5 May 2023
On 25 April 2023, the Monetary Authority of Singapore (“MAS”) published two consultation papers seeking feedback on proposals to enhance safeguards for prospecting and marketing of financial products. The enhancements seek to raise industry standards by requiring financial institutions (“FIs”) to implement additional controls when engaging in prospecting and marketing activities through both physical and digital means. The consultations close on 30 June 2023.
This article outlines some of the key proposals set out in the consultation papers.
Prospecting activities at public places and telemarketing
Proposed measures to address conduct risks and issues
MAS seeks to implement the following measures to address conduct risks and issues:
- Measure 1: Strengthen the safeguards in the Guidelines on Standards of Conduct for Marketing and Distribution Activities by legislating them as requirements in new Notice(s)
The Guidelines on Standards of Conduct for Marketing and Distribution Activities (“Marketing and Distribution Activities Guidelines”) set out safeguards for proper conduct of public prospecting activities (“PPAs”). However, there have been instances where FIs and their representatives have not adhered to the safeguards.
MAS thus proposes to legislate the safeguards as requirements in new Notice(s). Given that the conduct issues observed were mainly in relation to the marketing and distribution of investment products (such as capital market products and life policies), and long-term accident and health policies, MAS proposes to apply the new Notices to these products only. For other financial products such as banking and general insurance products, where similar issues have not been reported or were observed to a lesser extent, the Marketing and Distribution Activities Guidelines will continue to apply.
MAS also seeks comments on whether its expectations on the responsibilities of FIs’ board and senior management in respect of marketing and distribution activities as set out in the Marketing and Distribution Activities Guidelines, Notices, and/or Guidelines on Individual Accountability and Conduct are clear and well understood, or if there is a need to clarify any of them.
- Measure 2: Inform customers of motive and obtain consent before commencing any prospecting activity
MAS proposes to require FIs and their representatives to inform customers upfront of their intention to market financial products and services to them, and obtain customers’ consent, which could be either verbal or written, before commencing the prospecting engagement.
- Measure 3: Provide adequate time for customers to make properly considered purchase decisions
MAS proposes that no sale of financial products shall be concluded by FIs and their representatives at the initial prospecting engagement, unless (a) the FI and its representatives have offered the customer the option of taking more time to consider the purchase before subsequently completing the transaction, (b) the customer has made an explicit request to purchase the product at the initial prospecting engagement, after having considered and rejected the offer of more time to review the purchase, and (c) the FI and its representatives have documented the customer’s explicit request, and this documentation has been acknowledged by the customer.
Feedback is sought on the minimum duration that should be provided for customers to consider their purchases before the FI and its representatives are allowed to complete the transaction subsequently.
MAS intends to apply Measure 3 to initial prospecting engagements of all financial products, except in the case where sales of general insurance products are made in connection with the customer’s primary purchase of a non-insurance product or service at the same prospecting event, in view that the risks of an unsuitable purchase are generally lower in such cases.
MAS also seeks views on a proposed ex-post measure to extend the 14-day free-look period for life policies and seven-day cancellation period for collective investment schemes.
- Measure 4: Prohibit use or mention of gift offers to entice customers to purchase financial products or make larger purchases
To enhance the existing safeguards, MAS proposes to specify that FIs and their representatives shall not use or mention gift offers to entice customers to purchase a financial product or make a larger purchase.
- Measure 5: Conduct PPAs in proper and conducive settings, and in a responsible and professional manner
To ensure that PPAs are conducted in proper and conducive settings, MAS proposes to:
- require FIs to ensure that any prospecting activities held outside their own premises are conducted only at commercial premises;
- require FIs to ensure that at least 25 square metres of space is demarcated for prospecting events.
To ensure that PPAs are conducted in a responsible and professional manner, MAS proposes to:
- limit prospecting activities to within a five-metre radius of the demarcated event space;
- require FIs to establish a channel for consumers to provide feedback;
- designate an individual as a Public Prospecting Management Officer (“PPMO”) to help oversee conduct at prospecting events. MAS seeks views on whether conditions should be set on who may be designated as PPMOs.
MAS also seeks to require FIs to subject their representatives’ use of promoters to their approval, and to apply relevant safeguards in the Marketing and Distribution Activities Guidelines and the new Notice(s) to promoters.
As it is not practicable to apply Measure 5 to higher-risk PPAs such as street canvassing and door-to-door prospecting, these will continue to remain prohibited. Other than street canvassing and door-to-door prospecting, MAS states that there are multiple channels available to FIs and their representatives for engaging prospective customers. These range from in-person meetings made on an appointment basis at the FI’s or customers’ premises, to events at physical venues (e.g. roadshows, talks and seminars), and digital channels for prospecting and marketing.
Proposals to apply Measures 2 and 4 to telemarketing activities
MAS proposes to apply Measures 2 and 4 to the telemarketing of financial products and services.
MAS also seeks comments on the possible lifting of the prohibition on soliciting and closing a sale of any Medisave-approved policies over the telephone, subject to Measures 2 and 4, and the implementation of the safeguards introduced when MAS granted a temporary exemption from the prohibition in view of Covid-19 restrictions from 13 April 2020 to 30 September 2022.
Proposals to address influence posed by gift offers
MAS seeks comments on which of the following options should be applied to address the inherent influence that gift offers pose on consumers’ decisions to purchase financial products:
- disallowing the practice of offering gifts that are contingent on customers making a purchase;
- restricting the form of any offers to only discounts and rebates;
- limiting the monetary value of the gifts offered.
MAS intends to issue new Notices and revise the Marketing and Distribution Activities Guidelines to implement the proposals, taking into account responses to the consultation paper. MAS will publish a subsequent consultation paper on the legal amendments to effect the enhanced safeguards.
MAS proposes to provide a transition period of six to nine months for FIs to comply with the enhanced safeguards, i.e. the new Notices and revised Marketing and Distribution Activities Guidelines will be effected six to nine months from their issuance date.
Digital prospecting and marketing activities
Issuance of Guidelines on Standards of Conduct for Digital Prospecting and Marketing Activities
MAS proposes to issue Guidelines on Standards of Conduct for Digital Prospecting and Marketing Activities (“Digital Prospecting and Marketing Activities Guidelines”), to formalise MAS’ supervisory expectations on FIs to put in place safeguards for proper conduct of digital prospecting and marketing activities. The Digital Prospecting and Marketing Activities Guidelines are intended to complement the advertisement regulations set out in the Financial Advisers Regulations and the Securities and Futures (Licensing and Conduct of Business) Regulations (collectively, “Advertisement Regulations”).
The proposed Digital Prospecting and Marketing Activities Guidelines set out MAS’ expectations that the board and senior management of FIs are accountable and responsible for ensuring that proper controls are in place for their FI’s digital prospecting and marketing activities, and ensuring that these activities are conducted in a responsible and professional manner. The safeguards cover the following areas:
- selecting appropriate digital media for prospecting and marketing financial products and services;
- assessing specificities and limitations of digital media, and addressing risks associated with its use, including by providing important and prominent disclosures;
- providing clear guidance and proper training to representatives on appropriate digital prospecting and marketing practices;
- monitoring digital prospecting and marketing activities conducted by representatives and third-party service providers; and
- taking appropriate disciplinary actions against representatives and their supervisors for malpractices, and deterring errant conduct relating to digital prospecting and marketing.
Enhancements to Advertisement Regulations
To address risks posed by misleading non-product advertisements and anonymous advertisements, MAS proposes to:
- extend the application of the regulatory requirement for FIs’ approval to non-product advertisements. This will subject non-product advertisements, such as those advertising financial services, to similar approval processes and vetting controls as product advertisements; and
- require FIs and their representatives to state their identities in advertisements.
Enhancements to Notice FAA-N02 on Appointment and Use of Introducers
MAS proposes to refine the requirements in Notice FAA-N02 on Appointment and Use of Introducers (“Notice FAA-N02”) to strengthen FIs’ oversight and control of activities conducted by lead generation firms and enhance safeguards for proper handling of customers’ data.
In this regard, MAS has proposed amendments to Notice FAA-N02 to require FIs to monitor the activities and conduct of lead generation firms. As customers’ data must be handled with proper care, the proposed amendments also require FIs to ensure that the manner in which lead generation firms collect, use or disclose data is in line with the FI’s own data management policies and applicable laws such as the Personal Data Protection Act 2012.
As the relevance of these measures is not limited to the context of lead generation firms, the measures will apply to all introducers.
MAS is considering providing a transition period of six to nine months for FIs to comply with the proposed Digital Prospecting and Marketing Activities Guidelines and updated Advertisement Regulations and Notice FAA-N02, i.e. the effective date of these instruments would be six to nine months from their issuance date.
All advertisements, including pre-existing advertisements that remain posted on digital media on or after the effective date of the new Digital Prospecting and Marketing Activities Guidelines and updated Advertisement Regulations and Notice FAA-N02, will have to be compliant with the updated requirements, as allowing advertisements of differing standards to be disseminated would confuse consumers and result in varying levels of safeguards.
The following materials are available on the MAS website www.mas.gov.sg:
- Media release: MAS proposes enhanced safeguards for prospecting and marketing of financial products
- Consultation Paper on Enhancing Safeguards for Proper Conduct of Prospecting Activities at Public Places and Telemarketing