• The Monetary Authority of Singapore (MAS) found that three insurance companies did not review the performance of their supervisors
• The firms also failed to assign the supervisors a grade as required under regulations
• They paid commissions to these supervisors that exceeded the stipulated cap as well
• The central bank has reprimanded these companies and two other individuals for the breaches 
• MAS has also directed Aviva Financial Advisers to appoint independent persons to conduct a review of its internal control processes 

SINGAPORE — Insurance companies Aviva, AIA and Prudential have been found by the Monetary Authority of Singapore (MAS) to have breached regulations by not reviewing the performance of their supervisors and for paying them beyond the limit set by regulations.

MAS in a release on Tuesday (June 15) said that the companies have been reprimanded for the offences that happened between 2017 and 2019.

It said that a reprimand registers that MAS has serious concerns regarding the misconduct and the financial institutions, and individuals are required to remediate the issues promptly. 

MAS may also take these reprimands issued into account when deciding what action to take should these organisations or individuals breach regulations again.

In addition to the reprimands, MAS has directed Aviva Financial Advisers to appoint independent individuals outside the company to conduct a review of its internal control processes and to perform call-backs to all customers before any sales are completed. 

The central bank singled out Mr Peter Tan Shou Yi, a consultant engaged by Aviva, for accepting the commissions, and Mr Lionel Chee Boon Chai, chief executive of subsidiary Aviva Financial Advisers, for failing to perform his duties. 

Under the Balanced Scorecard framework set out in 2015 by MAS, financial advisers and the supervisors who manage them are graded from A (the best) to E (the worst) based on the number and category of infractions they make in a quarter. 

The value of commissions they receive, which is capped in the first year and spread out over a specified period under government requirements, are also linked to their grading. 

The central bank said, however, that despite these breaches, it has not found evidence of direct harm to customers. 

“Nevertheless, the failures are viewed seriously because the (regulatory) requirements are intended to align the interests of financial advisory firms, supervisors and representatives with those of their customers, and promote a culture of fair dealing,” it said. 

“Non-compliance with the requirements therefore increases the risk that customers’ interests could be prejudiced.”

In Aviva’s case, the company had engaged Mr Tan as a consultant from July 2016 to March 2020, but he also acted as a supervisor to the financial advisers representing Aviva Financial Advisers. 

Despite having frequent and direct interactions with the financial advisers on sales and compliance issues, neither Aviva or Aviva Financial Advisers put in place compliance arrangements to monitor Mr Tan’s activities from the time he joined until April 2019. 

Aviva Financial Advisers also failed to review Mr Tan’s performance, assign a grade to him and pay him according to the grade, as it should have, given that he took on supervisory roles and responsibilities, MAS said. 

In addition, Aviva did not cap and spread his commissions from the sales of insurance products. 

Mr Tan, on his part, breached commission requirements in accepting the remuneration. 

MAS said that Aviva had contravened risk management practices on internal controls and its subsidiary had breached regulations on financial advisers. 

Mr Chee, Aviva Financial Adviser’s chief executive officer, was reprimanded by MAS for failing to monitor Mr Tan’s activities and not properly addressing the poor conduct of his company’s financial advisers, who have misrepresented the nature and features of certain insurance products to their customers. 

“Despite MAS’ repeated supervisory engagements with Aviva Financial Advisers between August 2017 and September 2018 over the sales conduct of its representatives, the measures put in place by Aviva Financial Advisers to address these issues remained inadequate,” the central bank said. 

As for AIA, its subsidiary AIA Financial Advisers did not review and assess the performance of three of its managing directors who also acted as supervisors of financial advisers. 

These managing directors were not graded or paid according to the Balanced Scorecard framework and the company did not cap and spread their commissions. 

Prudential made similar regulatory breaches as AIA for three of its group leaders and a consultant. 

Prudential also breached risk management guidelines because it did not put in place enough risk management mitigation procedures and compliance arrangements to monitor the activities of the consultant and group leaders.