MAS to close loopholes on gold buyback schemes, collective investments

REGULATE INVESTMENT PROGRAMMES

Precious metals buy back

Programmes such as gold buyback schemes allow investors to buy physical gold at "discounted" prices, usually 1.5-2 per cent cheaper. Some entities even allow the customer to take the gold bar or gold coins home.

The company then promises to buy the gold back at the original sale price, meaning consumers get to earn the 1.5-2 per cent return when the gold is bought back. There are some companies that even agree to pay consumers a monthly fixed interest.

But unlike other investment products, the advertising (or prospectus) for such schemes are not regulated by the Monetary Authority Singapore (MAS).

This is set to change with the new rules, which state that sellers will have to register their prospectuses with MAS before they can solicit for potential investors.

Collectively managed investment schemes

This refers to schemes where groups of investors buy stakes in an asset, such as a plot of land.

But their funds are pooled and the asset is managed by the scheme operator, who splits any income or profit among the group.

An example is Profitable Plots, which was accused in 2012 of cheating investors of more than S$3 million. (See report on right)

The definition of such schemes will be amended under the Securities and Futures Act because sellers have used a legal loophole to exclude themselves from regulation.

Such schemes will now be regulated and require approval from MAS before it is allowed to be sold.

REGULATE BUYERS

All first-time investors would be treated as "retail investors" by default.

This means they cannot invest in complex investment products without first being offered financial advice from a qualified financial advisor.

Those with net personal assets of at least $2 million and whose annual income is at least $300,000 can choose to change their status to "accredited investors".