For the past few weeks, I have to face this nagging definition of an “Accredited” investors. I am not ashamed to say that I am quite fed-up with this artificial definition.

According to the Securities & Futures Act, an “accredited” investor refers to a person who has either $300,000 of income in the preceding 12 months or S$2m of net asset. Sometimes (depending which institution you talk to), require S$200,000 of one-time transaction in order to be eligible to be “accredited”. [More on this $200,000 thingg later]. Accredited investors have more investment choices then those who are “not-accredited.”

Why in the world is there such definition of Accredited investors and “the rest”?  From the spirit of the law, I gather it is to protect “small time” investors. Perhaps the logic is that the “small time” investors need more protection while the higher-networth individuals require “less legal protection”. Personally I am unsure this is correct because I thought the law is always fair (or am I too naïve?). How can it offer different level of protection depending on net worth or income level of the individual? Nevertheless if this is true, does it mean that the high-networth individual is potentially more exposed to more “damaging” products? This does not sound very encouraging if this is the case. Or put it another way round – does it mean that “small time” investors have a better choice of being offered “safer” products? If this is true, why is there so many “small timer” getting “con”?

Convention wisdom tells us that regardless of an individual wealth, he or she has exposure to both good and bad products. In fact, I do know of investment products exclusively available for “Accredited” investors should be made available to everyone or even I dare to say allowed to be used for CPFIS investment. Yet why is it only for “Accredited”? On the other hand, I know of investment products available for the masses should be banned in Singapore and yet why is it available to all? As what I see, it looks to me that good or bad products are everywhere regardless whether the products are designed for “accredited” or “not-accredited”. There is also something else – good and bad advisers are everywhere and all individuals have the same risk of exposing to either one. So it is fair in this case. I just want to say that the distinction between “accredited” and “non-accredited” is an artificial one. Take for example the widely acclaimed, “Vanguard Global Stock Index” domiciled in Ireland. It is under the Restricted List of MAS. This means that it can only be offered to accredited investors. My goodness, I would say that CPF should allow this to be even used for CPFIS investing! I find it ridiculous why it is not available for the man in the street.

Here are my frustrations for the past couple of weeks. According to the regulations, if the person don’t have S$2m net asset and don’t have $300K in annual income, he can be considered “accredited” if he transacts $200K in a single-transaction. (According to the current state of knowledge this is true but this has always been controversial depending on which institution you talk to). As an IFA, I usually recommend portfolio rather then products (this is in contrasts to most RM that recommend products first, then portfolio. Products are easier to sell. Portfolio hard to sell – clients cannot distinguish between a Durian and a Portfolio). So to me a transaction investing into a portfolio is a one-time single transaction. Of course in the portfolio are multiple products but this is transparent to the client because the portfolio is like a “black box.” Unfortunately the regulations are rigid. I was so near in transacting a $200K portfolio when I discovered that there is a “new” state of knowledge that the $200K must be per asset. I usually recommend at least 8 assets. So suddenly my client has to invest 8 x 200k = $1.6m into the portfolio! This is crazy! In fact, I was very angry why the regulations are so rigid. Not to mention all tremendous waste of time my clients have put into it. To put it this way, there should never be a distinction been an “accredited” and “non-accredited”. It is an artificial wall. If this is to solve the problems of mis-selling, then the mis-selling has to be addressed rather then splitting the human race based on their networth or income. The two groups of human race deserve equal treatment. Both are neither superior nor inferior to each other.

From my sources, there is no such things in Hong Kong. Hong Kong investors are free to choose their investments at their own risk. I think Singapore has a long way to go but time is running out.

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