Market Conduct

Promoting fair and responsible market practices

As part of the Bank’s principal regulatory objective to promote financial stability, the Bank strives to foster fair, responsible and professional business conduct of financial service providers and to protect the rights and interests of consumers of financial services and products. The Bank regulates the conduct of financial service providers through the Financial Services Act 2013 (FSA), the Islamic Financial Services Act 2013 (IFSA) and the Development Financial Institutions Act 2002 (DFIA). Under these legislations, financial service providers are required to be authorised to carry on a licensed, approved or registered business and are subject to standards on business conduct issued by the Bank to ensure fair dealings in their interactions with financial consumers.

In relation to market conduct practices, the Bank regulates licensed banks, licensed Islamic banks, licensed insurers, licensed takaful operators, prescribed development financial institutions, approved issuers of a designated payment instrument, approved issuers of a designated Islamic payment instrument, and financial intermediaries. Financial intermediaries include approved financial advisers, approved Islamic financial advisers, approved insurance brokers, approved takaful brokers and approved money brokers. Any person that meets the definition of a financial consumer as specified under the FSA, IFSA or DFIA, including any person who uses, has used or intending to use any financial service or product for personal, domestic or household purposes, or in connection with a small business, would generally benefit from the Bank’s scope of consumer protection.

In 2019, the Bank intensified efforts to foster high standards of professional conduct among financial service providers by introducing six key principles on fair treatment of financial consumers. The standards aim to ensure that financial consumers are treated fairly at all stages of their relationship with the financial service provider. Among others, the standards set out expectations for the board and senior management of financial service providers to promote a culture where the interests of financial consumers are an integral part of business operations. In addition, financial service providers must act in good faith by ensuring the fairness of contract terms, providing clear product information, offering advice or recommendations appropriate to an individual’s needs and financial circumstances, and exercising due care, skill and diligence when dealing with financial consumers. Financial service providers are also held accountable for the conduct and actions of their agents and representatives.

Market conduct supervision and enforcement

In protecting the interests and rights of financial consumers, the Bank supervises the market conduct practices of financial service providers and initiates remedial or enforcement actions for any breach of market conduct requirements. These key principles guide the Bank’s conduct supervisory approach:

• Principle 1: Fair outcomes for consumers and markets through assessments of conduct issues according to their impact on both financial consumers and market confidence.
• Principle 2: Forward-looking and pre-emptive in identifying potential risks and taking actions that are proportionate to the degree of non-compliance observed to prevent or address any adverse impact on the best interests of financial consumers.
• Principle 3: Robust supervisory assessments on conduct issues to ensure fair and timely redress for affected financial consumers, as well as effective resolution of root causes by financial service providers to prevent future recurrence of breaches observed.
• Principle 4: Leverage on financial service providers’ oversight functions to put in place adequate resources, and effective policies, processes, controls and governance to deliver fair treatment outcomes.
• Principle 5: Effective engagement and collaboration with relevant stakeholders, such as consumer and industry associations, to gain greater insights on conduct issues and challenges, as well as to work collaboratively with the stakeholders to elevate financial consumers’ understanding on their rights and obligations.

In light of the above, as part of the Bank’s supervisory process, the Bank undertakes macro and micro surveillance to identify and address conduct and business practices of financial service providers that may cause harm to financial consumers. The Bank’s conduct risk assessment is key in determining the type and intensity of supervisory activities to be performed to resolve any lapses identified. The assessment will involve the Bank identifying emerging and key conduct risks that can result in unfair outcomes for financial consumers and assessing their severity, such as the number of customers that are or could be affected, for prioritisation and allocation of supervisory resources and activities.

To resolve the identified conduct issues, the Bank then undertakes timely and appropriate supervisory and enforcement actions with the following desired outcomes:

1. securing fair restitution to affected financial consumers;

2. elevating culture of compliance in financial service providers;

3. rectifying root causes of non-compliance;

4. eliminating any financial gain or benefit from non-compliance by financial service providers;

5. to serve as strong deterrence against any future misconduct; and

6. to preserve public confidence in the quality, professionalism and fair conduct of financial service providers in meeting the needs of financial consumers.

Regulation and supervision of intermediaries

Intermediaries represent an important interface between financial consumers and financial service providers. Intermediaries generally provide advice and recommendations on suitability of financial products to financial consumers and source products from financial service providers on behalf of financial consumers. Hence, it is essential to ensure that intermediaries are professional, responsible and fair in their dealings with financial consumers.

There are two different approaches undertaken by the Bank in regulating intermediaries. Financial advisers, Islamic financial advisers, insurance and takaful brokers, and money brokers are intermediaries approved by the Bank, thus are referred to as approved persons, while loss adjusters are registered intermediaries. The different approach adopted by the Bank on approved persons and registered persons is reflective of the inherent risks presented by such intermediaries. Nevertheless, the Bank specifies both prudential and business conduct requirements on all intermediaries.

Regulations imposed on approved persons include minimum capital requirements, duties of key responsible persons of the business and shareholder suitability requirements to:

1. ensure that the approved persons are managed prudently and professionally; and

2. prevent any potential conflicts of interests in the running of the business and to ensure that any advice or recommendations provided to financial consumers are impartial and sound.

The approval granted to an approved person to conduct its business is generally valid between one to three years, after which the approved person must submit an application to renew its approval two months prior to the expiry of the existing approval.

For loss adjusters under the registration regime, regulations imposed are mainly on the eligibility criteria to qualify for registration. This includes minimum qualifications and minimum requirements for appointment of the shareholders, directors and senior management, as well as minimum capital requirements. Once registered, loss adjusters are permitted to conduct adjusting business on a continuous basis. Throughout the term of its business, loss adjusters are also required to comply with requirements on claims settlement practices as specified by the Bank.

To reinforce the Bank’s regulatory requirements, the Bank’s supervisory approach focuses on preserving a high level of integrity, competence and professionalism among intermediaries. Over the years, supervision of intermediaries have focused mainly on off-site monitoring of relevant indicators to ensure minimum capital, as well as suitability and fit and proper requirements, are duly complied with. Compared to the supervisory approach of approved persons, registered persons are subject to a more “light touch” supervisory approach. This is in view of the nature of business of loss adjusters, which does not involve the handling of clients’ monies.

Further information on the application procedures for parties interested to apply for approvals or registration as intermediaries are provided in the FAQs below.

Promoting financial capability of consumers

The Bank, together with its smart partners, has implemented the Consumer Education Programme (CEP) which provides consumers access to information on financial products and services as well as money management. CEP also aims to equip consumers with sufficient knowledge to understand the risks and obligations involved in order to make an informed financial decision. The presence of more confident, responsible and financially astute consumers will promote greater competition and thus market efficiency and innovation. To know more about financial education initiatives undertaken by the Bank, please go to the "Customer Information" section on the Bank’s website.

Updated: Mar 2021