Outcome from the Guidelines on Fair Dealing — Board and Senior Management Responsibilities for Delivering Fair Dealing Outcomes to Customers:
Outcome 1: Customers have confidence that they deal with financial institutions where fair dealing is central to the corporate culture.
Outcome 2: FIs offer products and services that are suitable for their target customer segments.
Outcome 3: Customers are served by competent representatives.
Outcome 4: Customers receive clear, relevant, and timely information that accurately represent the products and services offered and delivered.
Outcome 5: FIs handle customer complaints in an independent, effective, and prompt manner.
Board and Senior Management of FIs may better ensure their internal processes are aligned in order to achieve the Five Fair Dealing Outcomes.
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 ensure that their internal processes are aligned to uphold fair dealing principles across all aspects of their operations. This involves refining processes, systems, policies, and practices to empower their representatives to embody fair dealing values. Effective monitoring of 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 be able to justify any differential treatment of customers or customer groups using relevant and reliable information or data. This is because it is understood that 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, ensuring that 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. The justification for this disparity in treatment would be based on different risk appetites across different investor types.
Competency of representatives – Outcome 3
The Board and Senior Management of FIs have the responsibility to ensure that 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. Factors to be taken into accord would not just be solely focused on sales targets.
Example: A fund management company can implement tailored professional development programs for their regulated personnel, which includes regular training sessions, workshops and assessments to ensure that such personnel are kept abreast of the latest market practises, regulatory requirements and financial products. This allows them to ensure that appropriate advice is rendered to a customer.
Provision of clear, relevant and accurate information – Outcome 4
The Board and Senior Management of FIs have the responsibility to ensure that their products are presented in a clear, relevant, and accurate manner to enhance consumer knowledge. Throughout the various stages of the sales process (pre-, during, and post-sale), they should implement standardized scripts to ensure consistency in providing product information. This includes ensuring a current and fair representation of product details with highlighted risks.
The updated guidelines encourage FIs to assess the benefits and disadvantages of sharing information through a particular source and the risks associated with it. For instance, information provided through a particular medium should not be compromised due to the lack of characters or space. Any advertisement should be approved by the FIs senior management to ensure that it fits the bill. Moreover, FIs are now required to explain to customers how various fees and markets can impact their net investment. Customers will then be able to make more informed decisions.
In addition to that, there are contracts that in some circumstances exercise the Right to Review (ROR) clause unilaterally. In the updated guidelines, FIs are expected to disclose such a clause to their customers during the sales process and provide scenarios as to when this clause will be used, how much prior notice will customers be given and what are their avenues when this clause is exercised.
FIs should take note that this clause should be exercised with caution. There should be internal processes in place with Senior Management and Board Members to ascertain how the use of the ROR clause will impact their customers.
Example: Standardised marketing information should be presented in the simplest and easiest way possible. When technical terms are used, it should be clearly explained. 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 prioritize the proper handling of customer complaints and feedback. They should ensure that clear communication channels and procedures for submitting feedback and complaints are easily accessible and well-documented for monitoring purposes. Representatives should receive adequate training on how to effectively review and process customer complaints, with all outcomes properly documented. Policies should be established to ensure timely acknowledgment and resolution of customer complaints, emphasizing 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 that handle 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
These Guidelines were issued in 2009 before this recent update on the 30th of May 2024. Hence, the outcomes listed out above and in the Guidelines should already be incorporated by FIs through their internal policies and practices. Where system or process improvements are necessary for FIs to comply with specific areas of the updated Guidelines, FIs should promptly implement the required changes.
How Can We Help?
Our dedicated team in Singapore is here to support your organization in aligning with the updated Guidelines issued by the MAS, whether this involves updating/amending your existing policies and procedures or even assisting with the implementation of some of the measures that we have laid out as examples 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 [email protected] 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.
