The Monetary Authority of Singapore launched a public consultation paper on proposals to facilitate the provision of robo-advisory services in the city-state.

The forward looking regulator has been an ardent proponent of early and innovative financial technology adoption.

Its latest move is meant to help facilitate the provision of digital advisory services, also more commonly referred to now as «robo-advisory services.»

Innovation Support

The Monetary Authority of Singapore (MAS) has released a consultation paper on proposals to facilitate the provision of digital advisory services in Singapore. The proposals seek to support innovation in financial services by recognising the unique characteristics of digital platforms.

Financial institutions currently regulated under the Securities and Futures Act (SFA) and the Financial Advisers Act (FAA) can already provide digital advisory services, and some have started to do so.

More recently, MAS has also received indications of interest from new entities intending to offer digital advisory services to retail investors.

Regulatory Refinements 

The availability of digital advisory services will widen investor choice to low-cost investment advice.  To make it easier for entities offering digital advisory services to operate in Singapore, MAS intends to refine the licensing and business conduct requirements.

First, digital advisers that operate as fund managers under the SFA will be allowed to offer their services to retail investors even if they do not meet the track record requirement, provided they meet certain safeguards. 

These safeguards include:

  • offering diversified portfolios of non-complex assets
  • having key management staff with relevant collective experience in fund management and technology
  • undertaking an independent audit of the digital advisory business within one year of operations.

Second, digital advisers that operate as financial advisers under the FAA will be allowed to assist their clients to execute their investment transactions (e.g. passing their trade orders to brokerage firms) and re-balance their clients’ investment portfolios in collective investment schemes without the need for an additional licence under the SFA. This licensing exemption will also be made available to non-digital advisers.

New Technology Risks

Third, digital advisers can seek exemption from the FAA requirement to collect the full suite of information on the financial circumstances of a client, such as income level and financial commitments, if they can satisfactorily mitigate the risks of providing inadequate advice based on limited client information.

While facilitating new business models, MAS will require providers of digital advisory services to manage the new technology risks associated with these activities. 

The public consultation will end on 7 July 2017.