Amendment to Securities and Futures Act passed to introduce safeguards for retail investors

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The Securities and Futures Amendment Bill, which sought to introduce safeguards for retail investors in the securities and derivatives markets, has been passed in Parliament on Monday (9 January).

The Bill gives the Monetary Authority of Singapore (MAS) increased powers and flexibility to bring non-conventional investment products within regulatory perimeters. tighten the classification of accredited investors.

It also tightened the classification of accredited investors.

The central bank will classify buy-back arrangements involving gold, silver and platinum as debentures under the Bill. which said that offers of products with such buy-back arrangements will have to be made with a prospectus registered with authorities.

Under the new clause 3(l) introduced by the bill, the definition of “commodity” is replaced with a new definition that includes any produce, item, goods or article, any index, right or interest in produce, item, goods or article, and any index, right, interest, tangible property or intangible property of any nature that is prescribed, but does not include any produce, item, goods or article, or any index, right or interest in any produce, item, goods or article, that is prescribed as not being a commodity. All tangible properties may be a commodity, including, but not limited to, natural resources such as minerals, gold, oil and agricultural produce.

Under the old definition, “commodity” simply means gold or any produce, item, goods, article or financial instrument, and includes an index, right or interest in such commodity other than a financial instrument; and such other index, right or interest of any nature as the Authority may, by notification in the Gazette, prescribe to be a commodity.

The enhanced measures also make it more difficult for individuals to qualify as accredited investors, who are deemed more capable of taking on the risk of investing in more sophisticated products.

Currently, individuals qualify as accredited investors if they have more than S$2 million of net personal assets.

The Bill tightens the way net personal assets are calculated, such that net equity of an individual’s primary residence can only contribute up to S$1 million of the S$2 million threshold.

In addition, the Bill introduces another avenue for individuals to qualify as accredited investors if they have more than S$1 million of financial assets, net of any related liabilities.

With the amendment, individuals whose wealth is concentrated in their primary residence, with few other liquid assets to invest, will be treated as retail investors. They will benefit from the full range of regulatory safeguards under the Securities and Futures Act.

"I would like to emphasise all investments carry risk and ultimately, investors must take responsibility for their financial decisions," said Minister for Education (Higher Education and Skills) Ong Ye Kung, who is a member of MAS' Board of Directors.

"Investors need to critically assess investment products and refrain from investing in any products that they do not understand or where the returns sound too good to be true," he added.