After so many scams and people having lost their money, MAS finally decided to take action to regulate investments schemes which have been operating unregulated. These investment schemes include the precious metals schemes such as Genneva Gold and land banking schemes such as Ecohouse which I recently wrote about.
Precious metal schemes such as Genneva Gold typically work by selling to the consumers and guaranteeing to buy back from the consumer at a higher price later. Genneva Gold in fact guaranteed a 24% return over one year period which we all know is not achievable. MAS said uch schemes will be regulated like any other bonds, so does it mean that they can only sell to accredited investors from now on? Given the costs and regulations of bond issues, it is unlikely for such schemes to continue existing under the new rules. Besides, which bank would underwrite these schemes?
Land banking schemes and many other schemes such as hotel schemes are all known as collective investment schemes. Basically the company pools the money from all the individual investors to buy assets such as land, hotels and so on. Apparently collective investments schemes are not allowed to invest in undeveloped land and also cannot invest in liquid assets. So technically, it makes current land banking companies and other such schemes illegal.
All the resources you'll ever need as an investor
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Even if they could get allowed to exist, they would need to get a license from MAS and maintain a minimum base capital of up to $1 million. The sales staff need to take exams to become licensed financial advisors. Overall, this is a good move as it helps to eliminate the number of scams in the market and protect consumers. Hopefully, this should also put consumers on the right track to look at traditional investments such as equities and bonds rather than seek unreasonable returns in extremely risky unregulated investment schemes..