005. The current
restriction on licensed financial advisers granting unsecured credit
facilities to their directors, officers, employees or representatives for
trading purposes will be removed under Clause 14. |
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As with the SFA, there are sufficient existing
safeguards in the FAA on loans to directors, officers and employees to
mitigate the risk of licensed financial advisers being excessively exposed to
such credit risks. |
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Expanding the Grounds for Refusing Grant or
Renewal of Licence, or Revoking a Licence |
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The grounds under which MAS may refuse an
application for the grant or renewal of a licence, or revoke a licence, will
be expanded under Clauses 6 and 7 to include cases where the applicant or
licensee furnishes false or misleading information to the MAS. Such acts call
into question the integrity of the person concerned. |
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Conclusion |
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Sir, in conclusion, the Bill introduces changes
which will enhance MAS' quality of supervision and will over time help to
raise the level of professionalism of the financial advisory industry. |
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The updated legislation will encourage market
competition, while moving up the quality bar. It will support the evolution of
better quality advice and higher service standards by financial advisers, and
strengthen consumer confidence in the industry. |
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Mr Speaker, Sir, I beg to move. |
1 For
example, class exemptions have been granted to
(i) any approved headquarter company or
approved Finance and Treasury Centre which carries on a business involving
the provision of the provision of all or any type of financial advisory
service where such provision of financial advisory service has been approved
as a qualifying service in relation to that headquarter company or Finance
and Treasury Centre under the Income Tax Act;
(ii) a corporation providing financial
advisory services to its related corporations; and
(iii) a person resident in Singapore who
provides financial advisory service to not more than 30 accredited investors
on any occasion.
2 These
third parties may include people who have a vested interest in the success or
failure of the applicant, such as a competitor of the applicant, or a creditor
of the applicant - who may feel that successfully getting a licence would
enable the applicant to be able to repay his debts.
3 The
practice in other leading jurisdictions, such as UK, Hong Kong and Australia
are similar. Generally, only parties who are directly affected by the decision
may lodge an appeal. |
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Source:
Monetary Authority of Singapore News
Release 25 Jan 2005 |
Financial Advisers (Amendment) Bill 2005 passed
