24 July 2017
Download the paper now.

Singapore consults on robo-advisor rules

07 June 2017  |  3060 views  |  0 Source: Monetary Authority of Singapore

The Monetary Authority of Singapore (MAS) today released a consultation paper on proposals to facilitate the provision of digital advisory services1 (also known as robo-advisory services) in Singapore.

The proposals seek to support innovation in financial services by recognising the unique characteristics of digital platforms.

2 Financial institutions currently regulated under the Securities and Futures Act (SFA) and the Financial Advisers Act (FAA) can already provide digital advisory services, and some have started to do so2. More recently, MAS has also received indications of interest from new entities intending to offer digital advisory services to retail investors.

3 The availability of digital advisory services will widen investor choice to low-cost investment advice. To make it easier for entities offering digital advisory services to operate in Singapore, MAS intends to refine the licensing and business conduct requirements.

4 First, digital advisers that operate as fund managers under the SFA will be allowed to offer their services to retail investors even if they do not meet the track record requirement, provided they meet certain safeguards. These safeguards include:

offering diversified portfolios of non-complex assets;
having key management staff with relevant collective experience in fund management and technology; and
undertaking an independent audit of the digital advisory business within one year of operations.

5 Second, digital advisers that operate as financial advisers under the FAA will be allowed to assist their clients to execute their investment transactions (e.g. passing their trade orders to brokerage firms) and re-balance their clients’ investment portfolios in collective investment schemes without the need for an additional licence under the SFA. This licensing exemption will also be made available to non-digital advisers.

6 Third, digital advisers can seek exemption from the FAA requirement to collect the full suite of information on the financial circumstances of a client, such as income level and financial commitments, if they can satisfactorily mitigate the risks of providing inadequate advice based on limited client information.

7 While facilitating new business models, MAS will require providers of digital advisory services to manage the new technology risks associated with these activities. Unlike conventional financial advisory services, the delivery of digital advisory services relies on the use of algorithms and online tools to analyse client data and recommend investment portfolios. As digital advisory tools may be susceptible to technology risks such as erroneous algorithms and cyber threats, MAS has set out expectations on the governance and management oversight to be adopted by digital advisers, including the need to put in place a robust framework governing the design, monitoring and testing of algorithms. This includes having adequate board and senior management oversight and compliance arrangements to monitor the quality of advice provided.

8 The public consultation will end on 7 July 2017. A copy of the public consultation paper is available on the MAS website.

1 Digital advisory services refer to the provision of advice on investment products using automated, algorithm-based tools. Services are provided online with limited or no human interaction with clients.

2 Digital advisers may operate with a fund management licence or a licence for dealing in securities under the SFA, or a financial adviser’s licence under the FAA, depending on their business models and the specific activities that they undertake.

Comments: (0)

Comment on this story (membership required)

Related company news


Related blogs

Create a blog about this story (membership required)
visit www.worldpaymentsreport.comvisit www.finastra.comvisit www.niceactimize.com

Top topics

Most viewed Most shared
Mastercard to buy AI outfit BrighterionMastercard to buy AI outfit Brighterion
10695 views comments | 14 tweets | 20 linkedin
Barclays rides payments-as-a-service wave with investment in Form3Barclays rides payments-as-a-service wave...
9554 views comments | 16 tweets | 12 linkedin
Mastercard and Scotiabank join Enterprise Ethereum AllianceMastercard and Scotiabank join Enterprise...
8309 views comments | 25 tweets | 16 linkedin
PayPal strikes deals with Chase and CitiPayPal strikes deals with Chase and Citi
8042 views comments | 10 tweets | 5 linkedin
UK judge blocks £14bn class action suit against MastercardUK judge blocks £14bn class action su...
7896 views comments | 5 tweets | 6 linkedin