New measures from MAS: Customer Knowledge Assessment (CKA)

New measures from MAS: Customer Knowledge Assessment (CKA)

Dear Valued Investor, Our regulator, the Monetary Authority of Singapore, released new measures and enhanced requirements, aimed at safeguarding the interest of investors. These measures apply to unit trusts as well as other financial instruments and will go into full effect starting 1 January 2011. Under the new measures, a customer knowledge assessment (CKA) will be conducted by all distributors in order to assess whether the consumer has the relevant knowledge or experience to understand the risks and features of the product they are buying. If he fails this assessment, then MAS will not allow "execution only" services to be provided. This impacts online distributors like Fundsupermart in a major way due to our business model, which is essentially "self execution only". Online unit trust distributors like Fundsupermart essentially function like online stock brokerages, except we distribute unit trusts instead of stocks. The customer goes online, does the research himself, and executes his own unit trust trades - generally all "self execution only". Now, however, with the new measures, all distributors, including Fundsupermart, will perform customer knowledge assessments on our customers. If you pass the assessment, then well and good, you can proceed with executing the trades yourself. However, when you fail, you will be stopped from "self execution" trades. Distributors are required to stop you from proceeding if you are assessed to have failed. Having said all this, I would like to reassure all investors that Fundsupermart remains committed to the unit trust business and we are in for the long haul. So we are busy modifying our IT systems to take into account these changes, and I assure everyone that we will strive to effectively implement them with as little hassle as possible. We fully support investors receiving a higher degree of protection, as this new set of regulations require. Additionally, we have hired client investment specialists who will be providing investment advice to investors who need it. For now though, it is important to understand the criteria required to pass the CKA, especially for those of you who want to place your own trades unimpeded. To pass, you need to satisfy just any of the following three criteria. Have at least 6 transactions in unit trusts or investment linked products in the last 3 years; Have a diploma or higher qualification in relevant courses like accountancy, actuarial science, business, capital markets, commerce, economics finance, financial engineering, financial planning, computational finance and insurance; Have a minimum of 3 consecutive years of working experience in the past 10 years in the development, structuring, management, sale, trading, or research and analysis of investment products. (Work experience in accountancy, actuarial science, treasury or financial risk management is also considered relevant experience). As you can see, the work experience and educational qualification requirement are rather specific and may not be easy for everyone to meet. Of the three, criteria 1, which is at least 6 transactions in the past 3 years, is the easiest and most straightforward one to meet. We will be putting up a FAQ in due course to explain further specifics of these 3 criteria, as well as other details about this new CKA. We will also aim to launch our modified IT system in due course. Thus, for now, please do not be alarmed about these new regulations. Rest assured, we will make every effort to explain and implement them as efficiently and painlessly as possible to all investors. If you have further questions, feel free to call our hotline or email us. Yours sincerely, General Manager, Fundsupermart

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