FINANCIAL ADVISERS (AMENDMENT) BILL

Order for Second Reading read.

The Second Minister for Finance (Mr Lim Hng Kiang): Mdm Deputy Speaker, I beg to move, "That the Bill be now read a Second time."

The Financial Advisers Act (FAA) was passed concurrently with the Securities and Futures Act (SFA) in October 2001 as part of the major revamp of Singapore's capital markets regulatory framework. The FAA consolidates in a single piece of legislation the rules for financial advisers and their representatives when giving financial advice on investment products, marketing collective investment schemes and arranging contracts of life insurance policies. These rules were previously found in separate legislation - the Futures Trading Act, the Insurance Intermediaries Act and the Securities Industry Act. These Acts have now been repealed. The FAA establishes a consistent regulatory framework for financial advisory services across the financial services industry.

Madam, the FAA will also be amended in two phases. This will parallel the legislative review of the SFA. The first phase has culminated in this Bill where MAS has proposed some technical modifications. The second phase, which involves more in-depth policy reviews, is scheduled to be completed in the second half of 2004.

MAS conducted a public consultation review in April 2003. MAS' detailed reply to the comments received in the course of the public consultation is published on its website. Madam, let me now highlight the key amendments that are proposed in this Bill.

Exclusion of life reinsurance

Clause 2 amends the definition of "life policy" in section 2(1) to exclude any contract of reinsurance because life reinsurance activities are already regulated by MAS under the Insurance Act (Chapter 142). With this amendment, a person conducting any activity involving contracts of reinsurance is only subject to the requirements of the Insurance Act. The FAA will not apply.

Representatives of financial advisers must be natural persons

The Bill clarifies that only natural persons can act as representatives of financial advisers. This ensures proper accountability by the principal for the conduct of the representative. Corporate entities will not be permitted to act as representatives of financial advisers.

Greater scope for MAS to issue written directions

General or specific written directions are legally enforceable. Clause 19 amends section 58 to empower MAS to issue written directions to representatives of exempt financial advisers. This amendment will harmonise the application of section 58 for representatives of licensed financial advisers and representatives of exempt financial advisers. While representatives of exempt financial advisers are not required to hold a representative's licence, the business conduct rules of the FAA will apply to them.

To enable MAS to respond quickly to time-sensitive industry developments or requests from the industry participants, the amended section 58 also expands the scope that written directions can cover. I have earlier noted a similar amendment in the Securities and Futures (Amendment) Bill.

Madam, the following are also amendments that are common to the SFA Bill and this Bill.

Communications containing recommendations on securities

Financial advisers will no longer be required to sign circulars or other communications that contain recommendations on securities. MAS has received feedback from the industry that the requirement for a signature is administratively difficult. MAS has decided that the requirement can be removed without compromising investors' interest because financial advisers will remain accountable for their recommendations. The number of years that such documents have to be retained will be reduced from seven years to six years.

Opportunity to be heard and appointment of officers

The Bill's proposed amendments to the provisions relating to "the opportunity to be heard" and "MAS' powers to appoint its officers to grant or revoke exemptions" mirror those proposed in the Securities and Futures (Amendment) Bill.

To conclude, the Bill draws on MAS' operational experience in administering the FAA and feedback from the industry to make a few technical refinements to the Act. To ensure that the FAA remains responsive to the industry and investors, MAS has started work on the policy reviews for the second phase of amendments to the FAA and will begin consulting with the industry later this year.

Mdm Deputy Speaker, I beg to move.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. - [Mr Lim Hng Kiang].

Bill considered in Committee; reported without amendment; read a Third time and passed.