In 2022, a significant number of the sales practices-related eligible disputes received by SIDREC pertained to issues of alleged mis-selling, bad advice, inadequate disclosures and unsuitability of investment products. These disputes are claimed to have stemmed mainly from cases where:

• The risk-return profile of the client and the investment product sold allegedly do not align. For instance, a conservative investor may claim to have been sold a high-risk investment product with a complex structure, which was not appropriate for their risk tolerance;

• The key features of the investment product sold were allegedly misrepresented to clients. For example, the claimant may have been promised a principal-protected investment with a guaranteed rate of return, but later found out that the investment did not have these promised guarantees; and

• Adequate disclosures of factors that could impact investment returns were allegedly not provided. This can include the lack of disclosure of various fees and charges associated with the investment, such as sales charges, administration fees, management fees, trustee fees and switching fees.

SIDREC Members are strongly encouraged to maintain vigilance in ensuring that investors are equipped with the necessary information to make informed investment decisions through the implementation of good sales practices. Some of these practices were highlighted in previous SIDREC Annual Reports, including:

• Continuously reinforcing sales ethics among agents and sales representatives to ensure that clients are treated fairly. This involves providing them with ongoing updates on sales-related guidelines from regulators and Members and implementing a system to reward appropriate sales behaviour;

• Continuously providing adequate training to agents and sales representatives to ensure that they have a full understanding of the investment products they are selling, enabling them to better explain the key features to clients and prospects;

• Continuously reminding agents and sales representatives to be mindful of the following when conducting a sale:

• Adequately assessing the risk profile of a client and prospects, taking into account factors such as age, education level, source of income or funds, dependants and diversification of investments;

• Highlighting factors that could affect investment returns, including clearly explaining the key risks and fees associated with the investment;

• Avoiding aggressive sales pitches that suggest a particular investment product is similar to fixed deposits but offers higher returns, as this could lead to confusion about the product’s characteristics and risks;

• Avoiding allowing clients to pre-sign blank investment-related documentation, to be filled in later by the agent and sales representative without the client’s knowledge. If requested by the client or as part of the service offered, the agent or sales representative should fill in the documentation in the presence of the client, which provides both parties the opportunity to clarify any issues and ensures that clients are aware of how the documentation is being completed;

• Providing clients with all signed documentation at the point of sale.

Additionally, if not already in place, Members may consider implementing after-sales call-back confirmation procedures or cooling-off periods, particularly for higher risk investment products.

Eligible Disputes Relating to Service Standards

In 2022, out of the 23 service standard-related disputes SIDREC received, eight arose from delays, errors or glitches experienced while using online platforms and the remaining 15 related to other shortcomings in service standards such as mis-labeling of products and prolonged delays in processing client-related transactions.

Eligible Disputes Relating to Service Standards, 2022