MAS trying to weed out Bogus, Scam-Investment Scheme Operators – 23 July 2014

Posted on July 23rd, 2014 in Caution Ahead, Food for thought



Through new proposed regulations, now open for public consultation, the Monetary Authority of Singapore (“MAS”) is trying to close the loopholes that scam operators like Sunshine Empire, the Gold Guarantee and their black sheep incarnations in other guise and forms have exploited and hurt many Singaporeans.

There are many schemes and products that claim to offer us profits. MAS does not seek to assess the merit of each scheme or product offered. Regulation cannot guarantee the viability of products offered, or that the products will deliver on promised returns.  Consumers must get this point.

MAS is focused on regulating capital markets-like products that are deliberately structured to escape regulation.

Currently some schemes that operate like a Collective Investment Scheme (CIS) are not regulated unlike other CIS.  MAS intends to bring all such schemes under the same CIS regulations to try to weed out bogus, scammish or high risk operators.

MAS is proposing to extend its regulatory perimeters to include the following two types of arrangements:

(i) Buy-back arrangements involving gold, silver and platinum (“precious metals”); and

(ii) Collectively-managed investment schemes, being arrangements that display all characteristics of a regulated collective investment scheme.

Now, what is a Collective Investment Scheme (CIS)?

CIS are arrangements in respect of securities or futures, commodities, real estate (i.e plantation, landbanking, buildings, building units etc) that exhibit ALL of the following characteristics:

(i) Participants have no day-to-day control over management of the property (“lack of day-to-day control”);

(ii) Property is managed as a whole by or on behalf of the scheme operator (“collectively managed”);

(iii) Participants‟ contributions are pooled (“pooled contributions”);

(iv) Profits or income of the scheme from which payments are to be made to the participants are pooled (“pooled profits”); and

(v) Purpose or effect of the arrangement is to enable participants to participate in profits arising from the scheme (“rights to participate in pooled profits”).

As management of the scheme is entrusted to the scheme operator who has broad discretion to deal with scheme property, this raises concerns of transparency and accountability.  Proper CIS that are widely offered to retail investors are subject to prospectus disclosure requirements, authorisation or recognition requirements, investment restrictions and business conduct rules on an ongoing basis.

What MAS is proposing?

1)     CIS scheme operators must now comply with the provisions in the CIS Code which ensures that CIS offered to retail investors are subject to appropriate safeguards, including safeguards against liquidity, valuation and custody risk.

2)     CIS scheme operators must be regulated as licensed fund managers. Existing operators will be required to obtain a licence if they wish to take on new investors or offer additional units of the scheme to existing investors.


What you must take note of!

1) If you have already invested in such a CIS scheme, whether in plantation, or individual tree investment or in shared floors in medical suites in Philippines or Malaysia, do contact your operators when you can get back your investment returns.  The concern is if such operators stop offering their schemes (because they fail to comply with the provisions in the CIS Code and cannot qualify as licensed fund managers) after 3Q2015, there is a chance they cannot take on new investors and just pack up and go.

2) Even if MAS push through the regulation change, it does not mean that the market will no longer have investment scams. There will still be operators out to scam you or even lie to you that they have fulfilled MAS regulations.  Just like even if there are strict criminal punishments in Singapore, Singapore is not crime-free.

3) Another analogy is this.  Just like it’s the general rule that you should only go to licensed doctors to diagnose and treat you, there will still be fake or unqualified “doctors” that will try to sell you magic pills that cause you more harm than good

4) You will still have bad investments marketed to you by operators, perhaps in a more creative ways that circumvent the tighter regulations going forward.

5) The regulations if passed and implemented is expected to take a year and take effect in 3Q2015.

6) In the meantime, you may have aggressive operators approaching you to put money into their risky scheme before they have to comply with tighter regulations in 3Q2015

7) Be Alert!

Our Best, Always


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