INVESTMENT STATUS OF SINGAPOREANS (Update)

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INVESTMENT STATUS OF SINGAPOREANS:

(Update): The following Question stood in the name of Mdm Ho Geok Choo -

9. **** To ask the Senior Minister (a) for an update on the investment status of Singaporeans who have been led to park their monies in so-called 'lucrative' funds; (b) what measures are being taken by the authority with regard to fund managers who have flouted basic principles of gaming; and (c) how can we ensure a more educated and better informed pool of investors in our community.

Mr Zainudin Nordin: Question No. 9.

Mr Tharman Shanmugaratnam (for the Senior Minister): Mr Speaker, Sir, Mdm Ho has asked how Singaporeans have fared in their investments in 'lucrative' funds. MAS does not keep statistics on the profits and losses of investors in their respective investments.

I think Mdm Ho was concerned that investors may have been attracted to certain investment products on the basis of potentially high returns, without being aware of their inherent risks. MAS' role is to require that investors are provided with

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full, prompt and accurate disclosure of all material information, so that they can make informed decisions. To take Mdm Ho's example of funds, fund managers are required to disclose the investment objectives of the fund, the potential risks of the fund, as well as the relevant fees involved.

The fund management industry should also aim to provide disclosure that is not only technically accurate but helpful to investors in making informed judgments. This can only benefit the industry, as investor confidence in fund management products grows.

However, investors must ultimately bear responsibility for their decisions. In selecting an investment, investors should consider both the potential returns and the risks of the product they intend to invest in. Regulation can never protect investors from investment risk.

Mdm Ho was also concerned about overly aggressive behaviour by fund managers in recommending investment products. The Financial Advisers Act sets out market conduct rules regulating the sales and advisory process of all investment products. Recommendations on investment products must have a reasonable basis, taking into account the investment objectives, financial situation and particular needs of the person to whom the recommendation is being made.

MAS also provides quite regular guidance to the industry on the standards we expect of them. For example, we have made known our views on how remuneration should be disclosed. We will also be issuing a paper to highlight good practices observed in the industry, as well as guidelines to deter undesirable churning of products. Investors who feel that they have been subject to mis-selling or misrepresentation should first take up the matter with the financial adviser or the institution involved, failing which,

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they can turn to the existing industry dispute resolution schemes. We currently have the Association of Banks' Consumer Mediation Unit and the Insurance Dispute Resolution Organisation (IDRO), both of which were set up last year. But we are taking this further. MAS is also facilitating the setting up of an industry-wide integrated dispute resolution mechanism for all financial products and service providers.

Mdm Ho asked about initiatives to ensure that investors are more educated and better informed. The Government launched a national financial education programme called MoneySENSE in October last year. It is a collaborative effort involving several Government agencies, MCYS, MOE, CPF Board, People's Association and, of course, the MAS, and industry associations and various other community organisations. It aims to help Singaporeans acquire skills and knowledge to better manage their finances and make well-informed financial decisions.

MoneySENSE has issued consumer alerts and tips to guide consumers when they deal with financial advisers and to help them make sense of the various investment products. MoneySENSE has also organised a number of seminars and workshops covering topics, such as basic money management and financial planning.

Financial education, however, has to be a long-term, sustained effort. We have to continually raise awareness among consumers of the risks inherent in any product that offers high returns, and of the need to seek information and advice before committing to investing in a product.

Mr Sin Boon Ann (Tampines): Sir, would the Minister not agree with me that the Government's regulatory principle has not been consistently applied in all manner

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of investments? For securities and funds, it is a highly regulated environment. There are prescribed rules that have to be observed, whereas if I were to sell ostrich eggs in Singapore, this is an area of investment which is quite unregulated and, therefore, investors who put money in ostrich eggs are more exposed than those who put money in funds. Or, for that matter, in property investments overseas which are promoted by agents. Would the Minister just highlight to us as to whether or not the Government intends to take a consistent approach in regulating this manner of investments?

Mr Tharman Shanmugaratnam: Sir, the short answer is "No". We do not intend to regulate ostrich eggs or, for that matter, the wide variety of other eggs that might be offered on the market. It is not possible. It is important that we have a transparent system of regulation for all financial products, and I think in the last few years we have made good progress on that. The Financial Advisers Act streamlines both the regulations as well as the codes of best practices across securities firms, insurance firms and the banks, as well as independent financial advisers. That is a major step forward.

What we are doing now is to take forward the dispute resolution mechanism. It starts off with the banks - any product distributed by a bank. The insurance industry, both the life insurance and general insurance associations have also got together to set up IDRO, which is working quite well. But there are gaps in terms of fund management products, financial advisers and so on. So, now we are working to integrate all dispute resolution mechanisms, and that should be ready by sometime early next year.

Miss Penny Low: Sir, in view of the need for transparency, would the Minister also consider coming up with a standard template for fund fact sheets? Currently, the fund fact sheets are dictated by the manufacturer of the fund itself, and they come in different types of time periods

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and indexes, making it very difficult for the lay investor to comprehend and to make meaningful comparisons. Would the Minister consider a standardised template for fund fact sheets?

Mr Tharman Shanmugaratnam: I think that is a useful suggestion. We cannot make the template too detailed. We have to allow for variation. The products differ. So, sometimes they do not fit within the same template. But certain guidelines on best practices can be formed. At the very least, the best practices of existing players can be shared within the industry and, over time, consumers will know that that is the best practice they should ask for when they deal with the financial adviser.

Mr Sin Boon Ann: Coming back to the earlier response, is the Minister saying that the auntie who puts money into ostrich eggs is less deserving of protection in a regulated environment than a savvy stock market investor?

Mr Tharman Shanmugaratnam: I would put it another way. Consumers, when they enter financial markets or deal with a financial institution, do have a certain expectation of regulation, and the obligation is on us to ensure high standards of disclosure and proper dispute resolution mechanisms. But if we go into either ostrich eggs or some other exciting product offered by an unregulated institution, then we go in with our eyes open. We take our own risks. Most retail investors do not go into these products. The individuals who do so are those who know full well that this is an unregulated market. That is usually why very high returns are promised - because there is very high risk. It will also not be practical for the Government to provide any assurance or regulation over all these new products and players who are really not part of the financial industry. It is just not

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possible for us to do it, and philosophically, it may not be desirable either.