In draft guidance, the regulator explains it will be the job of an independent sales audit unit (ISA), which is part of the advisory company, to ensure its advisers are complying with a specific sales process and post-transaction checks.
It will be up to the ISA to decide whether an infraction has taken place, whether there were any mitigating factors and if the financial adviser in question should be placed under supervision. Any infractions identified by the ISA unit will affect the remuneration given to that adviser.
Grade E
Furthermore, if an adviser who is assigned an “E” grade within their balanced scorecard, the lowest rating (running from “A” to “E”), they are to be placed under close supervision, with the company chief executive personally responsible for each staff member under supervision.
If an adviser who receives an E grade is in a managerial position, the MAS said the company should conduct a review to ascertain whether their oversight of those under them is “adequate” and if necessary reduce the number of staff they manage. A manager who receives an E grade for two consecutive quarters should not be allowed to manage anyone for at least one year following.
On the pre-transaction checks set out by the MAS says: “A financial adviser should instil a strong culture of fair dealing where representatives conduct proper fact-finds and risk profiling analysis, so as to provide their clients with quality advice and appropriate recommendations.
“Besides carrying out and completing post-transaction checks under the balanced scorecard framework, a financial adviser should institute controls to check that its representatives have followed through the financial adviser’s prescribed advisory and sales process, including the proper collection of information from customers and documentation of the representatives’ basis of recommendation, and that the representatives’ recommendations meet the needs of the clients before a transaction is submitted to product manufacturers for processing and execution.”
Click here to download a copy of the draft guidelines, which include prescriptive details on pre- and post-sales checks and product suitability assessments.
