MAS expands scope of fair dealing guidelines

19 June 2024 | Asia | Articles

The MAS has recently updated its fair dealing guidelines and widened the application scope to “all products and services offered by financial institutions to their customers”. Following its consultation paper issued last year, the MAS expects these changes to raise the fair dealing standards in the financial industry and enhance customers’ experiences. With the guidelines taking immediate effect, it’s worth familiarising yourself with what this means for your compliance setup.

First introduced in 2009, the guidelines were issued to promote fair dealing by financial institutions (FIs) when providing financial advisory services to their consumers. Originally written with the needs of retail consumers in mind, the guidelines were designed to focus on customer outcomes and address concerns around whether FI investment products and services provided real value. The updates take effect immediately following the announcement, meaning all FIs must consider incorporating the principles of fair dealing in the various stages of a product’s life cycle, or services rendered to their customers, regardless of whether they’re based in or outside of Singapore. They are also encouraged to demonstrate how they’re achieving the five fair dealing outcomes outlined in the guidelines proportionate to their business model, and the types of products and services they offer.

In addition to widening the scope of application, some key updates to the guidelines include incorporating the following principles and guidance in some of the outcomes:

• Putting in place sound and objective processes to assess applications received for financial products and services (Outcome 1).
• Designing and manufacturing products and services that are suitable for target customer segments (Outcome 2).
• Delivering products and services that meet customer expectations and exercising right-of-review clauses judiciously (Outcome 4).

Regardless of customer type, the guidelines are intended to apply to all FIs on all the services and products they offer. Even if the FI doesn’t manufacture a product, they will still need to consider how the services they offer to customers can achieve the desired and advertised outcomes.

Steps to consider when applying the guidelines

In view of the different needs for information, advice and recommendations for customers and the wide range of services offered, you’ll need to consider how best to apply the guidelines in a way that is proportionate to your business model and customer base. Ultimately, your board and senior management team must be able to demonstrate that your strategy, policies, systems and processes support the fair dealing outcomes.

The proposed revisions will undoubtedly have a varying operational impact on all FIs in areas such as product life cycle development, services to customers, sales, marketing and promotion and after-sales processes such as customer feedback and complaints.

To start, it’s worth creating a clear strategy to achieve the fair dealing outcomes, including:

• conducting a gap analysis of your existing policies, processes and business practices against the guidelines to align your organisational policies and procedures to the outcomes.
• implementing a fair dealing framework covering policy and procedures.

You’ll also have to develop a management information framework to measure and monitor the achievement of fair dealing outcomes on an ongoing basis

How we can help

As proposed revisions are finalised and implemented, our team can help you develop the fair dealing framework, management reporting design and review existing policies and procedures to make sure they stand up to regulatory expectations.

Our team are preparing bespoke templates to help improve gap analyses, policy frameworks and MI reports. Please get in touch if you’d like to walk through any of the updated activities or how we can support you with implementing these changes to your compliance system.