Last Updated on January 7, 2024 by Tree of Wealth

Specified Investment Products (SIPs) refer to investment products that are more complex and may involve derivatives or have intricate formulas to determine returns or losses. These products require a certain level of financial knowledge and experience to make informed investment decisions.

To protect retail investors, the Monetary Authority of Singapore has classified certain investments as SIPs. Financial institutions are mandated to assess the investor’s investment knowledge and experience before offering SIPs. This assessment ensures that investors have the necessary understanding of the features and risks associated with these products before investing.

By classifying SIPs and conducting assessments, regulators aim to safeguard investors and promote responsible investing. It is important for individuals to familiarize themselves with the characteristics and risks of SIPs and seek professional advice when necessary to make informed investment choices.

Types of Specified Investment Products (SIPs)

Specified Investment Products (SIPs) can be categorized into two main types: listed SIPs and unlisted SIPs. Each type has its own characteristics and examples.

Listed SIPs are investment products that are traded on an exchange. Some examples of listed SIPs include structured warrants, futures, and daily leveraged certificates. These products are publicly available for trading and their prices and values are determined by market forces.

On the other hand, unlisted SIPs are investment products that are not traded on an exchange. Examples of unlisted SIPs include structured notes (such as equity-linked structured notes and credit-linked structured notes), certain unit trusts, and certain investment-linked life insurance policies. These products are typically offered by financial institutions directly to investors and may have specific terms and features.

Requirements for Investing in SIPs

Before you can invest in Specified Investment Products (SIPs), financial institutions have a regulatory obligation to assess your investment knowledge and experience. This assessment is separate from the suitability assessment, which focuses on your risk appetite. The purpose of this assessment is to ensure that you possess the necessary knowledge and understanding to comprehend the features and risks associated with SIPs.

For listed SIPs, you will need to undergo a Customer Account Review (CAR) conducted by the financial institution. This review evaluates your investment knowledge and experience in relation to the specific listed SIPs you intend to invest in.

For unlisted SIPs, you will need to undergo a Customer Knowledge Assessment (CKA). This assessment is designed to gauge your understanding and familiarity with the features and risks of unlisted SIPs, such as structured notes, certain unit trusts, and specific investment-linked life insurance policies.

Customer Account Review (CAR) and Validity

In order to open an account for trading listed Specified Investment Products (SIPs), a Customer Account Review (CAR) is conducted by the financial institution. The CAR process involves providing information about your educational qualifications, investment experience, and work experience. The purpose is to assess whether you meet the required criteria to invest in listed SIPs. These criteria include:

1. Relevant Educational Qualifications: Possessing educational qualifications related to finance or investments.
2. Professional Finance-Related Qualification: Holding a professional qualification in finance or a related field.
3. Relevant Working Experience: Having a minimum of 3 consecutive years of relevant working experience within the past 10 years.
4. Transaction History: Having completed at least 6 transactions in listed SIPs within the last 3 years.
5. SGX Online Education Programme: Completing the free learning module provided by SGX Online Education Programme and passing the assessment at the end of it.

The financial institution will inform you about the outcome of the CAR. It’s important to note that the outcome of the CAR is valid for 3 years, except in cases where you have transacted in a listed SIP only once or not at all during that period. In such instances, a new CAR will be required before you can engage in any transactions involving listed SIPs.

Understanding the outcome of your CAR is crucial as it determines your eligibility to trade listed SIPs. It’s advisable to stay informed about the validity of your CAR and consult with the financial institution regarding any necessary updates or renewals.

Customer Knowledge Assessment (CKA) and Validity

If you intend to transact in an unlisted Specified Investment Product (SIP), a financial institution must conduct a Customer Knowledge Assessment (CKA) to assess your suitability for investing in such products. During the CKA, the financial institution will request information regarding your educational qualifications, investment experience, and work experience. They will evaluate whether you meet at least one of the following criteria:

1. Relevant Educational Qualifications: Possessing educational qualifications relevant to finance or investments.
2. Professional Finance-Related Qualification: Holding a professional qualification in finance or a related field.
3. Relevant Working Experience: Having a minimum of 3 consecutive years of relevant working experience within the past 10 years.
4. Transaction History: Having completed at least 6 transactions in unlisted SIPs within the last 3 years. This includes purchasing unlisted SIPs or adding to your investment in an unlisted SIP.
5. ABS-SAS e-learning Portal: Completing the free learning modules provided by ABS-SAS e-learning portal on Specified Investment Products (SIPs) and passing the assessment at the end of it.

The financial institution will inform you of the outcome of the CKA. It’s important to note that the validity of the CKA outcome is limited to one year. After one year, regardless of the number of transactions you have made in unlisted SIPs during that period, a fresh CKA will be required by the financial institution before you can engage in any transactions involving unlisted SIPs. This ensures that your knowledge and experience remain up-to-date and relevant.

Although meeting the CKA criteria indicates your eligibility to transact in unlisted SIPs, it’s always advisable to seek advice from the financial institution regarding the suitability of specific unlisted SIPs for your investment objectives.

Trading both listed and unlisted SIPs

If you wish to engage in trading activities involving both listed and unlisted Specified Investment Products (SIPs), you will be required to undergo both a Customer Account Review (CAR) and a Customer Knowledge Assessment (CKA).

If you don’t meet the CKA and CAR criteria

In the event that you do not meet the criteria for the CKA or CAR, you still have the option to proceed with transacting in SIPs. However, it is important to understand the implications and consequences of proceeding with the transaction. It becomes your responsibility to ensure that you have a clear understanding of the features and risks associated with the capital market products you intend to invest in.

The financial institution is obligated to implement certain safeguards if you choose to proceed despite not meeting the CKA and CAR criteria. These safeguards may include requiring you to receive advice on the suitability of the product for your investment objectives or providing a thorough explanation of the general features and risks associated with investing in SIPs. It is essential to consider these additional measures in order to make informed investment decisions.

Checklist: Key Considerations Before Investing

Before purchasing an investment product or engaging in trading activities, it’s important to take the following factors into consideration:

1. Regulatory Compliance: Ensure that the financial institution you are dealing with is regulated by the Monetary Authority of Singapore (MAS) and authorized to provide financial advice. This helps ensure consumer protection.
2. Suitability of the Investment Product: Ask questions and fully understand the recommended investment product and why it is suitable for you. Consider the following:

• How does the product align with your investment objectives? Will it increase or decrease the risk in your portfolio? What are the potential benefits and risks?
• Evaluate your understanding of the associated risks. What is the maximum potential loss? Can you financially withstand such a loss?
• Assess the time required to monitor the product’s performance. Do you have the necessary time commitment?
• Take the time to explore and compare similar products available in the market, considering their benefits and risks.

3. Warning Signs: Be vigilant for warning signs that indicate complexity or potential loss of investment. Do not invest in a product if you don’t fully comprehend it or feel uncomfortable with the risks involved.

• Be cautious of verbal promises or guarantees of exceptionally high returns. Remember, if something appears too good to be true, it probably is. Seek a clear understanding of the risk-reward characteristics and request relevant clauses from the product documents to support any verbal representations made.

Remember, you can always decline: If you have any doubts or concerns, you have the right to decide against purchasing a product.

• While financial institutions are required to provide reasonable recommendations, it’s crucial to carefully consider the advice and recommendations given. Avoid being influenced by gifts, discounts, or pressured sales tactics.
• If you don’t fully understand a product or disagree with the advice provided, it is perfectly acceptable to say “No.” Trust your instincts and walk away if you have doubts about the product or your interactions with the financial institution or its representatives.

Note: If you choose not to seek financial advice or opt for a product not recommended by the financial institution, you bear the responsibility for ensuring its suitability for your needs.

 

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