Investors can make claims of up to S$150,000 if found to have been sold unsuitable products.
We all know investing is a good way to make our money work harder for us. But going through pages of numbers and jargon to pick the most suitable investment can be intimidating as a layperson.
To promote greater transparency and protect investors’ interests, the Monetary Authority of Singapore (MAS) and the Financial Industry Disputes Resolution Centre (Fidrec) have recently updated two measures that will hold financial institutions (FIs) to a higher standard.
The first change is to enhance fair dealing guidelines, which cover all financial products and services sold here. FIs are expected to adopt best practices, such as recommending appropriate products. The second change raises the claim limit of consumers who suffer losses if they have been sold unsuitable investments.
Ensuring a fair deal
MAS updated its Guidelines on Fair Dealing in May to ensure FIs recommend products that are suited to investor needs, and this includes explaining the risks involved beyond the potential profits of a product, and more prudence when selling to customers deemed more vulnerable.
MAS defines vulnerable investors as those who meet two of the following three criteria: They are aged 62 years or older; are not proficient in written or spoken English; or do not have at least GCE N- or O-level academic qualifications.
Increased claim limit
While the revised guidelines are not enforceable by law, the second enhanced measure gives investors recourse for greater losses incurred. Since July this year, those who believe they have been sold unsuitable investment products can now claim for losses of up to S$150,000, up from S$100,000 at Fidrec.
Seeking a formal conclusion for the claim will cost S$50. If the claim exceeds S$150,000, investors can request mediation at no cost.
Prevention is better than cure
At the end of the day, however, the best way course of action is for investors to do their due diligence and exercise prudence. Here are some questions you can ask before buying an investment product:
• Are there good processes to deal with customers fairly?
• Are the financial products and services suited to your current life stage and risk appetite?
• Is there a clear avenue for feedback and customer assistance?
• Will there be clear and regular updates on the product(s)?
And when considering which product to invest in, pay attention to details like the risks involved, payment terms, and termination procedures.
In short, making sound investments requires careful navigation. Weigh the risks against the benefits before making a decision.
the bottom line:
While the enhanced measures are welcome safeguards, investors must still consider the risks involved carefully before committing to any product.
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