Singapore

MAS to close loopholes on gold buyback schemes, collective investments

Gold buyback and collectively-managed investment schemes have long been mired in controversy, but they are not subject to Monetary Authority of S'pore (MAS) regulations. MAS announced on Tuesday that it plans to tighten regulation on such schemes. Here are some key changes it plans to table in Parliament next year to be passed into law

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".

Past scams that exploited loopholes

SUISSE INTERNATIONAL

In January, more than 100 people gathered to lodge reports with the Commercial Affairs Department (CAD) about local investment company Suisse International, claiming to represent about 250 people who had lost about $35 million to the firm.

They had invested in a gold buyback scheme but claimed that they had stopped receiving their promised monthly payments, some as far back as September 2014.

The Monetary Authority of Singapore (MAS) put both the Singapore and Hong Kong arms of Suisse International on its Investor Alert List.

THE GOLD GUARANTEE

The CAD launched investigations into the company after receiving numerous complaints.

The company was running a gold buyback scheme but had failed to pay investors the amount they were promised.

After investigations started, company founder Lee Song Teck went on the run.

GENNEVA

The company running a gold buyback scheme had operations in Singapore and Malaysia.

In 2012, authorities on both sides of the Causeway launched investigations against it.

It was estimated to have between 10,000 and 20,000 customers in Singapore.

Its operations here have shut but key officers of the company currently face charges in Malaysia.

PROFITABLE PLOTS

The land banking scheme offered investors a chance to invest in UK properties.

In June, two directors were jailed a total of 15 years following a 64-day trial that started in April 2013.

ECOHOUSE DEVELOPMENTS

The Brazilian social-housing developer promised investors returns of up to 20 per cent over 12 months.

Two years after it started attracting Singaporean investors, the company began missing payments.

Winding-up proceedings started this year.

- Adapted from 
The Business Times