New mar­ket con­duct guide­lines for FIS

They may not have the force of law, but they will im­pact fi­nan­cial in­sti­tu­tions and pro­tect cus­tomers.

Singapore Business Review - - LEGAL BRIEFING -

The Mon­e­tary Au­thor­ity of Sin­ga­pore (MAS) is­sued the Guide­lines on Stan­dards of Con­duct for Mar­ket­ing and Dis­tri­bu­tion Ac­tiv­i­ties to em­pha­sise ex­pec­ta­tions for fi­nan­cial in­sti­tu­tions and their rep­re­sen­ta­tives to con­duct their mar­ket­ing and dis­tri­bu­tion ac­tiv­i­ties at re­tail­ers and pub­lic places in a re­spon­si­ble and pro­fes­sional man­ner. Four lawyers share their views on what the guide­lines spell for the mar­ket upon im­ple­men­ta­tion in April 2017.

How will the Guide­lines on Stan­dards of Con­duct for Mar­ket­ing and Dis­tri­bu­tion Ac­tiv­i­ties is­sued by MAS af­fect fi­nan­cial in­sti­tu­tions?

The guide­lines seek to for­malise and pro­vide greater guid­ance on mar­ket con­duct re­quire­ments for the mar­ket­ing and dis­tri­bu­tion of re­tail prod­ucts, says

Nizam Is­mail, head of reg­u­la­tory prac­tice, RHTLAW Tay­lor Wess­ing LLP. “Reg­u­la­tions sur­round­ing sell­ing and dis­tri­bu­tion of re­tail prod­ucts have come into sharp fo­cus, es­pe­cially af­ter the Lehmans Mini­bonds is­sue.”

The aim is to mit­i­gate against the risk of mis­selling, suit­abil­ity mis­match, cus­tomer ha­rass­ment due to high­pres­sure sales and mar­ket­ing, and mis­han­dling of funds, notes Is­mail. Most fi­nan­cial in­sti­tu­tions would have put in place guide­lines on suit­abil­ity, sales and dis­tri­bu­tion, and MAS’ guide­lines seek to pro­vide a holis­tic and con­sis­tent treat­ment across banks, in­sur­ance com­pa­nies, cap­i­tal mar­kets in­ter­me­di­aries, fi­nan­cial ad­vis­ers, and credit card is­suers. “This also en­sures con­sis­tent treat­ment across in­vest­ment prod­ucts and credit prod­uct, which were pre­vi­ously gov­erned by dif­fer­ent reg­u­la­tory prob­lem. Fi­nan­cial in­sti­tu­tions, he says, would have to find the bal­ance be­tween cus­tomer pro­tec­tion and in­cen­tivis­ing the sales force, with cus­tomer pro­tec­tion tak­ing promi­nence. “The var­i­ous safe­guards in the guide­lines es­sen­tially en­able the cus­tomers to fo­cus on the prod­uct fea­tures by seek­ing to elim­i­nate prac­tices which may dis­tract the cus­tomers from the key is­sues.”

Which of the safe­guards do you think will have the most im­pact on the con­duct of ac­tiv­i­ties? Clau­dia Teo,

part­ner and head, cor­po­rate & fi­nan­cial ser­vices at Harry Elias Part­ner­ship LLP, says the first safe­guard in the MAS’ guide­lines, which re­quires fi­nan­cial in­sti­tu­tions to con­duct call­backs or sur­veys for all cus­tomers dur­ing the free-look or cool­ing-off pe­riod, will have the most im­pact. “Whereas most of the other safe­guards are pre­ven­tive in na­ture, the first safe­guard has an ad­di­tional cor­rec­tive ele­ment,” notes Teo. “A cus­tomer who ex­pe­ri­enced in­ap­pro­pri­ate con­duct of mis­selling, mis­rep­re­sen­ta­tion, or pres­sure sell­ing will be re­minded of his right to cor­rect the de­ci­sion dur­ing the call­back or sur­vey.” From a mon­i­tor­ing per­spec­tive, she says, the first safe­guard is also help­ful in ar­rest­ing any con­se­quence of mis­con­duct dur­ing mar­ket­ing and dis­tri­bu­tion ac­tiv­i­ties.

direc­tor, cor­po­rate, bank­ing & fi­nance de­part­ment, Tan Peng Chin LLC, shares the same view re­gard­ing the im­pact of the first safe­guard. He adds that an­other safe­guard that could have the most im­pact on the con­duct of mar­ket­ing and dis­tri­bu­tion ac­tiv­i­ties is the re­quire­ment to con­duct reg­u­lar mys­tery shop­ping and site vis­its to mon­i­tor and en­sure that prac­tices are in line with the fi­nan­cial in­sti­tu­tions’ in­ter­nal stan­dards and pro­ce­dures, as well as the guide­lines (which ap­ply to the sale of all prod­ucts, ex­cept where the sale is re­lated to a prod­uct that the cus­tomer has bought).

“Such safe­guards are likely to be most ef­fec­tive for re­tail con­sumer pro­tec­tion, but they also ap­pear likely to re­sult in a con­sid­er­able run-up in the costs to con­duct mar­ket­ing and dis­tri­bu­tion ac­tiv­i­ties,” he says.

Sim Lin Piah, What are fur­ther im­pli­ca­tions of the guide­lines for fi­nan­cial in­sti­tu­tions and their rep­re­sen­ta­tives?

“The guide­lines set a con­sis­tent stan­dard for re­tail prod­ucts, and raises the bar for sales and dis­tri­bu­tion ac­tiv­i­ties across the fi­nan­cial cen­tre,” says Is­mail. “There will be some ini­tial ad­just­ment, but these guide­lines gen­er­ally foster a bet­ter mar­ket con­duct cul­ture across the fi­nan­cial in­dus­try, and fos­ters cus­tomer con­fi­dence.”

Is­mail adds that be­ing set as guide­lines (not hav­ing the force of law), there is some flex­i­bil­ity for fi­nan­cial in­sti­tu­tions to de­part from some of these re­quire­ments, de­pend­ing on their spe­cific busi­ness mod­els. “This flex­i­bil­ity is a good one, as it al­lows de­par­ture from a ‘cookie-cut­ter ap­proach,’ and al­lows fi­nan­cial in­sti­tu­tions to take a risk-fo­cussed ap­proach,” he says.


Nizam Is­mail

Amit Dhume

Sim Lin Piah

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