By Nurdianah Md Nur
June 12, 2017
Singapore has proposed new guidelines for the provision of robo-advisory services in the republic.
Its central bank—the Monetary Authority of Singapore (MAS)—last Wednesday (7 June 2017) released a public consultation paper that outlines its plans to refine the licensing and business conduct requirements for companies offering robo-advisory services.
This is in response to the interest from new companies that intend to offer such services to retail investors.
Robo-advisory services—also known as digital advisory services—refer to the provision of online advice using automated, algorithm-based tools, with limited or no human interaction with clients.
MAS proposed that digital advisors operating as fund managers under the Securities and Futures Act (SFA) will be allowed to offer their services to retail investors, even if they do not meet the track record requirements.
However, they will need to meet certain safeguards, such as having diversified portfolios of non-complex assets; having key management staff with relevant collective experience in fund management and technology; and undertaking an independent audit of the digital advisory business within one year of operations.
As for digital advisors operating as financial advisors under the Financial Advisers Act (FAA), they will be allowed to assist their clients to execute their investment transactions and rebalance their clients' investment portfolios in collective investment schemes without requiring an additional licence under the SFA.
Besides that, MAS proposed that digital advisors can request to be exempted from the FAA requirement of collecting the full suite of information on clients' financial circumstances. However, they need to show that they can satisfactorily mitigate the risks of providing inadequate advice based on limited client information.
The public consultation paper is available on MAS' website, and is open public feedback from now till 7 July 2017.
MAS joins hands with ASBA to accelerate the growth of fintech
To further support the growth of financial technology (fintech), MAS recently signed a memorandum of understanding (MoU) with the Association of Supervisors of Banks of Americas (ASBA).
The MoU will provide a framework for Singapore and ASBA member countries to explore potential joint innovation projects on technologies such as blockchain and big data. MAS and ASBA will also facilitate discussions around emerging fintech trends and other pertinent issues on innovative financial services.
"Fintech is fundamentally about ideas and enterprise flowing between cities. This MoU embodies MAS' and ASBA's resolve in accelerating the growth of fintech in the respective regions, through increased collaboration and exchanges between our respective fintech ecosystems," said Sopnendu Mohanty, chief fintech officer, MAS.
"Fintechs will progressively change the region's financial ecosystem. This change is expected to occur in an environment characterised by an ample competition, transparency, sound risk management, and client-centeredness. Thus, by uniting efforts with the MAS, we expect to support the development of a regulatory and supervisory framework that while supporting financial stability, nurtures innovation, and promotes market transparency and proper conduct," said Rudy Araujo, secretary general, ASBA.