[SINGAPORE] The Monetary Authority of Singapore’s (MAS) proposals to strengthen product highlights sheet (PHS) requirements and streamline the framework for complex products signal a major shift in the local investment landscape, say market observers.
The move is seen as a response to industry feedback, aiming to reduce complexity and broaden retail investor access to a wider range of financial products.
MAS launched a public consultation on Tuesday (Jul 1) and is seeking feedback until Sep 1.
“Our proposals seek to address key feedback that retail investors would like a more reader-friendly document that helps them identify the most relevant and crucial information for investment products; and that there is room to streamline the investing process for complex products to be more disclosure and information-based,” a MAS spokesperson told The Business Times.
Luke Lim, managing director of PhillipCapital and chairman at Securities Association of Singapore (SAS), said these changes could “democratise investing by giving retail investors broader access to a wider range of investment products”.
He added that remisiers and financial advisors would, in turn, be better positioned to help clients build smarter, more resilient portfolios. They can continue advancing financial literacy to ensure investors use such products responsibly and with long-term goals in mind.
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Broad industry support
The proposals have received broad support from industry groups such as SAS and the Securities Investors Association (Singapore), or Sias.
Members from both associations have urged MAS to review the framework with the aim of creating a “seamless investment journey for retail investors, on a caveat emptor basis” while maintaining safeguards for vulnerable investors, said Melinda Sam, chief executive officer at SAS.
She added that SAS members support MAS’ proposal for a disclosure-based framework, noting that “over the years, retail investors have matured and are more savvy with their investments”.
Similarly, Sias President David Gerald sees the new streamlined framework for complex products “striking the right balance (by) introducing sufficient safeguards to help investors understand the risks, while preserving their autonomy to choose products that suit their investment goals”.
However, he added that Sias supports maintaining the requirement for vulnerable investors to obtain licensed financial advice before purchasing complex products.
Other industry observers, including corporate lawyers like Robson Lee, partner at Kennedys Law, echo this view.
Lee stressed the importance of investors without sufficient knowledge or experience in complex products seeking licensed financial advice before investing.
“Notwithstanding the proposed requirement to prominently highlight the risks involved in complex products, investors who have any difficulty in comprehending the terms and conditions of any product should seek proper professional advice before making any such investment,” he said.
Helping make “informed decisions”
To improve investor understanding, MAS is proposing that complex products be clearly marked with a prominent red label to prompt investors to seek advice when necessary – a move fully supported by Kennedys Law’s Lee, who emphasises the importance of clearly flagging such products.
He also highlighted the proposed requirement to present key risks upfront on the first page of the PHS, and said that this will help retail investors make “informed decisions” before investing.
PhillipCapital’s Lim agreed and pointed out that financial warnings should guide investors.
“Simple language and clear examples help investors understand the real risks, so that they can make informed choices,” he said.
This is where a question-and-answer format on the PHS could be beneficial.
SAS’ Sam said it offers better visibility and understanding of the product. Along with a simplified product knowledge assessment, these proposals have been widely welcomed.
“This came from investors’ feedback as they wanted to know more about the product features and risks,” she added.
Other proposed changes include requiring a PHS for investment-linked policies (ILPs), which were previously exempt.
Industry observers noted that ILPs are complex, multi-layered products susceptible to market volatility and global uncertainties, making this update a sensible step.
“Investors should also be fully aware of fund management fees that are payable in relation to such products,” added Lee.