SINGAPORE: The Monetary Authority of Singapore (MAS) has reprimanded four financial institutions for breaching rules related to risk management practices and sales-related remuneration under the Financial Advisers Act, the regulator said on Tuesday (Jun 15).
The four institutions are: AIA Financial Advisers (AIA FA), Prudential Assurance Company Singapore, Aviva and Aviva Financial Advisers (Aviva FA).
MAS also reprimanded two individuals â Mr Peter Tan Shou Yi, a consultant engaged by Aviva, and Aviva FAâs chief executive and director Lionel Chee Boon Chai â in relation to the matter.
MASâ deputy managing director for financial supervision Ho Hern Shin said the regulator has âdealt firmlyâ with these financial institutions and individuals âto send a clear message to the industry on the importance of upholding high ethical standardsâ.
WHAT RULES WERE BREACHED
In a media release, MAS said that during the course of its ongoing supervision, there were indications that these financial institutions may have breached regulatory requirements on remuneration practices.
It conducted an investigation and found ânumerous instancesâ where remuneration was paid to supervisors â a person responsible, both directly or indirectly, for the supervision or management of a financial adviser â in contravention of requirements under the Financial Advisers Act.
One is the Balanced Scorecard requirements (BSC) for the sale of investment products.
Under this, the variable income of supervisors and representatives are determined by the fulfilment of non-sales key performance indicators, such as understanding a clientâs needs and suitability of product recommendations.
Grades are given to the supervisors and representatives every quarter.
Another is the Spreading and Capping of Commissions (SCC) requirements that apply to the sale of regular premium life policies.
Insurers and financial adviser firms are required to cap the variable income payable to representatives and supervisors to 55 per cent in the first year, and spread the remaining variable income payable over a âprescribed periodâ.
Both requirements were introduced as part of the Financial Advisory Industry Review in 2015. The BSC and SCC âseek to align the incentives of financial adviser firms, representatives and supervisors with their customersâ interests, to promote a culture of fair dealingâ, MAS said on Tuesday.
The financial institutions and individuals had also breached the Financial Advisers Regulations and Guidelines on Risk Management Practices, which require financial institutions to put in place appropriate policies to ensure compliance with regulations.
WHAT HAPPENED AT AVIVA
MAS said Aviva engaged Mr Peter Tan Shou Yi as a consultant from July 2016 to March 2020 to provide strategic advice on Aviva FAâs business.
But Mr Tan âwent beyond providing strategic advice and acted as a supervisorâ to representatives at Aviva FA during this period by having frequent and direct interactions with these representatives, including discussions on sales and compliance issues.
From July 2016 to April 2019, neither Aviva nor Aviva FA put in place compliance arrangements to monitor Mr Tanâs activities in Aviva FA.
MAS said for failing to put in place these arrangements, Aviva and Aviva FA had contravened the Guidelines on Risk Management Practices â Internal Controls and the Financial Advisers Regulations, respectively.
âMr Tan had acted as a supervisor of Aviva FA by virtue of his roles and responsibilities in the firm, but Aviva FA failed to review and assess Mr Tanâs performance, assign a BSC grade to him, and determine and pay his remuneration in accordance with the BSC,â the regulator said.
âAviva also failed to cap and spread his variable income in accordance with the SCC. In accepting such remuneration, Mr Tan also breached the SCC.â
Aviva FAâs chief executive and director, Mr Chee, was also reprimanded for failing to âdischarge the duties of his officeâ, said MAS.
Apart from failing to ensure that proper arrangements were in place to monitor Mr Tanâs activities, he did not properly address the issue of the poor conduct of Aviva FAâs representatives which included misrepresentations to customers regarding the nature and features of certain insurance products.
MAS said despite its repeated supervisory engagements with Aviva FA between August 2017 and September 2018 over the sales conduct of its representatives, the measures put in place âremained inadequateâ.
As a result, it has directed Aviva FA to appoint independent external persons to conduct a "holistic review" of the companyâs internal control processes, and to perform call-backs to all customers before any sales are completed. These measures remain in place, said the regulator.
WHAT HAPPENED AT AIA FA
AIA FA did not review and assess the performance of three of its managing directors who had acted as supervisors, said MAS.
It also failed to assign BSC grades, as well as determine and pay remunerations in accordance with the BSC.
AIA FA also failed to cap and spread the variable income of these managing directors in accordance with the SCC.
WHAT HAPPENED AT PRUDENTIAL
Prudential had appointed three individuals referred to as âMaster Group Agency Managerâ leaders and a consultant to act as supervisors.
It failed to review and assess the performance of these leaders and consultant, assign BSC grades to them, as well as determine and pay their remuneration in accordance with the BSC requirements.
Prudential also failed to put in place adequate risk mitigation procedures and compliance arrangements to monitor the activities of this group of leaders and consultant.
Ms Ho said MAS expects financial institutions to have ârobust arrangementsâ to ensure that their representatives place their customersâ interests first.
âOur requirements on remuneration practices relating to the sale of investment and life insurance products aim to promote good sales conduct in the financial advisory industry,â she added.
âWe have dealt firmly with these financial institutions and individuals who have breached our regulations, to send a clear message to the industry on the importance of upholding high ethical standards.â
SINGAPORE: The Monetary Authority of Singapore (MAS) has reprimanded four financial institutions for breaching rules related to risk management practices and sales-related remuneration under the Financial Advisers Act, the regulator said on Tuesday (Jun 15).
The four institutions are: AIA Financial Advisers (AIA FA), Prudential Assurance Company Singapore, Aviva and Aviva Financial Advisers (Aviva FA).
MAS also reprimanded two individuals â Mr Peter Tan Shou Yi, a consultant engaged by Aviva, and Aviva FAâs chief executive and director Lionel Chee Boon Chai â in relation to the matter.
MASâ deputy managing director for financial supervision Ho Hern Shin said the regulator has âdealt firmlyâ with these financial institutions and individuals âto send a clear message to the industry on the importance of upholding high ethical standardsâ.
WHAT RULES WERE BREACHED
In a media release, MAS said that during the course of its ongoing supervision, there were indications that these financial institutions may have breached regulatory requirements on remuneration practices.
It conducted an investigation and found ânumerous instancesâ where remuneration was paid to supervisors â a person responsible, both directly or indirectly, for the supervision or management of a financial adviser â in contravention of requirements under the Financial Advisers Act.
One is the Balanced Scorecard requirements (BSC) for the sale of investment products.
Under this, the variable income of supervisors and representatives are determined by the fulfilment of non-sales key performance indicators, such as understanding a clientâs needs and suitability of product recommendations.
Grades are given to the supervisors and representatives every quarter.
Another is the Spreading and Capping of Commissions (SCC) requirements that apply to the sale of regular premium life policies.
Insurers and financial adviser firms are required to cap the variable income payable to representatives and supervisors to 55 per cent in the first year, and spread the remaining variable income payable over a âprescribed periodâ.
Both requirements were introduced as part of the Financial Advisory Industry Review in 2015. The BSC and SCC âseek to align the incentives of financial adviser firms, representatives and supervisors with their customersâ interests, to promote a culture of fair dealingâ, MAS said on Tuesday.
The financial institutions and individuals had also breached the Financial Advisers Regulations and Guidelines on Risk Management Practices, which require financial institutions to put in place appropriate policies to ensure compliance with regulations.
WHAT HAPPENED AT AVIVA
MAS said Aviva engaged Mr Peter Tan Shou Yi as a consultant from July 2016 to March 2020 to provide strategic advice on Aviva FAâs business.
But Mr Tan âwent beyond providing strategic advice and acted as a supervisorâ to representatives at Aviva FA during this period by having frequent and direct interactions with these representatives, including discussions on sales and compliance issues.
From July 2016 to April 2019, neither Aviva nor Aviva FA put in place compliance arrangements to monitor Mr Tanâs activities in Aviva FA.
MAS said for failing to put in place these arrangements, Aviva and Aviva FA had contravened the Guidelines on Risk Management Practices â Internal Controls and the Financial Advisers Regulations, respectively.
âMr Tan had acted as a supervisor of Aviva FA by virtue of his roles and responsibilities in the firm, but Aviva FA failed to review and assess Mr Tanâs performance, assign a BSC grade to him, and determine and pay his remuneration in accordance with the BSC,â the regulator said.
âAviva also failed to cap and spread his variable income in accordance with the SCC. In accepting such remuneration, Mr Tan also breached the SCC.â
Aviva FAâs chief executive and director, Mr Chee, was also reprimanded for failing to âdischarge the duties of his officeâ, said MAS.
Apart from failing to ensure that proper arrangements were in place to monitor Mr Tanâs activities, he did not properly address the issue of the poor conduct of Aviva FAâs representatives which included misrepresentations to customers regarding the nature and features of certain insurance products.
MAS said despite its repeated supervisory engagements with Aviva FA between August 2017 and September 2018 over the sales conduct of its representatives, the measures put in place âremained inadequateâ.
As a result, it has directed Aviva FA to appoint independent external persons to conduct a "holistic review" of the companyâs internal control processes, and to perform call-backs to all customers before any sales are completed. These measures remain in place, said the regulator.
WHAT HAPPENED AT AIA FA
AIA FA did not review and assess the performance of three of its managing directors who had acted as supervisors, said MAS.
It also failed to assign BSC grades, as well as determine and pay remunerations in accordance with the BSC.
AIA FA also failed to cap and spread the variable income of these managing directors in accordance with the SCC.
WHAT HAPPENED AT PRUDENTIAL
Prudential had appointed three individuals referred to as âMaster Group Agency Managerâ leaders and a consultant to act as supervisors.
It failed to review and assess the performance of these leaders and consultant, assign BSC grades to them, as well as determine and pay their remuneration in accordance with the BSC requirements.
Prudential also failed to put in place adequate risk mitigation procedures and compliance arrangements to monitor the activities of this group of leaders and consultant.
Ms Ho said MAS expects financial institutions to have ârobust arrangementsâ to ensure that their representatives place their customersâ interests first.
âOur requirements on remuneration practices relating to the sale of investment and life insurance products aim to promote good sales conduct in the financial advisory industry,â she added.
âWe have dealt firmly with these financial institutions and individuals who have breached our regulations, to send a clear message to the industry on the importance of upholding high ethical standards.â