Due to the complexity of financial products being offered in the market, BSP has issued new rules for its supervised financial institutions to prevent clients to invest in unsuitable products.
BSP Gov. Amando Tetangco Jr. said, “They (banks) have to have policies and procedures in place for the marketing of financial products particularly on the specifications of information that would have to be gathered for the client suitability.”
The BSP issued these new set of rules on sales and marketing of financial products on Oct. 29.
Supervised financial institutions are required to have appropriate policies and procedures to be able to offer the right and suitable products to their clients.
Proper conduct of client suitability is very important not just for consumer protection but it also protects banks against adverse claims.
“Information should be gathered in the conduct of client suitability. There is also greater emphasis on disclosure requirements for financial products marketed by the banks through their treasury department,” Tetangco added.
Some of the new rules are:
- BSP-supervised financial institutions should classify clients according to their risk tolerance in addition to their sophistication and setting out the suite of products that may be offered to conservative clients.
- It articulates circumstances for the use of waivers such that clients are not made to automatically and comprehensively waive the outcome of the client classification process and the resulting protections even before the product is recommended or offered.
- BSP- supervised financial institutions are also required to regularly review compensation and incentive programs for sales personnel and ensure that these are designed in a way that would prevent conflict of interest.
- The guidelines emphasize the role of control functions in ensuring the financial institution complies with its own policies and procedures and relevant laws, rules and regulations in respect of their sales and marketing activities.
The supervised financial institutions are given 3 months from the effectivity of the circular to make the proper changes on their sales and marketing procedures in compliance with the new regulations.
Source: Philippine Star