1 Product highlights sheet

To be prepared by product issuers, the product highlights sheet should be given to consumers before they make investment decisions.

This will supplement the product's current marketing material, such as a prospectus and fact sheets in the case of unit trusts, or benefit illustrations for investment-linked products.

Capped at four pages, it will set out key product information in a simple and concise manner.

It comprises a question and answer format with the questions set out by the regulator and answers provided by the product manufacturer.

It will not be 'fine print' but rather must be presented in a font size of at least 10-point Times New Roman.

2 Complex investments

The Monetary Authority of Singapore (MAS) is seeking feedback on a suitable definition for complex investment products. Broadly, these would be products with derivatives embedded in them.

For those classified as 'complex investments', the regulator proposed that they be sold only after advice is given.

It is proposed that representatives selling such products be required to undergo a new complex product knowledge module.

There will also be a 'health warning' slapped on all the product's marketing and advertising material.

This is to inform consumers that the product is complex and that it cannot be sold unless the investor is provided with advice including an explanation of whether the product is suitable for the given investor.

3 Risk rating

The MAS is considering introducing a system to rate the risks of investment products so that investors can assess their suitability.

Still, consumers should also consider other factors such as their liquidity needs and portfolio diversification.

4 Fair and balanced advertising materials

The aim is to ensure that these materials present a realistic and balanced perception of the product and its features and risks.

Therefore, they should not suggest that the product is comparable to a bank deposit or that there is little or no risk of the investor losing his investment.

Customers will also be cautioned that the MAS does not pre-vet such materials.

To ensure that customers are aware of this, the regulator will require marketing and advertising material to include a statement that they have not been reviewed or endorsed by the MAS.

5 Bank tellers cannot act as product introducers

This will prohibit bank tellers and those working in finance firms from referring customers to representatives flogging investment products.

By doing so, it will help consumers distinguish better the primary function of tellers to take deposits, from that of representatives selling products.

6 Sellers to exercise greater due diligence

Distributors must assess the suitability of the product by answering questions such as 'Who is the product intended for' and if the representatives have the qualifications to sell it.

Advisory firms must document in greater detail the basis of their recommendations.

They must also gather more information as to whether the invested amount is a substantial portion of the customer's assets.

7 Restrictions on product sales without advice

Advisory firms can waive the need to give advice only if the customer contacts them on his own initiative to buy a product.

This waiver must be documented. For instance, if a customer buys products online, the firm may dispense with advice to such customers.

8 Enhancing MAS' powers

The MAS wants more powers to pursue breaches under the Financial Advisers Act (FAA).

The Act will be beefed up to allow the MAS to take civil penalty action against firms or individuals who contravene the FAA provisions.

There is also a proposal to allow investors to apply to court for compensation against a wrongdoer who has been prosecuted successfully by the MAS, without having to take individual separate legal action to prove the wrongdoing.

The consultation paper can be found on the MAS website www.mas.gov.sg .

Anyone who wants to provide feedback has until April23 to do so.

This article was first published in The Straits Times.