Friday, September 30, 2016

Legal issues which are of concern to financial bloggers.

Some financial bloggers know that one of my personal aims is to become the financial blogger that other financial bloggers read. As such, I am always trying to establish myself as a thought leader in personal finance but it also forces me to sacrifice some relevance to ordinary readers.

I have an exam in Financial Regulations after my mid-term break and have made it a point to write this article for other financial bloggers as we always have some legal concerns when it comes to the articles which we write.


As I am but a humble law student, please do not take this as legal advice. Just appreciate this as an essay on how I intend to manage my own personal risks when putting up articles on this blog.


A problem when it comes to financial blogging is that if someone makes a complaint to MAS that we are providing financial advise without a license, we face the risk of  being fined or given a jail term. 


a) What constitutes financial advise ?


Schedule Two of the Financial Advisor's Act (FAA) has the following definition on what financial advise is. As you can observe later below, some blog articles can constitute research analysis concerning an investment product like a stock. Even promoting an ETF investment strategy can run the risk of being accused of attempting to market a collective investment scheme.


If you are considered by MAS to be providing a financial advisory service, you will need to obtain a license from MAS and be subject to even more stringent regulations ( which would not be the subject to this article today).


You can find the relevant snippet from Schedule Two of the FAA here :

TYPES OF FINANCIAL ADVISORY SERVICE
1.  Advising others, either directly or through publications or writings, and whether in electronic, print or other form, concerning any investment product, other than —
(a)
in the manner set out in paragraph 2; or
(b)
advising on corporate finance within the meaning of the Securities and Futures Act (Cap. 289).
2.  Advising others by issuing or promulgating research analyses or research reports, whether in electronic, print or other form, concerning any investment product.
3.  Marketing of any collective investment scheme.
4.  Arranging of any contract of insurance in respect of life policies, other than a contract of reinsurance.

b) So how do bloggers get their exemption from the requirement of getting  a license ?
MAS obviously does not really want to spend their time going after bloggers, so an exemption occurs under the first schedule of the SFA. Section 4 under Schedule 1 of the FAA relieves financial bloggers from the need to obtain a license :


4.  Any person who owns, operates or provides an information service through an electronic, or a broadcasting or telecommunications medium, where —
(a)
the service is generally available to the public in Singapore;
(b)
any advice given, or analysis or report issued or promulgated, is given, issued or promulgated only through that service;
(c)
that person receives no commission or other consideration, apart from any fee received from subscription to the service, for giving the advice, or for issuing or promulgating the analysis or report; and
(d)
 the advice is given, or the analysis or report is issued or promulgated, solely as incidental to that person’s ownership, operation or provision of that service.

Blogging is generally available to the public in Singapore. Our articles are issued only on our blogs and various aggregators, and we get no commissions from our readers and the advice given by blogs is incidental to the operation of our blog.


So in essence, if you are a financial blogger, you are safe.


c) Some risks are heightened when we get into the public and speak to people.

One issue which was repeatedly bugging me is next week's talk when participants do pay good money to engage with us. 

Due to the lack of common law precedents, I can only offer a very amateurish take on cases where bloggers get paid for a public appearance to mingle with fans.

One possibility is that the exemption remains valid because the blogger does not get commissions from any sales of securities from the talk. But I am not comfortable with this notion because being paid a speaking fee may be considered "other consideration" as stated in s4(c) FAA. 

The safest course of action is to treat all public appearance as voiding the exemption for financial bloggers. 

This means that we need to be extra careful once we start speaking for a fee.

d) Financial bloggers need to be careful when interacting with the public for a fee.

Some things we have done :
  • In this case, it may be safer to make sure that every power point slide does not mention specific securities so that it cannot be interpreted as an inducement to get the public to buy something. I have censored some screenshots from Bloomberg to avoid creating the impression that the stocks in the screen-shot are buy recommendations.
  • Another possibility is to couch our answers in a way which cannot be misunderstood as any form of financial advice but instead as what we would do for our own portfolios given our own personal situations.
  • The safest way to share with readers is to share broad strategic ideas that add value to the participant without making a buy/sell recommendation for any specific stock counter. 
Anyway, that's all I have for now given how much I studied our local laws. 

The only way for me to know more and become more useful to other bloggers is that I somehow get into real legal practice and take on actual cases. 

Please so not mistake this as legal advise. 

Always consult a real lawyer. 

5 comments:

Clive ong said...

This post is making me paranoia man!

Christopher Ng Wai Chung said...

That's not my intention at all.

My intention is to tell all finance bloggers that they are safe because there is a provision to exempt them from the need to get a financial advisor's license.

Wilfred said...

Exactly 1 1/2 years ago, MAS did invite a few bloggers with regard to regulating financial blogs. Those who were invited would know MAS' position and how they may legislate changes.

Christopher Ng Wai Chung said...

It will be great if they can share their experiences here.

The landscape is not completely friendly. I was told that every now and then, some agent will take offence at ideas like "Buy Term, Invest the Rest" and threaten to complain to MAS.

If we are better informed, we can collectively take a stand to counter such threats in the future.

Wilfred said...

As long as there is no commission received and that the blog articles are factual in nature, I don't think any bloggers need to worry about breaking the law.