Unregulated investment schemes on the rise in S’pore
UNREGULATED investment schemes involving online trading platforms and digital tokens are becoming increasingly common in Singapore.
The Monetary Authority of Singapore (MAS) – the city-state’s central bank – has added more than 300 people and companies to its Investor Alert List in the past five years – almost double the number for the 2004 to 2014 period.
Experts say that low interest rates, coupled with the rise of fintech-based investment options, have led to more companies entering the market as potential financial advisers.
“The bar for getting accredited and regulated has not substantially come down … [so] I believe the list might have become bigger recently,” said Singapore Management University assistant professor of finance (education) Aurobindo Ghosh.
The alert list was started in 2004 to help consumers assess investment opportunities so that they could make more informed decisions.
MAS receives information about unregulated people or entities – based here or overseas – that offer investment opportunities targeting local consumers.
Consumers often wrongly perceive that these entities or people are licensed or regulated by MAS and that there are safeguards in place.
Being placed on the list does not mean that the person or entity has breached regulations. Rather, it simply means that they have misrepresented themselves as being regulated by MAS.
But by the same token, it does not automatically mean that a firm is regulated by MAS if it does not appear on the alert list.
People or entities on the list can ask MAS to be delisted.
An MAS spokesman said that this is not a common occurrence but has happened when the listed person or entity has rectified the issues that led to the initial listing.
“MAS will also delist after an [unregulated person or entity] has obtained the requisite licence, authorisation or exemption to conduct their regulated activities,” he added.
Digital tokens
Unregulated entities offering investment schemes involving digital tokens have become more common in recent years.
One in four complaints or queries about unlicensed entities lodged with MAS last year involved initial coin offerings or cryptocurrency exchange services.
Two advisories have been issued to alert the public about the risks of investing in digital tokens – in August 2017 and December last year.
MAS has placed OneCoin and One Concept on the alert list.
The Commercial Affairs Department has also charged two people over the promotion of a multi-level marketing scheme involving a purported cryptocurrency scheme known as OneCoin.
And eight digital token exchanges were warned in May last year not to facilitate trading in tokens that are securities or futures contracts without authorisation.
MAS has also been getting complaints involving unlicensed online platforms that allow investors to trade a wide range of products, such as foreign exchange, shares, commodities and binary options.
Some investors said that they had been instructed by such platforms to transfer money to overseas bank accounts. They later had problems recovering their funds.
MAS corporate finance and consumer department executive director Abigail Ng urged consumers to deal only with regulated entities, which in turn gives them protection under the law.
“Our regulatory framework seeks to ensure that investors receive adequate information to make wellinformed decisions, and are dealt with fairly by entities distributing investment products,” she said.
Ng advised consumers to check the MAS website to see if a company or person is regulated: “Before committing to any investment, consumers should always ‘ask, check and confirm’ to avoid any potential issues in the future.”
Alfred Chia, CEO of financial advisory firm SingCapital, said Singapore is known for its stringent rules on how financial institutions operate there.
“To be given a licence by the MAS to operate … carries high prestige. It can attract consumers’ confidence,” Chia said.
So in that sense, the alert list is very useful for investors to verify the claims made by companies selling financial products, he added.
But he warned that investors must take responsibility for their own investment decisions: “When the deal appears to be too good, you will need to do more due diligence.”
Prof Ghosh agrees that the alert list can serve as a first line of defence for retail investors.
“I think it might also be worthwhile to have a standard set of questions for retail investors to ask any investment professional, including whether they are regulated by the MAS and, if so, the type of licence they have, before making any investment decisions,” he said.