MAS ‘mystery shopping’ plans for advisory firms amid misconduct concerns

The Monetary Authority of Singapore is set to introduce a raft of new measures to quell the rise of misconduct cases in the the financial advisory market.

Speaking at last week’s Association of Financial Advisers annual conference, Merlyn Ee, executive director at MAS, said that the regulator will be introducing a series of enforcement actions, including new mystery shopping plans for the industry in 2017.

The Singapore regulator has more than 500 financial institutions and over 38,000 representatives under the Financial Advisers Act, with financial services ranging from insurance and retirement planning to independent financial advisory, and robo-advisory services more recently.

MAS last conducted mystery shopping exercises in 2011, but, as Ee explained, the time is right to re-introduce random clients into the marketplace in a bid to curb the rising number of misconduct cases.

“We have found mystery shopping to be a useful complement to our suite of supervisory tools to identify conduct issues,’ said Ee. “When customer complaints are lodged, it is often difficult to tell which party is right or wrong as many cases involve one person’s words against the other.’

“[Financial advisory] firms should also conduct mystery shopping and on-site visits to ensure that the marketing activities of their representatives comply with the Guidelines on Standards of Conduct for Marketing and Distribution Activities,” she said.

‘Inappropriate advice’

MAS said that it will also be stepping up investigation into misrepresentation, mis-selling and inappropriate advice, and will “take enforcement actions where necessary”.

The regulator’s new enforcement department was established in August 2016 and recently began conducting on-site inspections and found cases where its ‘balanced scorecard framework’ used to determine remuneration of sales personnel and supervisors was not implemented properly, it said.

It also identified marketing malpractices and lapses in the behaviour of supervisors, who “were not up to the mark” in identifying misrepresentation and dealing with customer call-backs.

In her speech Ee warned that as financial firms grow their business, they must ensure that their controls and processes “keep pace”.

“The financial advisory business is one that is centred on customers,” she said. “It is thus crucial to instil confidence that FA firms and their representatives put customers at the centre of everything they do.

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Gary Robinson
Head of Video and Ezines at Open Door Media Publishing. Deputy Editor, International Investment. An experienced journalist and filmmaker with more than 20 years' financial services experience, both as journalist and originally as a fully qualified IFA, Gary works across both International Investment and InvestmentEurope titles. Previous video production credits include projects on BBC, C4 and SKY.

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