Impact of Financial Product Marketing Tactics on Less Financially Literate Consumers and Recourse Available

Mr Desmond Choo asked the Prime Minister (a) what is the impact of undesirable marketing tactics for financial products, such as ambush style marketing, on less financially literate consumers; and (b) what recourse do consumers have after buying products as a result of such tactics.

The Minister of State for Trade and Industry (Mr Alvin Tan) (for the Prime Minister): Sir, the Monetary Authority of Singapore (MAS) expects financial institutions or FIs and their representatives to conduct their prospecting and marketing activities responsibly and in conducive settings. MAS has set standards of conduct for such activities. For example, one, representatives of FIs must disclose their identities upfront and clearly to prospective clients; two, FIs should monitor the conduct of their representatives at roadshows through site visits and mystery shopping; three, FIs should conduct call-backs and surveys within the free-look period to check if clients understood the products that they purchased at roadshows.

MAS has recently issued a public consultation to strengthen these safeguards by making them mandatory. MAS has also proposed additional new measures, such as requiring FIs to: one, offer consumers additional time of at least three to five days to consider their decisions; two, limit the use of gifts to influence consumers’ decision-making; and three, conduct roadshows and marketing events only in commercial premises instead of public spaces such as streets and pedestrian areas.

A consumer who feels he has been sold a product through inappropriate means by a representative of an FI should immediately lodge a complaint with the FI. The FI is required by regulation to thoroughly investigate the matter. Where the representative has been found to have mis-sold a product, the FI will offer redress. Should the consumer remain dissatisfied with the FI’s response, he can approach the Financial Industry Disputes Resolution Centre (FIDReC) for assistance. FIDReC’s mediation and adjudication services provide consumers with an accessible and affordable avenue to resolve disputes with financial institutions.

Mr Speaker: Mr Desmond Choo.

Mr Desmond Choo (Tampines): I thank the Minister of State for his comprehensive reply. I have two supplementary questions. The first, we know lots of residents who might not be familiar with English and they tend to be older residents. So, what are the additional safeguards put in place to help these vulnerable residents? We do see some of these marketers doing ambush tactics in the heartlands, going after these residents. This is my key concern for them.

So, the second supplementary question. Has the MAS monitored how many of such residents, victims of such ambush marketing tactics, have subsequently asked to withdraw the investments, and if they want to do so, are the remedial actions and recourse easily accessible to them?

Mr Alvin Tan: Sir, I thank the Member for his supplementary question. W ith regards to vulnerable clients including seniors who may not be savvy with the English language, financial institutions must implement additional safeguards when recommending products to such clients. A supervisor from the financial institution must call the client to check back on his or her understanding of the product and risks before any sale to vulnerable clients is allowed to be completed. MAS has also publicly consulted on proposals to enhance pre- and post-transaction safeguards for these vulnerable clients.

I will just share a few examples. First is the strengthening of requirements to identify selected clients. Second is to require financial institutions to ask the selected clients to have a trusted individual to be present during the sales and advisory process. And third, to require financial institutions to audio record call-backs to the selected clients and to provide the recordings to them upon request.

MAS is reviewing the feedback from the public consultation and will produce the response when the review is completed.

With regards to his second supplementary question, t here are many different reasons why clients may wish to withdraw their investments. One, it may be due to the fact that they have their own preference or they may have a change of mind. MAS does not have this information, but the financial institutions will have that information. But to also elaborate on what recourse mechanisms customers or consumers might have, please allow me to just elaborate shortly.

Consumers who suspect any wrongdoing again should launch a complaint with the financial institutions, which are required by MAS regulations to investigate and resolve these complaints promptly and also independently. The complaint must be handled by a separate unit comprising staff who are not involved in sales. Financial institutions will then review the facts and circumstances of the case in accordance with proper procedures, including interviewing the complainant and keeping the complainant apprised of the case status. They will offer redress to consumers where their representatives are found to have committed mis-selling or other wrongdoing.

If the financial institutions response is not to the customer's satisfaction, he or she can approach FIDReC, which I mentioned. The outcome of FIDReC's adjudication is binding on the financial institutions, but not on consumers, who retain the right to pursue their claims through other avenues such as seeking legal advice on the merits of their case.

Finally, consumers may also file a report with MAS if they suspect that a financial institution or representative has committed a regulatory breach or misconduct. While MAS does not adjudicate individual cases of disagreement between consumers and financial institutions, MAS will review reports of breaches or misconduct and take appropriate regulatory actions against financial institutions or representatives found to have breached MAS regulations.

Mr Speaker: Mr Saktiandi Supaat.

Mr Saktiandi Supaat (Bishan-Toa Payoh): Thank you, Mr Speaker. I would like to ask the Minister of State a supplementary question. With regard to the recourse on products which are not specifically fronted by financial institutions in particular, for example, commodities-related products such as gold, can I ask the Minister of State for clarification, is appropriate recourse via FIDReC in those type of situations? Because if I am not mistaken, I think, when it comes to commodities-related products, it is not. So, maybe you can help me clarify that point.

Mr Alvin Tan: Sir, I do not have that answer this moment but I would check and get back to the Member.

Mr Speaker: Ms Carrie Tan, a clarification?

Ms Carrie Tan (Nee Soon): Thank you, Speaker. I would like to seek clarification from the Minister of State pertaining to this matter. I appreciate that MAS performs a regulatory check and balance on the FIs, but it does not sound to me like the individuals who fall prey to such marketing techniques have any form of recourse or compensation. So, my question is, should MAS find any particular financial institution have breached a certain threshold of aggressive or inappropriate marketing, then will there be retroactive forms of compensations required of them to be made to the consumer?

Mr Alvin Tan: Sir, I thank Ms Carrie Tan for her question. As I mentioned earlier on, MAS will review reports of breaches of misconduct and take appropriate regulatory actions against financial institutions or representatives that are found to breach MAS regulations.

Mr Speaker: Ms Carrie Tan, next question.