When is an Individual Investor Not in Need of Consumer Protection? Comparative Analysis of Singapore, Hong Kong, and Australia

Abstract

In Singapore, Hong Kong, and Australia, standard retail investor protection laws do not apply to special categories of individual investors. Issuers and intermediaries can avoid preparing a prospectus and assessing the suitability of a financial product or investment when financial advice is given for these investors. However, with the increasing complexity of products and potentially unregulated alternative investments such as crypto-assets, this legal framework is increasingly being debated and challenged. More disclosure is not the answer. This paper explores the rationale behind the special categories, the implications of falling into these categories from a consumer protection perspective and the current debates as to whether these special categories should continue to be recognised. The paper argues that the existing wealth or income based criteria that determine eligibility are anachronistic and inappropriate. Instead, all individuals making investment decisions should have the benefit of a rating framework that is based on both complexity and risks and be subject to a suitability test in the case of complex products.