Singapore -Market Conduct Rules For Marketing And Distribution Arrangements Of Financial Institutions At Retailers And Public Places.

18 August, 2015

 

The Monetary Authority of Singapore (“MAS”) has issued a Consultation Paper on the proposed Market Conduct Rules for Marketing and Distribution Arrangements of Financial Institutions at Retailers and Public Places (“Consultation Paper”). The MAS proposes to:

 

• Issue guidelines setting out safeguards that financial institutions (“FIs”) are required to implement when conducting marketing and distribution activities at retailers and public places.
• Require FIs to notify MAS of their marketing and distribution activities at retailers and public places.
• The last day for feedback is 24 August 2015. This Update looks at the new rules proposed. 

 

Reasoning and Scope of the Rules

 

FIs today have various distribution agreements to market their products and services at public places, increasing the reach of FIs to members of the public. In the Consultation Paper, MAS noted that it is common practice for some FIs to conduct roadshows at public places. The proliferation of such arrangements, if not properly managed, could lead to the following problems:

 

• Harassment of Consumers;
• Confusion over the roles of the FI and retailer;
• Enticement of consumers to purchase unsuitable products;
• Unconducive environment for the purchase of financial
• products; and
• Mishandling of cash and cheques collected.

 

To address the above concerns, MAS is proposing to require FIs to:

 

• Comply with guidelines aimed at mitigating the risks of FIs engaging in improper practices as well as ensuring consistency in the market conduct standards across the financial sector (“Market Conduct Guidelines”); and 
• Provide prior notification to MAS of their plans to conduct marketing and distribution activities at retailers and public places which will allow MAS to monitor the proliferation of such activities and take pre-emptive measures where necessary (“Notification Requirements”).

 

It is proposed that the Market Conduct Guidelines and Notification Requirements will apply to the following FIs listed in Table 1 and the financial products and services listed in Table 2. 

 

Table 1: List of FIs 

 

• Banks
• Non-bank credit card and charge card licensees
• Holders of a capital market services licence
• Licensed financial advisers
• Insurance companies and their intermediaries 

 

Table 2: List of Financial Products and Services 

 

• Banking products and services, including credit cards, charge cards and unsecured facilities
• Capital market products and services
• Life insurance
• General insurance, including Accident and Health insurance 

 

The proposed Market Conduct Guidelines and Notification Requirements will apply to all arrangements accessible to members of the public but will not apply to “closed-door” events such as seminars organised in an auditorium by invitation or subject to registration, or a workplace seminar specifically conducted for employees of an organisation.

 

Market Conduct Guidelines

 

Under the proposed Market Conduct Guidelines, FIs are expected to implement the following processes for the oversight of their distribution activities at retailers and public places:

 

Market Conduct Risks

 

• Safeguard 1: FIs should conduct call-backs to all customers prospected at retailers and public places before or within the free-look or cooling-off period, to ensure that customers have understood the transactions made. This applies to the sale of life, general, accident and health insurance products, and collective investment schemes. 
• Safeguard 2: FIs should monitor and ensure that their representatives’ conduct is in line with internal standards and procedures as well as the Market Conduct Guidelines by conducting regular mystery shopping and site visits. This is not required for the sale of general insurance products where the insurance purchased is related to the product or service that the customer is buying.
• Safeguard 3: FIs should track and monitor complaints arising from activities at retailers and public places. Complaint statistics should also be reported to senior management on a regular basis.
• Safeguard 4: FIs should maintain a register containing information on their marketing and distribution arrangements.

 

Representatives

 

• Safeguard 5: FIs and their representatives should conduct and present themselves in a professional manner at all times.
• Safeguard 6: FIs and their representatives should only prospect for customers in the immediate vicinity of the FI’s sales booth and must not be unreasonably persistent or place undue pressure on members of the public.
• Safeguard 7: FIs should ensure that their representatives clearly disclose upfront their identities and the FI that they are representing. If they market third-party products, they should explain the relationship between their FI and the third-party products.
• Safeguards 8 and 9: FIs should ensure that their representatives undergo proper sales conduct training and have a good compliance record.
• Safeguard 10: FIs should ensure that the remuneration and incentives paid to representatives for products and services sold at retailers and public places are not higher than those sold at other locations or channels.

 

Conduct and Venue of Sales

 

• Safeguard 11: FIs should ensure that any gift offered to customers does not influence the decision of the customer to purchase any financial products and services. Gift details should not be prominently displayed or actively promoted.
• Safeguard 12: FIs should ensure the space allocated for their sales booth is adequate and conducive for representatives to conduct a proper sales and advisory session.
• Safeguard 13: FIs should have adequate controls in place to ensure that payments are secured properly. 

 

FIs who Market at Retailers

(only applicable to FIs who market financial products and services at retailers)

 

• Safeguard 14: FIs should clearly disclose to consumers the relationship between the FI and the retailer, and each party’s roles and responsibilities.
• Safeguard 15: FIs should also ensure that any co-branding efforts with the retailer are not misleading, nor create any confusion among consumers as to the roles and responsibilities of the FI and the retailer.

 

Notification Requirements

 

MAS proposes to require FIs to notify MAS and submit information on their market and distribution arrangements at retailers and public places on a quarterly basis. MAS will use such information to identify any potential market conduct risks posed to consumers and take pre-emptive measures to mitigate the risks.

 

For arrangements with a duration shorter than one quarter, the FIs will be required to furnish (i) information on their plans in the next calendar quarter to conduct marketing and distribution activities at retailers and public places at least two months prior to the start of the next calendar quarter; and (ii) information on the actual activities that have been conducted in the preceding calendar quarter. See Table 3 below on the details to be submitted.

 

Table 3: Proposed Details to be Submitted 

 

For all marketing and distribution arrangements at retailers and public places with a duration shorter than one quarter:

 

• Number of arrangements that will be/were conducted.
• Number of days that marketing and distribution activities will
• be/were conducted for all arrangements combined.
• Maximum number of representatives that will be/were
• stationed at any arrangement, in any single day.
• Number of locations where the activities will be/were conducted across all arrangements, naming the top five locations based on the number of days that the activities will
• be/were conducted.