MAS Fine-Tunes Rules For Robo Advisers
The Singapore financial regulator released a set of guidelines that aim to make it easier for firms offering digital advisory services to operate in Singapore.
The Monetary Authority of Singapore (MAS) unveiled a set of guidelines on Monday that clarifies how existing rules apply to firms providing digital advisory services that require little to no human interaction.
«We are refining our regulatory framework to support innovation in financial advisory services while maintaining adequate safeguards to protect investors’ interests. The guidelines will facilitate new online business models to provide investors with more options to access investment advice,» said Lee Boon Ngiap, Assistant Managing Director (Capital Markets) at MAS in a a press release.
Safeguards Required
Digital advisers that seek to offer fund management services to retail investors will be eligible for licensing even if they do not meet the SFA corporate track record requirements, provided they meet other specified safeguards, MAS added.
These safeguards include having board and senior management members with relevant experience in fund management and technology; offering portfolios that comprise simple collective investment schemes; and doing an independent audit at the end of the first operational year.
«Digital advisers will be exempted from the FAA requirement to collect the full suite of information on the financial circumstances of a client, such as income and financial commitments. This is on the condition that they put in place measures to mitigate the risks of providing unsuitable investment recommendations due to limited client information,» MAS added.
Licence Exemption
With the new guidelines, such digital advisers do not need a full capital markets licence under the Securities and Futures Act (SFA), when they pass on their clients' trade orders to brokerage firms for execution and to re-balance their clients' portfolios in collective investment schemes.
As such business models carry unique risks, such as faulty algorithms and cyber threats, business operators must establish robust frameworks to govern and supervise their algorithms.
