MAS issued guidelines on fair dealing

Recently, MAS has issued guidelines on fair dealing. This came about 2 months after HKMA has issued their guidelines from the aftermath of the Lehman Brother's fiasco. I have a short post here on the measures by HKMA previously.

In summary, MAS has identified 5 fair dealing outcomes:

1. Customers have confidence that they deal with financial institutions where fair dealing is central to the corporate culture.
   
   
2. Financial institutions offer products and services that are suitable for their target customer segments.
   
   
3. Financial institutions have competent representatives who provide customers with quality advice and appropriate recommendations.
   
   
4. Customers receive clear, relevant and timely information to make informed financial decisions.
   
   
5. Financial institutions handle customer complaints in an independent, effective and prompt manner.

According to the guidelines issued, MAS will take into account a financial institution’s ability or failure to observe the Guidelines in assessing whether it continues to be fit and proper to conduct regulated activities. Where the failings relate to obligations under the relevant legislation, MAS will take supervisory or enforcement action.

MAS will use inspections and visits to financial institutions, interviews with the Board and Senior Management, surveys of financial institutions, customer surveys and mystery shopping exercises to assess whether financial institutions are observing the Guidelines.

MAS has also indicated that the guidelines may be updated after the consultation paper.

My personal feeling is that they are generalizing the 5 outcomes to a very high level. From what I read of the 5 outcomes, they are basically saying that you better target your customers properly, and give quality and timely advice. If not, handle the complaints in a prompt manner. How the institutions handle the 5 outcomes is up to them.

What I do not like about the guidelines issued is that the supervisory or enforcement action is very vague. The penalties should be clearly spelled out, even if it's high-level. Jail term for e.g., or a penalty of x% of the related products sold. The relevant legislations related to these guidelines are also not spelled out. I think that it's a little too high level to be of any use. How are they going to enforce it?

I come from the old school of thought. You must catch the attention by emphasizing the penalties. Otherwise, nobody will even take a look at the guidelines. Anyway, I hope the next update to these guidelines will be clearer.

More information about the MAS paper can be found here.