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10 financial advisory firms may have breached anti-competition law

Ten prominent financial advisory (FA) firms have been provisionally found by the Competition Commission of Singapore (CCS) to have made an anti-competitive agreement against one of their own two years ago.


TEN prominent financial advisory (FA) firms have been provisionally found by the Competition Commission of Singapore (CCS) to have made an anti-competitive agreement against one of their own two years ago.

In the first such decision made against the financial industry, the competition watchdog on Thursday issued a proposed infringement decision against the 10 FA firms, all members of the Association of Financial Advisers (Singapore) or AFAS; of the 10, nine have representatives on the AFAS executive committee.

The 10 are Cornerstone Planners, Financial Alliance, First Principal Financial, Frontier Wealth Management, IPP Financial Advisers, JPARA Solutions, Professional Investment Advisory Services, Promiseland Independent, Ray Alliance Financial Advisers, and Wynnes Financial Advisers.

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CCS said these firms put pressure on iFAST Financial to withdraw its offer of a 50 per cent commission rebate to individuals who buy life insurance products from providers through The online portal is iFAST's online unit trust distribution arm.

The watchdog deems this move by the 10 firms in contravention of Section 34 of the Competition Act, which bars businesses from entering into agreements to prevent, restrict, or distort competition.

The 10 parties now have six weeks to make representations before CCS issues its final decision.

iFAST withdrew its offer of commission on May 3, 2013, after having launched it only three days before.

CCS said it had noted media reports on the withdrawal of the offer, and that it received a complaint on the matter. It subsequently launched a probe into it.

At the time, iFAST, a securities dealer and financial adviser, was not a member of AFAS. iFAST distributes investment products such as unit trusts through its platform to retail investors. It also offers investment products through a business-to-business distribution platform to financial institutions.

CCS said the 10 FA firms' use of iFAST's distribution platform "contributed significantly" to iFAST's revenues in Singapore.

Vincent Ee, managing director of Financial Alliance and also AFAS president, said it was never the objective of his firm to suppress competition in the FA industry. Offering a commission rebate as an inducement was unethical, he said, because it could lead consumers into making purchases on the spur of the moment.

"It is unfortunate that, in the attempt to uphold a long-standing practice among financial advisory practitioners and to safeguard consumers from potentially misleading marketing material, Financial Alliance, a member of the AFAS executive committee, may be seen by CCS to have infringed competition law."

He said the 10 firms had "expressed disappointment" to iFAST out of concern that its marketing approach would not only mislead consumers, but also tarnish the industry's ethical and professional standing and violate anti-inducement guidelines and practice.

Separately, AFAS said it has long held the view that commission rebates should not be used as an inducement to purchase financial products.

"This position has been consistent with that of the regulator and the Life Insurance Association. Unlike a supermarket rebate, which is direct and has no long-term implications, life insurance commission rebates have financial implications that could impact consumers later."

If the rebate issue is not handled properly, consumers' trust in the FA industry would be undermined in the long run, said AFAS.

Seah Seng Choon, executive director of the Consumers Association of Singapore (Case) said: "Businesses should not be colluding to set or limit prices, as this will effectively dismantle the free market, causing consumers to be greatly disadvantaged."

He added that competition is a key component of the free market and spurs businesses to be more efficient as they compete with each other, giving consumers more choice and better prices.

If the 10 firms are found to have breached the regulations, financial penalties could be imposed on them.