Digital prospecting and marketing activities
The MAS is proposing to implement Guidelines on Standards of Conduct for Digital Prospecting and Marketing Activities (Digital Guidelines) to address the additional risks digital media advertisements pose compared to print media. These additional risks include omitting key information due to word/character limits, publishing misleading advertisements that do not substantiate claims, publishing advertisements anonymously using pseudonyms that are difficult for retail investors to verify and prospecting using inappropriate platforms like online dating apps.
Implementing Digital Guidelines
To combat these additional risks, the Digital Guidelines hold the board and senior management of FIs accountable for ensuring safeguards are in place for digital prospecting and marketing activities. The proposed safeguards are:
- Selecting appropriate digital media for prospecting and marketing financial products and services;
- Assessing specificities and limitations of digital media, and addressing risks associated with its use, including by providing important and prominent disclosures;
- Providing clear guidance and proper training to FI representatives on appropriate digital prospecting and marketing practices;
- Monitoring digital prospecting and marketing activities conducted by FI representatives and third-party service providers; and
- Taking appropriate disciplinary actions against FI representatives and supervisors for malpractices, and deterring errant conduct relating to digital prospecting and marketing.
Regulating non-product advertisements
The MAS is also aware of misleading non-product advertisements, for example where advertisements tout high returns without mentioning the specific financial products that generate such high returns. The MAS intends to extend current regulations so that FIs are responsible for approving non-product advertisements, in addition to product advertisements. FIs and their representatives must also state their identities in advertisements (instead of using pseudonyms) so that retail investors can verify that the FIs and their representatives are regulated by the MAS.
Regulating online lead generation
Finally, the MAS is introducing changes to ensure FIs generate online leads in an appropriate manner. Notice FAA-N02 on Appointment and Use of Introducers by Financial Advisers will be amended to require stronger FI oversight and control of lead generation firms’ activities. The MAS has also reiterated that applicable legislation like the Personal Data Protection Act 2012 and advertisement regulations continue to apply to lead generation activities.
Public prospecting and telemarketing activities
The MAS has proposed five measures for public prospecting activities as conduct issues have persisted since the introduction of the 2016 Guidelines. Public prospecting activities include roadshows and street canvassing. Examples of conduct issues include FIs and their representatives not being upfront with their identity and motive, engaging in pressure selling and harassing retail investors.
New legal requirement
Measure 1 makes the 2016 Guidelines a legal requirement via new MAS notice(s). The MAS is proposing to only target investment products and long-term accident and health policies, since these financial products have surfaced more conduct issues. The 2016 Guidelines will remain as best practice standards for other financial products, such as banking and general insurance products, and will not become a legal requirement for now.
Upfront consent
Measure 2 requires FIs and their representatives to inform retail investors upfront of their intention to market financial products and services and obtain consent from retail investors. The consent can be verbal or written and must be obtained before FIs and their representatives commence prospecting. Prospecting events that conduct pre-event registration will be deemed to have obtained consent from retail investors.
Adequate time
Measure 3 requires FIs and their representatives to provide adequate time for retail investors to make properly considered purchase decisions. As an ex-ante measure, no sale of financial products may be concluded unless the FI and its representatives have offered the retail investor the option of taking more time to consider the purchase, the retail investor has made an explicit request to purchase the product after having considered and rejected the offer of more time, and the retail investor’s explicit request is documented and acknowledged. General insurance products, such as home insurance sold at show flats, will be exempted from Measure 3 when sold in connection with the retail investor’s primary purchase of a non-insurance product or service at the same event. The MAS is seeking feedback on the minimum duration that is considered as adequate time, as well as whether to extend the existing free-look period for life policies and cancellation period for collective investment schemes as an ex-post measure.
No gift offers
Measure 4 prohibits the use or mention of gift offers to entice retail investors to purchase financial products or make larger purchases. This prohibition protects retail investors from pressure selling and other inappropriate influences.
Proper conduct of prospecting activities
Measure 5 requires FIs to ensure prospecting activities are conducted in proper and conducive settings, in a responsible and professional manner. Prospecting events outside FIs’ own premises must be conducted at commercial premises and have at least 25 metres of space demarcated. FIs must ensure prospecting activities are conducted within a five-metre radius of the demarcated space, provide a feedback channel for retail investors and designate an individual to oversee the proper conduct of the prospecting activities. If FIs engage promoters at prospecting activities, the promoters must be subject to the FIs’ approval and comply with applicable safeguards. The MAS is seeking feedback on the requirements for proper conduct of prospecting activities and how designated individuals should exercise oversight of the prospecting activities. Street canvassing and door-to-door prospecting will remain prohibited as applying Measure 5 would not be practicable in these scenarios.
Telemarketing
The MAS proposes to apply Measure 2 and Measure 4 to telemarketing activities and to lift the prohibition on telemarketing for Medisave-approved policies. The prohibition was temporarily lifted for Medisave-approved policies during the COVID-19 pandemic and did not lead to a spike in complaints about telemarketing conduct. To safeguard retail investors, the MAS will require FIs to perform call-backs to ensure customers understand the product purchased, and maintain records of the call-backs to facilitate audits.
Conclusion
The two consultation papers continue the MAS’ track record of proactive measures and enforcement to protect retail investors. While the exact measures will only be confirmed after the consultation process, some prospecting and marketing activities could face more regulatory overheads while the position for other activities may remain unchanged. FIs should monitor updates closely and adjust their procedures accordingly.
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Client Alert 2023-143
