Review of Investor Definitions under Section 4A of Securities and Futures Act 2001

Mr Melvin Yong Yik Chye asked the Prime Minister and Minister for Finance (a) when were the definitions of specific classes of investors as specified under section 4A of the Securities and Futures Act 2001 last reviewed; and (b) in the past three years, whether MAS has received feedback that an individual's eligibility as an accredited investor should be premised on relevant knowledge, in addition to the individual's net worth.

Section 4A of the Securities and Futures Act 2001 sets out the asset and income thresholds for an individual to become eligible for accredited investor status. The accredited investor eligibility criteria were last updated in 2018 to introduce a $1 million cap on the value of an individual's primary residence that could be used in the net personal asset assessment. It also requires investors who meet the eligibility criteria to expressly opt in before they can be treated as an accredited investor by a financial institution.

Regardless of an individual's net worth, financial institutions must, in the first instance, treat all customers as retail investors and accord them the full range of safeguards. This means that financial institutions must comply with prescribed product disclosure requirements and assess the investor’s investment knowledge and experience before recommending products that may be more complex in nature.

Beyond this, investors who meet the accredited investor eligibility criteria may be offered the option to become accredited investors, which will avail them to a larger suite of products and services but will not avail them to the same level of regulatory safeguards as retail investors. These investors must choose to become accredited investors and financial institutions are required by regulation to explain clearly to them the safeguards they will forgo when opting to be an accredited investor.

Under the Fair Dealing Guidelines that the Monetary Authority of Singapore recently updated in May 2024, financial institutions are also expected to consider a customer's profile, risk tolerance and financial knowledge, regardless of his or her accredited investor status, to assess whether a product is suitable for the customer before making a recommendation. Nonetheless, regulatory safeguards are not a substitute for investor responsibility. All investments carry risks and investors are advised to engage only with products they fully understand and that align with their risk tolerance.