Understanding Specified Investment Products

Key Takeaways

There are certain more complex retail investment products that are classified as Specified Investment Products (SIPs)
If you want to buy and sell SIPs listed on an exchange, you need to go through a Customer Account Review before opening an account
If you want to buy and sell SIPs that are not listed on an exchange, you similarly need to get through a Customer Knowledge Assessment
This is to assess that investors have the knowledge or experience to assess an SIP's complex features before they invest

What Are SIPs?

SIPs are generally products that are more complex than others. For example, they may contain derivatives, which can expose you to more factors that may affect your investment, or have returns or losses determined by complicated formulas.

Hence, you should have some prior financial knowledge or experience in order to make an informed investment decision.

To help retail investors, the Monetary Authority of Singapore has classified certain investments as SIPs, and requires financial institutions to assess the investor's investment knowledge and experience before selling SIPs to the investor. This is to assess that investors have the relevant knowledge and experience to understand the features and risks associated with investing in such products, before they invest.

Types Of SIPs

There are generally two types of SIPs - those that are listed on an exchange and those that are unlisted.

Examples of listed SIPs	Examples of unlisted SIPs
Structured warrants Futures Daily leveraged certificates	Structured notes (e.g., equity-linked structured notes, credit-linked structured notes) Certain unit trusts Certain investment-linked life insurance policies

Tip: On the SGX website, SIPs are marked with an "@" prefix.

What Is Required

Financial institutions are required to formally assess your investment knowledge and experience before selling SIPs to you. This is to ensure that you have the relevant knowledge and experience to understand the features and risks associated with investing in such products.

It is not the same as the suitability assessment which considers your risk appetite.

You will need to go through a Customer Account Review for listed SIPs, or a Customer Knowledge Assessment for unlisted SIPs.

Customer Account Review

Before you can open an account to trade listed SIPs, the financial institution must conduct a Customer Account Review.

The financial institution will request information on your educational qualifications, investment experience, and work experience. They will use it to assess whether you meet at least one of the following criteria:

Have the relevant educational qualifications
Have a professional finance-related qualification
Have a minimum of 3 consecutive years of relevant working experience in the past 10 years
Have made at least 6 transactions in listed SIPs in the last 3 years
Have completed the free learning module from SGX Online Education Programme and passed the assessment at the end of it

You can find out the outcome of the Customer Account Review from the financial institution.

How Long It Is Valid For

The outcome of your Customer Account Review will expire after 3 years if you have transacted in a listed SIP only once or not at all during that period. If so, the financial institution will be required to conduct a new Customer Account Review before you can transact in any listed SIP.

Customer Knowledge Assessment

If you wish to transact in an unlisted SIP, the financial institution must conduct a Customer Knowledge Assessment.

Have the relevant educational qualifications
Have a professional finance-related qualification
Have a minimum of 3 consecutive years of relevant working experience in the past 10 years
Have made at least 6 transactions in unlisted SIPs in the last 3 years. Transactions include buying unlisted SIPs or topping up your investment in an unlisted SIP
Have completed the free learning modules from ABS-SAS e-learning portal on SIPs and passed the assessment at the end of it

You can find out the outcome of the Customer Knowledge Assessment from the financial institution.

Even if you meet the Customer Knowledge Assessment criteria, remember that you can always ask the financial institution for advice on whether an unlisted SIP is suitable for you.

How Long It Is Valid For

The outcome of your Customer Knowledge Assessment is only valid for a year.

After the one year, the financial institution will be required to conduct a fresh Customer Knowledge Assessment regardless of the number of transactions in unlisted SIPs you have made in that period, before you can transact in an unlisted SIP. This is to ensure that your knowledge and experience continue to be relevant.

Trading Both Listed And Unlisted SIPs

If you want to buy both listed and unlisted SIPs, you will be asked to go through both a Customer Account Review and a Customer Knowledge Assessment.

If You Don't Meet The CKA And CAR Criteria

You can still proceed to transact in SIPs if you do not meet the Customer Knowledge Assessment or Customer Account Review criteria. However, you should be aware of the consequences of proceeding with the transaction, and know that it is your responsibility to ensure that you understand any capital markets products that you intend to invest in.

The financial institution will be required to put in place certain safeguards if you intend to proceed despite the outcome of your Customer Knowledge Assessment and Customer Account Review. For example, it might require that you receive advice on whether the product is suitable for you, or explain to you the general features and risks associated with investing in SIPs.

Checklist

Before you purchase an investment product or open an account to trade, consider the following:

Is the financial institution regulated? Check if the financial institution you are dealing with is regulated by MAS and if it is authorised to provide financial advice.
Is the investment product suitable for you? Ask questions and understand the product recommended to you, and why it is suitable for you. Consider the following: How can the product help you achieve your investment objective? How well do you understand the risks? If things go wrong, what is the maximum you can lose? How much time do you need to monitor the product’s performance?
Are there any warning signs? Do not buy the product if you do not fully understand the product or are not comfortable with the risks. Be careful of verbal promises and guarantees of high returns. Remember that if something sounds too good to be true, it probably is. Ask the financial institution to refer you to the relevant clauses in the product documents that describe the verbal representations made.

Remember, you can always walk away

If you have any doubts, you have every right to decide not to purchase a product.

Even though financial institutions need to have a reasonable basis when recommending an investment product to you, you too need to consider the advice and recommendation carefully. Do not be induced by gifts or discounts, or be pressured to make a purchase decision.

Say "No" if you do not fully understand the product or disagree with the advice provided. Walk away if you have doubts about the product or your dealings with a financial institution or individuals representing the financial institution.

Note: If you decide not to take up the offer of financial advice or choose to invest in a product that the financial institution did not recommend to you, you will have to take responsibility for ensuring that product is suitable for you.

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