Guidelines on fair dealing – board and senior management responsibilities for delivering fair dealing outcomes to customers (FSG-G04)

      Following the update on the revised guidelines, all financial institutions (FIs) will be expected to incorporate key principles of fair dealing at various stages of the life cycle of a product or service rendered.

      Outcome 1: Customers have confidence that they deal with FIs where fair dealing is central to the corporate culture

      Key points:

      • Assign responsibilities to specific and suitably senior executive(s) for carrying out initiatives to promote fair dealing practices within a financial institution.
      • Robust due diligence should be conducted before providing any financial product or services to the customers.
      • Ensure representatives are fit and proper, trained and have proper performance evaluations.
      • Establish a formal process to gather customer feedback, and a regular forum to discuss market conduct related matters.
      • All marketing materials should provide customers with a fair and balanced description of the product or service offered. Ensure that there are no pressure, scare or other unethical sales tactics employed when dealing with customers. This is to enable customers to make informed decisions based on clearly disclosed facts.
      • When providing financial products and services, FIs should be able to justify differential treatment to any customer or groups of customers, on the basis of relevant and reliable information or data.
      • Have a management information framework to measure and monitor the achievement of fair dealing outcomes.

      Action item: FIs should devise a clear strategy to achieve the fair dealing outcomes, align organizational policies and practices to the fair dealing outcomes, prioritize the communication of the fair dealing outcomes and monitor the implementation of the fair dealing strategy.

      Outcome 2: FIs offer products and services that are suitable for their target customer segments

      Key points:

      • The FI should test how a product performs under various market conditions or scenarios to form a balanced assessment of the value that the product ultimately offers customers. The assessment should include the impact of costs and fees.
      • In deciding whether to distribute a new financial product, the FI should conduct formal due diligence to assess the features and risk-reward characteristics of the product and determine if it is suitable for the customer segments being targeted.

      Action item: FIs should maintain good design and governance of products, conduct product due diligence, and adjust the marketing approach to targeted customer segments.

      Outcomes 3: Customers are served by competent representatives

      Key points:

      • Ensure a training and competency programme is in place to equip all representatives with the knowledge and skills to provide appropriate advice or other services to customer.

      Action item: FIs should ensure that their representatives are competent, have processes in place to ensure appropriate advice and recommendations are provided, and establish a remuneration structure that aligns with customer interests.

      Outcomes 4: Customers receive clear, relevant and timely information to accurately represent the products and services offered and delivered

      Key points:

      • FIs should present information in plain language, minimising the use of technical terms to the extent possible. Where appropriate, tables, diagrams, graphics and examples should be used to explain a product’s key features and risk-reward characteristics. Representatives should be able to explain the information contained in the disclosure documents and assess whether customers are able to understand the information.
      • All advertisements for the FIs’ products and services should be clear, fair, balanced and not misleading. Advertisements should not give customers the impression that a service is completely free when there are other fees and charges involved. All fees and charges (including any subsequent changes) should be clearly disclosed and communicated.

      Action item: FIs should accurately state what customers can expect of the products and services provided. They should provide customers with all relevant information before they make any financial decision, provide customers with information and updates on product performance and any material developments about their financial purchases, and consider the potential impact to customer interest when revising the terms and conditions of existing products and services.

      Outcomes 5: FIs handle customer complaints in an independent, effective and prompt manner

      Key points:

      • While customers should first approach their FIs to resolve any disputes, they should be made aware of the option to go to the Financial Industry Disputes Resolution Centre Ltd (FIDReC).

      Action item: The FI should devote sufficient resources to attend to and resolve customer complaints within its stipulated turnaround times, without compromising the quality of review.

      If you would like to find out more about these regulations and how they may affect your business, please reach out to your usual Waystone Compliance Solution’s representative, or contact us below.

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