MAS proposes to apply Fair Dealing Guidelines to all

The MAS has issued a consultation regarding its Fair Dealing Guidelines which widens the scope of application to include “all products and services offered by financial institutions to their customers”. The regulator also encourages the incorporation of “key principles and guidance to help uphold the fair treatment of customers”.

The consultation, running until 8 February 2023, will include, explicitly (i) all financial institutions (FIs), (ii) all products and services offered by them, and (iii) to all their customers.

First introduced in 2009, the guidelines were issued under the Financial Advisers Act to promote fair dealing by 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 stemming from experiences of dealing with FIs and whether the investment products and services they bought provided real value.

The MAS believe it is fundamental that FIs demonstrate fair treatment of ‘customers’ in the broadest sense, the proposals include an expansion of scope to include FIs that deal with accredited and/or institutional investors, including licensed and registered fund management companies, corporate financial advisers, securities brokers and payment service providers.

The guidelines set out five fair dealing outcomes, which the boards and senior management of FIs are expected to deliver to their customers, applying to the manufacturing, selection, marketing and distribution of financial products and include providing advice and other services for these products alongside after-sales services and complaints handling.

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.

The five fair dealing outcomes

The revised outcomes listed in the guidelines are:

  1. Customers have confidence that they deal with FIs where fair dealing is central to the corporate culture.
  2. Products and services offered are suitable for their target customer segments.
  3. FIs have competent representatives to serve customers.
  4. Customers receive clear, relevant and timely information that accurately represents the products and services offered and delivered.
  5. Customer complaints are handled in an independent, effective and prompt manner.

The key principles and guidance on the fair dealing outcomes that the MAS proposes to incorporate are:

  • 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
  • Delivering products and services that meet customer expectations and exercising right-of-review clauses judiciously (Outcome 4).

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 will 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. At the outset, you will have to consider devising a clear strategy to achieve the fair dealing outcomes and aligning organisational policies and procedures to the outcomes. This means that they must relate to areas such as product life cycle development, services to customers, sales, marketing and promotion and after-sales processes such as customer feedback and complaints. You will also have to develop a management information framework to measure and monitor the achievement of fair dealing outcomes.

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.

Get in touch if you’d like to discuss the regulatory implications of these changes and how to remain compliant.