Published in Straits Times Forum, 26 January 2012
NEW regulations require consumers to get appropriate investment advice before investing in financial products that carry higher risks, such as structured products and investment funds.
However, they have the unintended consequence of preventing the online purchase of certain indexed exchange traded funds (ETFs) that are suitable for long-term investment. It is ironic that investors are allowed to make online purchase of individual stocks but are disallowed from investing in ETFs that allow them to diversify their risk over a number of blue chip companies that comprise the stock market index.
I recognise that some ETFs are invested in financial derivatives or are leveraged and are not suitable for investors who are not aware or not properly advised about the risks. But these risks do not apply to non-leveraged ETFs invested directly in the component shares of the stock market index. A few ETFs quoted in the Singapore Exchange meet this criterion and are safer than investing in individual stocks.
I suggest that the Monetary Authority of Singapore exempt the non-leveraged, indexed ETFs from the need to receive appropriate advice.
Tan Kin Lian
President
Financial Services Consumer Association
President
Financial Services Consumer Association
5 comments:
Maybe MAS is worried more people become investment savy. There need to be people to loose in order that Temasak Holdings and GIC to make money. If you look round, there are many who lost big in the stocks and I am sure our state companies actually benefit from them.
It does not make sense to allow people to buy S-chips but restrict them from buying an ETF that tracks the Straits Times Index which is a diversified portfolio of Singapore's blue chips.
Individual stocks like S-chips can go to near zero (unexpected fraud) but an index cannot unless a person can believe that all the Singapore's blue chips can go bankrupt. Even the synthetic ETFs with higher counterparty risks are still lower risk than the S-chips, statistically speaking if one measures the percentage of S-chips that have bombed out.
I have sent this letter to MAS today, and hope to get their response.
Had said before,
Illogical to the point of stupidity.
The real reason is simple to guess. MAS is under pressure from FIs who issue synthetic ETFs to be given equal treatment to the one put out by SGX STI ETF. Dun forget MAS need these FIs, esp foreign based, to operate in Singapore, without them MAS could forget making Singapore the 4th Financial centre in the world. It's the FIs who could lord over MAS. Protecting the average Joe investor is false, protecting the FIs is the real truth.
In the eyes of the FIs, whether local or foreign, our Regulator is a paper tiger with no teeth, if they could slaughter this paper tiger, they will slaughter, and easily get away with it. MAS is that lame, just threaten with a "we decide to close shop and move overseas", is enough to bring this Regulator on its knees to beg.
Yujuan, sadly I have to concur with your belief. So far, MAS has never demonstrate that it is in charge and have Singapore / Singaporeans interests as its priority. We are always persuaded with the need to attract Big, foreign banks, hedge funds and other financial institutions......
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