Written reply to Parliamentary Question on sale of sophisticated investment products to retail investors

In a recent parliamentary sitting, the Prime Minister of Singapore was asked the following – as quoted:
(a) what is the prevalence of sophisticated investment products such as structured products, or those involving derivatives, being sold to retail investors as a share of all financial products sold; and
(b) what requirements does MAS impose in terms of disclosure and pre-purchase counselling before non-accredited investors are allowed to purchase sophisticated investment products.
In its response, Mr. Tharman Shanmugaratnam, Senior Minister and Minister in charge of the Monetary Authority of Singapore (MAS), provided the following brief answer on behalf of the Prime Minister.
To (a): According to Mr. Shanmugaratnam, less than 5% of all financial products sold to retail customers are structured products or derivatives.
To (b): As with all financial products sold to retail clients, financial institutions must ensure to perform a suitability assessment to ensure that a product is in line with a client’s objectives, its financial situation, and its risk appetite. For structured products or products involving derivatives, the assessment requirements are more comprehensive and more stringent to include additional steps for assessing a client’s investment know-how and experience. Investors must then be advised according to the outcome of the assessment. If a client seeks to engage in such products despite the fact that an assessment revealed insufficient experience and / or knowledge, advisers must escalate the matter within a firm for senior approval. The client, on the other hand, would have to provide its written consent that indicates that he or she is engaging in such transactions against the explicit advice of an institution.
As far as disclosure requirements are concerned, again, as with all financial products sold, financial institutions must ensure to distribute all relevant information to clients before any investment decision is made. Such information must include disclosures on the risks of a product. Additionally, at the point of sale, they must also „explain any option to unwind the purchase decision“, if such option is available to clients.