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Singapore extends regulations to non-conventional investments

The Monetary Authority of Singapore (MAS) will protect the public by applying its standard regulations to 'non-conventional' investment products such as precious metals buy-back arrangements and collective investment schemes that do not pool investors' contributions. 25 Sep 2015

MAS said it will go ahead with proposed changes to its Securities and Futures Act based on feedback on a consultation paper published in July 2014.

The regulatory framework will now cover non-conventional products that are similar to capital markets products, and will treat these either as debentures or investment funds, depending on their features, MAS said.

Precious metals buy-back schemes are equivalent to collateralised borrowing, and will be treated as debentures, requiring sellers to create and register prospectuses in order to sell to retail investors, the authority said.

Collectively-managed investment schemes will all be treated in the same way, and those intended for retail investors will need authorisation from MAS. They will also be restricted to investment in securities or other liquid assets, or assets with the ability to generate income, such as completed real estate.

Arrangements that were in place before the legislative changes will not be affected, unless additional funds are raised from investors after the new laws are in place, MAS said.

MAS encourages potential investors to look on its website when considering investment schemes, to see registered prospectuses, authorised retail investment funds and registered financial institutions. More information is also available from Singapore's national financial education programme MoneySENSE, it said.

MAS also announced that investors who qualify as accredited investors (AIs), having met wealth or income thresholds, can now benefit from the same regulatory safeguards as retail investors.

AI status allows investors access to a wider range of complex and higher-risk products, MAS said.

Currently, investors who reach the thresholds are classified as AIs by default. This gives them a lower level of protection as they are seen as better able to protect themselves, but this may not be true for all investors MAS said.

New investors will now have to opt in to be treated as AIs by financial institutions, while existing investors will continue to be treated as AIs unless they opt out.

Lee Boon Ngiap, managing director of capital markets at MAS, said, "The measures will strengthen regulatory safeguards for retail investors. Regulatory safeguards, however, are not a substitute for investor responsibility. All investments carry risk, so investors should buy only products that they understand and have a level of risk that they are comfortable with."