The Monetary Authority of Singapore (MAS) has proposed tightening the rules on the sale of certain “non-conventional” products, noting that there has been a rise in the volume of these offered to retail investors as alternative investments.

It is consulting on the regulations around two specific categories:

  • buy-back arrangements involving the exchange of precious metals. In economic effect, such arrangements are equivalent to collateralised borrowing and will be regulated as “debentures” under Singapore's Securities and Futures Act (SFA); and

  • schemes which have the elements of a regulated collective investment scheme but do not pool investors’ contributions. The proposal is to regulate such schemes as collective investment scheme under the SFA.

The regulator says such products have features that are similar to regulated capital markets products, but are structured to assign ownership of underlying physical assets to investors, thereby taking them beyond the SFA's coverage.

The key changes would:

  • extend to investors in such non-conventional investment products the current regulatory safeguards available to investors in capital markets;

  • require all investment products to be rated for complexity and risks, and for these ratings to be disclosed to investors; and

  • provide accredited investors (such as high-net-worth, insituttional and/or professional investors) the option to benefit from the full range of capital markets regulatory safeguards that are applicable for retail investors.

The deadline for comments on the proposals is September 1. A copy of the consultation paper is available on the MAS website.