Singapore Regulator Relaxes Retail Investor Access to ETFs

Starting from this Wednesday, retail investors based in Singapore who are interested in committing their savings to investment funds and

Starting from this Wednesday, retail investors based in Singapore who are interested in committing their savings to investment funds and exchange-traded funds (ETFs) will have an easier time to use the products they chose.

The array of expanded options for retail investors comes after the Monetary Authority of Singapore is relaxing some rules which previous hampered a number of products from reaching the retail investor.

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The changes are part of the efforts by the MAS to expand the range of simple, low-cost investment options available to retail investors.

Under previous definitions, all the funds which use derivatives were classified as Specified Investment Products (SIPs). Those are considered complex products and can only be offered to retail investors with enhanced safeguards. The procedure included an assessment of an investors’ markets knowledge and experience.

After thorough feedback from the industry, the MAS has decided that funds using derivatives to a limited extent are relatively less complex and should be made more accessible to retail investors.  Such funds typically use derivatives in order to hedge risks related to their market exposure.

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In order for the classification to allow access to retail investors, the fund managers will need to reclassify the investment funds meeting the new derivatives criteria as Excluded Investment Products (EIPs).

Retail investors in EIPs will not be assessed on their investment knowledge and experience.

The MAS advises all investors to check the Singapore Exchange (SGX) website or ask their brokers for a list of SGX-listed ETFs that are classified as EIPs. Access to the new products will be similar to SGX-listed shares.

Unlisted investment funds that are classified as EIPs, are also available, but prospective investors need to contact their brokers or financial advisers to gain more information.

Commenting on the announcement, the Assistant Managing Director of Capital Markets at the MAS, Lee Boon Ngiap, said, “With the changes to the EIP definition, the total number of SGX-listed ETFs which are classified as EIPs could increase to about 20, accounting for over 80% of assets under management by ETFs listed on SGX.”

“This provides retail investors convenient access to a broader range of relatively simple investment funds while maintaining sufficient safeguards for the more complex products,” he explained.

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