On 30 May 2024, MAS issued its updated Guidelines on Fair Dealing (FSG-G04). The MAS fair dealing guidelines help Boards and Senior Management of FIs align their internal processes to achieve the Five Fair Dealing Outcomes.
The Five Fair Dealing Outcomes from MAS’s Guidelines — Board and Senior Management Responsibilities for Delivering Fair Dealing Outcomes to Customers:
1: Customers have confidence that they deal with financial institutions where fair dealing is central to the corporate culture.
2: FIs offer products and services that are suitable for their target customer segments.
3: Customers are served by competent representatives.
4: Customers receive clear, relevant, and timely information that accurately represents the products and services FIs offer and deliver.
5: FIs handle customer complaints in an independent, effective, and prompt manner.
The updated MAS fair dealing guidelines set out five outcomes Boards and Senior Management of FIs must work toward to ensure fair customer treatment.
Here’s a summary of the key updates and required actions for FIs:
Confidence in FIs – Outcome 1
The board and senior management of FIs must align their internal processes to uphold fair dealing principles across all aspects of their operations. This involves refining processes, systems, policies, and practices. The goal is to empower representatives to embody fair dealing values. Effectively monitoring these strategies and establishing a robust framework are essential steps toward achieving this goal. In addition to that, FIs should have a sound and objective process to assess applications. When offering financial products and services, FIs must justify any differential treatment of customers or customer groups. FIs must base this on relevant and reliable information or data. This is because FIs may provide different products, pricing, and fees to various customer segments based on commercial considerations or market segmentation.
Example: A fund management company can implement a Fair Dealing Committee to regularly review and update policies. This ensures they align with the principles of fair dealing. This committee could also monitor the performance of representatives to ensure compliance.
Products and Services for customers – Outcome 2
The updated MAS Guidelines have clarified what is expected of FIs when taking on a new product. FIs need to ensure that the new product is relevant to its target market; however, FIs in the updated MAS Guidelines should take it a step further and also assess the substance of the new product in various scenarios to ascertain its potential benefit to their customers.
Example: A fund management company that is catering to Accredited Institutional Investors can offer a premium product tailored to such a demographic, different to that offered to retail investors. Different risk appetites across different investor types would justify this disparity in treatment.
Competency of representatives – Outcome 3
The Board and Senior Management of FIs are responsible for ensuring their representatives are adequately trained and competent. Additionally, their remuneration structures should align the interests of their representatives with those of their customers to uphold fair dealing practices. These factors should not focus solely on sales targets.
Example: A fund management company can implement tailored professional development programs for their regulated personnel. This can include regular training sessions, workshops, and assessments, ensuring personnel stay abreast of the latest market practices, regulatory requirements, and financial products.
Provision of clear, relevant and accurate information – Outcome 4
The Board and Senior Management of FIs are responsible for ensuring products are presented clearly, relevantly, and accurately, to enhance consumer knowledge. Throughout the various stages of the sales process (pre-, during, and post-sale), FIs should implement standardized scripts. As a result, this ensures consistency in providing product information. This includes ensuring product details are current and fairly represented, with risks clearly highlighted.
In addition, the updated guidelines encourage FIs to assess the benefits and disadvantages of sharing information through a particular source, along with the associated risks. For instance, a lack of characters or space should not compromise information provided through a particular medium. FIs’ senior management should approve any advertisement to ensure it fits the bill. Moreover, FIs must now explain to customers how various fees and markets can impact their net investment, helping customers make more informed decisions.
In addition to that, there are contracts that in some circumstances exercise the Right to Review (ROR) clause unilaterally. The updated guidelines require FIs to disclose this clause to customers during the sales process. FIs should provide scenarios for when the clause will be used, how much prior notice customers will receive, and what avenues are available when it is exercised.
However, this clause should be exercised with caution. Internal processes should be in place with Senior Management and Board Members. These should ascertain how use of the ROR clause will impact customers.
Example: FIs should present standardised marketing information in the simplest and easiest way possible. When FIs use technical terms, they should clearly explain them. FIs should use graphics, illustrations and tables (where relevant) to simplify the product’s features. Representatives can also check in and obtain an acknowledgement from their customers after providing the requisite explanations, and before proceeding with the transaction.
Handling of complaints – Outcome 5
The Board and Senior Management of FIs should prioritise the proper handling of customer complaints and feedback. They should ensure clear communication channels and procedures for submitting feedback and complaints. These should be easily accessible and well-documented for monitoring purposes.
Furthermore, representatives should receive adequate training on how to effectively review and process customer complaints, with all outcomes properly documented. FIs should establish policies to ensure timely acknowledgment and resolution of customer complaints. These should emphasise proactive intervention to address customer concerns promptly. This approach helps maintain customer satisfaction and trust in the institution’s services.
Example: Reviewers of complaints should not be individuals involved in the provision of services. Appointed personnel handling complaints should also be independent, to avoid any conflict of interest or biased opinions. FIs can also put in place a notification message to acknowledge the received complaints and give a turnaround time for it. The Board and Senior Management are to then oversee the complaints and take swift action where necessary.
Conclusion
MAS first issued these fair dealing guidelines in 2009, before this recent update on 30th May 2024. Hence, FIs should already have incorporated the outcomes listed above, and in the Guidelines, through their internal policies and practices. Where system or process improvements are necessary to comply with specific areas of the updated Guidelines, FIs should promptly implement the required changes.
Fair Dealing Guidelines: How Can We Help?
Our dedicated team in Singapore is here to support your organisation in aligning with the updated Guidelines. This includes updating or amending your existing Compliance Policies and Procedures, and assisting with implementing the measures we outline above.
We specialize in providing comprehensive regulatory compliance assistance, ensuring your business practices meet the highest standards of integrity and transparency.
Reach out to us today at admin@curiaregis.com to learn how we can assist you further. Let us help you ensure that your business not only meets regulatory expectations but also fosters trust and integrity with your counterparties.
