MAS first part response as a result of Lehman fiasco

Apparently, MAS has a 2 part response to the Lehman fiasco. MAS has just released the first part of the response to feedback on the proposals to:

• promote more effective disclosure, including the introduction of a Product Highlights Sheet, new ongoing disclosure requirements, and restrictions on advertising and marketing materials;
  
  
• strengthen fair dealing in the sale and advisory process, including enhanced requirements for the due diligence of new products and the advisory process, restrictions on sale without advice, and restrictions on bank teller activities;
  
  
• introduce the concept of a complex investment product and enhanced competency requirements for representatives selling complex investment products; and
  
  
• introduce a cooling off period of seven days for unlisted debentures.

The list of responses are quite long but the following are some key points which I felt was important in preventing the Lehman fiasco from happening again:

• To impose ongoing disclosure obligations for unlisted investment products. Information that is likely to materially affect the price or value of an unlisted investment product would be considered “material changes”.
  
  
• To impose requirements for semi-annual and annual reports on unlisted investment products with tenures of 12 months or longer. Guidance for the format will be issued for consultation in 1Q 2010.
  
  
• To require issuers to make available, publicly and regularly, bid or redemption prices of unlisted investment products. Requirement to disclose bid or redemption prices does not constitute an obligation on issuers to provide an exit mechanism for investors.
  
  
• Marketing and advertising materials would be considered “fair and balanced” if they are clear and easily understood by the audience being addressed; set out clearly both the potential upside and downside of the investment; highlight prominently the risks of the product; do not give the impression that an investor can profit without risk; do not present information in footnotes if such presentation would cause difficulty to an investor in understanding the product; and do not omit any material information if the omission would cause the marketing and advertising materials to be misleading.
  
  
• Marketing and advertising materials should not suggest that the product is, or is comparable to, a bank deposit; or there is no or little risk of the investor losing his principal or not achieving the stated or targeted rate of returns. Footnotes must also be in a font size of at least 10-point Times New Roman.
  
  
• To prohibit the use of the term “capital/principal protected” and any other derivative or form of this term in all disclosure documents, and marketing and advertising materials.
  
  
• Allow for tellers to refer customers to representatives for the purchase of investment products only when the customer has approached the teller with an explicit request for information on investment products; To ban incentives for tellers’ referral activities.
  
  
• Both new and existing representatives to be required to pass the new CMFAS module for complex investment products before they are allowed to sell complex investment products.
  
  

The second part of the response will come near end of the year. Well, at least MAS is doing something about it.