MAS unveils proposals to strengthen OTC derivatives market, improve provision of financial advisory services

THE Monetary Authority of Singapore (MAS) has unveiled proposals to strengthen Singapore's over-the-counter (OTC) derivatives market and to enhance the provision of financial advisory services.

In a consultation paper released on Wednesday, MAS proposed a regulatory framework for capital markets intermediaries dealing in OTC derivative contracts, as well as refinements to rules governing financial advisory services.

Under the proposed framework, intermediaries dealing in OTC derivatives will have to meet prescribed capital and business conduct requirements, such as putting in place risk management policies and controls to safeguard customers' assets.

MAS also proposes to introduce a set of risk mitigation requirements for intermediaries that deal in non-centrally cleared OTC derivatives, which will serve to enhance legal certainty over the terms of non-centrally cleared OTC derivatives transactions, foster effective management of counterparty credit risk, and facilitate timely dispute resolution.

As for refining the rules governing financial advisory services, MAS proposes to exempt from the Financial Advisers Act (FAA) trading representatives (TRs) who provide advice that is incidental to their execution services.

"This follows feedback that TRs who provide execution-based services find the existing FAA rules a challenge, such as the need to take into account the investment objectives, financial condition and risk profile of customers," said MAS in a statement.

The exemption, it added, will be subject to safeguards, and apply to listed Excluded Investment Products, which include stocks and shares, real estate investment trusts and simpler exchange-traded funds.

"The proposals will allow TRs to continue providing general financial advice to their customers as a value-added service," said MAS.

Finally, MAS proposes to allow financial advisers to help customers transact in collective investment schemes (CIS) when an investment recommendation on CIS has been accepted by the customers.

This is in response to industry feedback and will help financial advisers better serve their customers, said MAS.

In the meantime, MAS said it invites interested parties to submit their comments to cmi-reply@mas.gov.sg by July 3.