Safeguards for the Sale of Investment Products to Vulnerable Customers
We thank Ms Sim Chwee Sean for her letter “Are Banks Observing Due Diligence Before Selling Elderly Customers High-Risk Products” on 15 June 2020.
The Monetary Authority of Singapore (MAS) requires financial institutions (FIs) selling all investment products to conduct product suitability assessments, information disclosures and pre-transaction reviews as explained in our earlier reply, “Checks In Place For Banks Selling Investment Products” on 8 April 2020. When investment products are sold to vulnerable customers such as elderly persons who are not well-versed in English, FIs must implement additional safeguards. Before the sale of an investment product to vulnerable customers can be completed, a supervisor from the FI has to call the customer to check on his or her understanding of the product and the risks; the customer too may reconsider the investment and inform the FI’s supervisor if he or she no longer wishes to proceed with the transaction.
If the investment product being sold is classified as a complex product (e.g. structured note or warrant), FIs are additionally required to assess customers’ knowledge and investment experience prior to the sale. If the customer is assessed not to have the relevant knowledge and experience, the FI would advise the customer that the product may not be suitable for him or her. If the customer decides on proceeding, a supervisor from the FI must confirm with the customer that he or she has been properly informed of the risks before proceeding with the investment.
FIs are required by MAS to maintain documents and records demonstrating compliance with the regulatory safeguards concerning sales and advisory processes. These documents may be reviewed during internal and external audits, the FI’s investigations into customer complaints, as well as MAS’ inspections. MAS will require FIs to address deficiencies in their advisory and sales process, and take action against FIs and their representatives for serious breaches of our regulatory requirements.
If Ms Sim’s parents had been persuaded to buy certain financial products without the proper sales and advisory processes having been carried out, they can make a complaint to the FI and provide it with the relevant information for investigation, with a copy sent to MAS so that we can help monitor the FI’s reply. Members of the public may also present any case of alleged mis-selling or disagreements to the Financial Industry Dispute Resolution Centre (FIDReC) for redress.
Director (Corporate Communications)
Monetary Authority of Singapore
Source:: Monetary Authority of Singapore