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Singapore regulator proposes new rules on mass recruitment of financial advisers

The Monetary Authority of Singapore proposed new rules to tackle the large-scale movements of financial advisory representatives from one company to another.

The regulator said March 7 that the proposed rules aim to address the risks associated with the mass recruitment of financial advisory representatives from one company to another. The MAS had observed that such mass recruitment drives include sizable sign-on incentives that are tied to sales targets that representatives must meet. Such practices increase the risk of financial advisory representatives engaging in aggressive sales tactics to meet targets.

The Singapore regulator proposed four measures to address this risk. The MAS recommended that first-year sales targets tied to sign-on incentives should be no higher than the representative's average annual sales in the prior three years. The second measure proposes that sign-on incentives should also be spread over a minimum period of six years and for the first-year payment to be capped at 50% of the representative's average annual income for the previous three years.

Further, the MAS suggested that financial advisory companies be required to claw back the representative's sign-on incentives if the percentage of insurance policies serviced by the representative at his previous company that remain in force falls below a threshold of between 75% and 85% two years after his departure. This would dissuade advisers from encouraging clients to surrender existing insurance policies to purchase new ones from the new company.

Financial advisory companies will also be required to undertake enhanced monitoring of their newly hired representatives' sales transactions for a minimum period of two years.

The regulator is accepting public comment on the proposed rules until April 9.