Impact of Financial Product Marketing Tactics on Less Financially Literate Consumers

Sir, the Monetary Authority of Singapore (MAS) expects financial institutions or FIs and their representatives to conduct their prospecting and marketing activities responsibly and in conducive settings. MAS has set standards of conduct for such activities. For example, one, representatives of FIs must disclose their identities upfront and clearly to prospective clients; two, FIs should monitor the conduct of their representatives at roadshows through site visits and mystery shopping; three, FIs should conduct call-backs and surveys within the free-look period to check if clients understood the products that they purchased at roadshows.

MAS has recently issued a public consultation to strengthen these safeguards by making them mandatory. MAS has also proposed additional new measures, such as requiring FIs to: one, offer consumers additional time of at least three to five days to consider their decisions; two, limit the use of gifts to influence consumers’ decision-making; and three, conduct roadshows and marketing events only in commercial premises instead of public spaces, such as streets and pedestrian areas.

A consumer who feels he has been sold a product through inappropriate means by a representative of an FI should immediately lodge a complaint with the FI. The FI is required, by regulation, to thoroughly investigate the matter. Where the representative has been found to have mis-sold a product, the FI will offer redress. Should the consumer remain dissatisfied with the FI’s response, he can approach the Financial Industry Disputes Resolution Centre (FIDReC) for assistance. FIDReC’s mediation and adjudication services provide consumers with an accessible and affordable avenue to resolve disputes with FIs.

I thank the Minister of State for his comprehensive reply. I have two supplementary questions. The first is that we know lots of residents who might not be familiar with English and they tend to be older residents. So, what are the additional safeguards put in place to help these vulnerable residents? We do see some of these marketers doing ambush tactics in the heartlands, going after these residents. This is my key concern for them.

So, the second supplementary question is: has MAS monitored how many victims of such ambush marketing tactics have subsequently asked to withdraw their investments and, if they want to do so, are the remedial actions and recourse easily accessible to them?

Sir, I thank the Member for his supplementary questions. With regard to vulnerable clients, including seniors who may not be savvy with the English language, FIs must implement additional safeguards when recommending products to such clients. A supervisor from the FI must call the client to check back on his or her understanding of the product and risks before any sale to vulnerable clients is allowed to be completed. MAS has also publicly consulted on proposals to enhance pre- and post-transaction safeguards for these vulnerable clients.

I will just share a few examples. First is the strengthening of requirements to identify selected clients. Second is to require FIs to ask the selected clients to have a trusted individual to be present during the sale and advisory process. And third, to require FIs to audio record call-backs to the selected clients and to provide the recordings to them upon request.

MAS is reviewing the feedback from the public consultation and will produce the response when the review is completed.

With regard to the Member's second supplementary question, there are many different reasons why clients may wish to withdraw their investments. One, it may be due to the fact that they have their own preference or they may have a change of mind. MAS does not have this information, but the FIs will have that information.

On what recourse mechanisms customers or consumers might have, please allow me to just elaborate shortly.

Consumers who suspect any wrongdoing again should lodge a complaint with the FIs, which are required by MAS regulations to investigate and resolve these complaints promptly and also independently. The complaint must be handled by a separate unit comprising staff who are not involved in sales. FIs will then review the facts and circumstances of the case in accordance with proper procedures, including interviewing the complainant and keeping the complainant apprised of the case status. They will offer redress to consumers where their representatives are found to have committed mis-selling or other wrongdoing.

If the FI's response is not to the customer's satisfaction, he or she can approach FIDReC, which I mentioned. The outcome of FIDReC's adjudication is binding on the FIs, but not on consumers, who retain the right to pursue their claims through other avenues, such as seeking legal advice on the merits of their case.

Finally, consumers may also file a report with MAS if they suspect that an FI or representative has committed a regulatory breach or misconduct. While MAS does not adjudicate individual cases of disagreement between consumers and FIs, MAS will review reports of breaches or misconduct and take appropriate regulatory actions against FIs or representatives found to have breached MAS regulations.

Mr Speaker, I would like to ask the Minister of State a supplementary question. With regard to the recourse on products which are not specifically fronted by FIs, for example, commodities-related products, such as gold, can I ask the Minister of State for clarification? Is the appropriate recourse via FIDReC in those types of situations? Because if I am not mistaken, when it comes to commodities-related products, it is not. So, maybe the Minister of State can help me clarify that point.

Sir, I do not have the answer at this moment but will check and get back to the Member.

Thank you, Speaker. I would like to seek clarification from the Minister of State pertaining to this matter. I appreciate that MAS performs a regulatory check and balance on the FIs, but it does not sound to me like the individuals who fall prey to such marketing techniques have any form of recourse or compensation. So, my question is: should MAS find any particular FI in breach of a certain threshold of aggressive or inappropriate marketing, will there be retroactive forms of compensations required of them to be made to the consumer?

Sir, I thank Ms Carrie Tan for her question. As I mentioned earlier on, MAS will review reports of breaches of misconduct and take appropriate regulatory actions against FIs or representatives that are found to breach MAS regulations.