The MAS has issued its response to feedback on its 2021 proposals to refine the tier structure requirements under the Financial Advisers Act, as well as to introduce restrictions on direct payment by third parties of remuneration to representatives or supervisors of financial advisory firms.
With respect to the tier structure requirements, MAS has indicated that it will proceed with the following proposals (to which majority of the respondents agreed with or did not provide comments): (1) limiting the tier structures of financial advisory firms to three tiers; (2) limiting the payment of overriding benefits to a maximum of two supervisors for each representative in the first tier; and (3) limiting supervisors to accepting overriding benefits only from the financial advisory firm in which he/she is a supervisor. In response to feedback, MAS also confirmed that breakaway payments, business allowances, vested commissions and commissions from joint sales would be excluded from the tier structure requirements, but provided that financial advisory firms have proper governance frameworks and adhere to the relevant conditions for each of these types of payments (as set out in detail in the MAS' response paper). The tier structure requirements will also apply to all financial advisers (whether licensed or exempt), but not to exempt financial advisory firms who serve only accredited, institutional and/or expert investors.
MAS will also proceed to implement its proposals that: (1) other than the principal financial advisory firms, other third parties (such as direct life insurers) would be prohibited from determining, communicating and paying Volume Based Incentives (“VBI”) directly to the representatives of the principal financial advisory firms; (2) representatives would correspondingly be prohibited from receiving VBI for the sale of life business products directly from any person who is not their principal financial advisory firm; and (3) financial advisory firms would be prohibited from making commission payments for the sale of regular premium life policies to the representatives and supervisors of other financial advisory firms.
MAS' response can be accessed here.
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