On 30 November 2021, the Monetary Authority of Singapore ("MAS") published in the Government Gazette the new Financial Advisers (Complaints Handling and Resolution) Regulations 2021 ("FA(CHR)Regs"), which establishes requirements on complaints handling and resolution for financial advisory ("FA") firms. The FA(CHR)Regs will take effect on 3 January 2022.

Because the FA(CHR)Regs only apply to complaints received by FA firms from retail clients, clients who are accredited investors ("AIs") would not benefit from the regime of the FA(CHR)Regs.

Further, since the term "AI" refers to persons who are eligible to be and have further opted in to be treated as such, it also became necessary to amend the Securities and Futures (Classes of Investors) Regulations ("SF(COI) Regs") to include the FA(CHR)Regs as consent provisions that would be impacted by a person's election to opt-in to be treated as an AI. Accordingly, the Securities and Futures (Classes of Investors) (Amendment) Regulations 2021 ("SF(COI)(Amendment)Regs") have also been gazetted to take effect on the same day.

This Client Update provides a summary of the key provisions under the FA(CHR)Regs and the SF(COI)(Amendment)Regs, as well as some practical considerations for FA firms in light of the new regulations.

Overview

The FA(CHR)Regs seek to effect the policy proposals on complaints handling and resolution, and applies to all licensed and exempt financial advisers under the Financial Advisers Act ("FAA"). The FA(CHR)Regs generally impose the following obligations on FA firms:

i. To establish an independent unit which will handle and resolve, or supervise the handling and resolution of, complaints received by the FA firm (the "Complaints Handling and Resolutions Unit");

ii. To establish a process for handling and resolving complaints which is independent and prompt;

iii. To designate a senior management member or committee comprising senior management members within the firm who are not directly involved in the provision of any FA service to be responsible for the oversight of its compliance with the FA(CHR) Regs;

iv. To ensure that information on its complaints handling and resolution process is publicly available;

v. To put in place a centralised management system to record, track and manage complaints; and

vi. To report its complaints data to MAS on a biannual basis.

Scope of complaints

The FA(CHR)Regs apply to any complaint made on or after 3 January 2022 by retail clients who are natural persons This means that corporations are excluded from the scope of the FA(CHR)Regs.

The FA(CHR)Regs cover any complaint made by any named client or named prospective client as to the manner in which an FA firm has provided any financial advisory service. To fall within the regime, the complaint must contain an allegation of any conduct that would constitute a contravention of a business conduct requirement under the FAA or an unfair practice.

Process for handling and resolving complaints

FA firms are required to establish a process for handling and resolving complaints which provide for (i) the assessment of the merits of each complaint, (ii) the criteria for determining whether the Complaints Handling and Resolution Unit should refer a complaint to senior management, in which case senior management would then decide on the FA's response to the complaint, and (iii) a reasonable timeframe for handling and resolving complaints.

FA firms must also ensure that the process includes procedures for all of the following:

i. the provision to the complainant, within 2 business days after receiving the complaint, of a written acknowledgment that the complaint has been received, and a written notice setting out a summary of the FA firm's process for handling and resolving complaints;

ii. the interviewing of the complainant;

iii. the reviewing, and the completion of the review, of the complaint;

iv. ensuring that the complainant is kept informed of the status of the handling of the complaint;

v. the sending to the complainant, within 20 business days after the date on which the complaint is received, of:

a) the FA firm's final response to the complaint; or

b) a written response informing the complainant of all the following matters:

1. the reason for any delay in providing the FA firm's final response to the complaint;

2. an indicative reasonable timeframe within which the complainant may expect to receive the FA firm's final response to the complaint; and

3. where the complainant has a right to refer the complaint to an alternative dispute resolution scheme approved by MAS (presently, the Financial Industry Disputes Resolution Centre ("FIDReC")), that fact; and

vi. where an offer of redress or remedial action is accepted by the complainant, the payment of the money offered as redress, or the carrying out of the remedial action.

Timeline for handling complaints

FA firms are required to provide a final response for complaints within 20 business days (i.e., generally 4 weeks) after the date on which the complaint is received. This timeframe is intended to align with the existing timeline for complaints to be lodged with FIDReC.

A complaint is deemed to be resolved under the FA(CHR)Regs upon either (i) the complainant accepting any explanation given or offer made by the FA firm, or (ii) the FA firm sending its final response to the complainant in respect of the complaint.

Meaning of "senior management"

The term "senior management" includes (i) the chief executive officer, (ii) the chief operating officer, (iii) any officer of the FA firm who is employed in an executive capacity and is responsible for the FA firm's compliance functions, (iv) any director of the FA firm who is employed in an executive capacity; and (v) any other person, by whatever name called, who is in charge of carrying out the duties of any office mentioned in paragraph (i), (ii), (iii) or (iv).

Board and senior management responsibility

FA firms' board and senior management are allowed to delegate the authorisation of biannual report submission to a single member of the FA firm's senior management. However, the FA firm's board and senior management will retain overall responsibility for the submission of this report.

Biannual reporting

FA firms are required to prepare and submit reports to MAS in the prescribed form for each half year ending on 30 June or 31 December (or part of any such half year), setting out (i) every complaint received by the FA firm, and (ii) the actions undertaken by the FA firm to resolve each complaint.

The reports must be approved by a member of senior management and lodged with MAS within 3 months after the end of the half year (or part half year) for which it is prepared.

Treatment of existing clients who had opted in to be treated as AIs prior to 3 January 2022

The FA(CHR)Regs would not apply to non-retail clients. Thus, a client who has opted in to be treated as an AI would not benefit from the new regime of the FA(CHR)Regs. Consequently, a necessary amendment to the SF(COI)Regs is needed to include the relevant provisions of the FA(CHR)Regs within the set of consent provisions that would be impacted by a person's election to opt-in to be treated as an AI.

In this regard, what is of particular interest are the transitional arrangements to accommodate the inclusion of the FA(CHR)Regs within the AI opt-in regime under the FAA.

FA firms must supplement their existing AI opt-in protocols by informing all of their AI clients (existing as at 3 January 2022) that the consent provisions impacted by an AI opt-in will, with effect from 3 January 2022, include the FA(CHR)Regs. Consistent with existing AI opt-in requirements, this would entail explaining that a person who opts-in to be an AI would not be able to benefit from the regime established under the FA(CHR)Regs.

However, in recognition that FA firms may need some lead time to reach out to their AI clients, FA firms will be given an additional 3 months to do this. Between 3 January 2022 and 3 April 2022, all such AI clients (existing as at 3 January 2022) are deemed to have opted in to be treated as an AI for the purposes of the FA(CHR)Regs. In effect, FA firms will have until 3 April 2022 to refresh the opt-in of their clients who had previously opted-in to be treated as AIs prior to 3 January 2022.

For new AI-eligible persons onboarded by an FA firm after 3 January 2022, the FA firm must of course procure the opt-in of such persons in accordance with the revised SF(COI)Regs, which will include the FA(CHR)Regs as one of the consent provisions.

The MAS has also acknowledged that FA firms may proceed immediately to refresh the opted in AI status of their existing clients and that they need not wait until the FA(CHR)Regs formally form part of the consent provisions come 3 January 2022. However, some thought has to be given to the wording of communications if an FA firm were to start refreshing the opted-in AI status of its clients ahead of the effective date of the SF(COI)(Amendment)Regs.

Reference materials

The FA(CHR)Regs and the SF(COI)(Amendment)Regs may be accessed in the download links below:

The relevant MAS materials are set out below, all of which are available on the MAS website:

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.