SCI M8 – Collective Investment Schemes

Correct: According to Section 8 of the Insurance Act of Singapore, no person shall carry on insurance business in Singapore as an insurer unless the person is registered by the Monetary Authority of Singapore (MAS) in respect of that class of business. There is no exemption for digital platforms or entities that do not use traditional agency forces if they are underwriting and carrying on the business of insurance themselves.

Incorrect: The suggestion that a Capital Markets Services license allows one to carry on insurance business is incorrect, as insurance registration is a distinct requirement under the Insurance Act. The Financial Advisers Act governs the provision of financial advice, not the underwriting of insurance risks. The Singapore Exchange (SGX) is a front-line regulator for listed companies and trading, but it does not grant licenses to carry on insurance business; that authority rests solely with MAS.

Takeaway: Under the Insurance Act, any person or entity carrying on insurance business in Singapore must be registered with the Monetary Authority of Singapore (MAS).

Correct: Under the Financial Advisers Act (FAA) and the Representative Notification Framework (RNF), the principal firm is legally responsible for ensuring that any individual it appoints as a representative is fit and proper. A robust due diligence process involving independent verification of qualifications, financial integrity, and regulatory history is the most effective control to ensure that only suitable individuals are authorized to provide financial advice in Singapore.

Incorrect: Allowing an individual to provide advice before the notification process is complete or before background checks are finalized is a breach of the FAA. Relying solely on self-declarations or statutory declarations without independent verification fails to meet the MAS Guidelines on Fit and Proper Criteria. Delaying the assessment until after sales targets are met is a regulatory violation, as fitness and propriety must be established prior to appointment and maintained throughout the representative’s tenure.

Takeaway: The principal firm must conduct thorough, independent due diligence to ensure all representatives meet MAS fit and proper criteria before they are authorized to provide financial advisory services under the FAA framework.

Correct: Under the Financial Advisers Act (FAA), the Monetary Authority of Singapore (MAS) has the power to issue Prohibition Orders (PO) against individuals. A PO can bar an individual from performing any regulated activity or taking part in the management of a financial adviser if they have breached the Act or are deemed not ‘fit and proper’. This is a key tool for MAS to maintain market integrity and protect consumers in Singapore.

Incorrect: The suggestion that MAS can only penalize the institution is incorrect because the FAA provides MAS with direct enforcement powers over individuals, including the issuance of Prohibition Orders. The claim that a High Court injunction is required is false, as MAS exercises administrative power to issue these orders directly. Finally, the idea that MAS only handles prudential oversight is incorrect; MAS is an integrated regulator responsible for both prudential supervision (solvency) and market conduct (consumer protection and disclosure).

Takeaway: MAS has the statutory authority under the Financial Advisers Act to issue Prohibition Orders against individuals to ensure high standards of conduct in the Singapore financial advisory industry.

Correct: Under the Policy Owners’ Protection (PPF) Scheme in Singapore, Investment-Linked Policies (ILPs) receive 100% protection for the value of the units. However, any guaranteed benefits associated with the policy, such as the sum assured from a death benefit rider or a guaranteed surrender value, are subject to the specific caps defined by the SDIC (e.g., S$500,000 for aggregated sum assured and S$100,000 for aggregated surrender value per insurer). This ensures that the investment component (units) is fully preserved while the insurance component is protected up to the statutory limits.

Incorrect: The suggestion that the scheme protects against market fluctuations is incorrect because the PPF Scheme protects against the insolvency of the insurer, not investment risk or market loss. The claim that policyholders must manually register is false because coverage under the PPF Scheme is automatic for all eligible policies issued by member insurers. The reference to a flat S$100,000 limit is incorrect as it confuses the Deposit Insurance (DI) Scheme limits with the more complex aggregated caps used for life insurance under the PPF Scheme.

Takeaway: The PPF Scheme provides automatic, 100% protection for the unit value of ILPs, while guaranteed life insurance benefits are subject to aggregated caps per policy owner per insurer.

Correct: The Singapore College of Insurance (SCI) is designated as the examination body for insurance-related modules under the Capital Markets and Financial Advisory Services (CMFAS) examination framework. Its role includes the administration, scheduling, and conduct of examinations such as M9 (Life Insurance and Investment-linked Policies) and M9A (Life Insurance and Investment-linked Policies – Supplementary). This ensures that representatives meet the entry-level competency standards mandated by the Monetary Authority of Singapore (MAS) before they can provide financial advice on specific products.

Incorrect: The Monetary Authority of Singapore (MAS) is the regulator that issues and revokes licenses, not the SCI. The SCI is an educational and examination body, not a statutory board under the Ministry of Finance, and it does not provide legal defense for representatives. Furthermore, the SCI is the actual administrator of the examinations, not just a tuition provider; MAS sets the policy and requirements but delegates the administration of these specific insurance exams to the SCI.

Takeaway: The Singapore College of Insurance (SCI) is the official body responsible for administering insurance-related CMFAS examinations to ensure professional competency in the Singapore financial sector.

Correct: Under the Singapore Insurance Act, a proposer must have an insurable interest in the life of the insured at the time the policy is effected. The Act specifies certain relationships where insurable interest is automatically presumed: one’s own life, a spouse, and one’s child or ward under the age of 18. For any other relationship, such as a niece or an adult child over 18, the proposer must prove a pecuniary (financial) interest. Since the niece is 22 and not dependent, the client does not have an automatic insurable interest and must demonstrate a financial loss would occur upon the niece’s death.

Incorrect: The approach suggesting blood relationship alone is sufficient is incorrect because the Insurance Act limits automatic interest to specific categories; extended family members require proof of financial interest. The approach requiring interest at the time of claim is incorrect because, for life insurance in Singapore, insurable interest is only required at the inception of the contract, not at the time of the loss. The approach suggesting consent waives the requirement is incorrect because insurable interest is a statutory requirement under the Insurance Act intended to prevent moral hazard and wagering.

Takeaway: In Singapore, insurable interest for life insurance must exist at the time of inception and is only automatically presumed for oneself, a spouse, or a child/ward under 18 years of age.

Correct: Under the Life Insurance Association (LIA) Singapore guidelines and MAS disclosure requirements, financial advisers are required to provide the Your Guide to Life Insurance or Your Guide to Investment-Linked Insurance Policies to prospective clients at the point of sale. This must occur before the client signs the application form to ensure the client is well-informed about the nature of the product, the risks involved, and their rights as a consumer before making a formal commitment.

Incorrect: Providing the guides during the free-look period is incorrect because these are pre-contractual disclosure documents intended to aid decision-making before a purchase. There is no minimum sum assured threshold for these guides; they are mandatory for all relevant life and ILP applications. While insurers provide policy contracts after issuance, the specific responsibility for delivering these guides lies with the representative at the point of sale, not as a post-issuance head office function.

Takeaway: The mandatory LIA consumer guides must be provided to prospective clients at the point of sale before the application form is signed.

Correct: Under the Singapore Insurance Act, insurers are required to maintain a separate insurance fund for participating policies. In a participating (Par) fund, policyholders share in the profits or surplus of the fund, which are usually distributed in the form of reversionary or terminal bonuses. Conversely, non-participating (Non-Par) policies do not entitle the policyholder to any share of the fund’s surplus; the benefits are fixed and guaranteed at the time of policy inception.

Incorrect: The assertion that non-participating funds must distribute 90% of surplus is incorrect because the 90/10 rule (where at least 90% of surplus goes to policyholders and up to 10% to shareholders) applies specifically to participating funds. The claim that assets must be pooled without segregation is false, as the Insurance Act requires the establishment of separate funds for participating business to protect policyholder interests. The statement regarding guarantees is also incorrect because participating policies contain non-guaranteed components (bonuses) that depend on fund performance, whereas non-participating policies generally provide fixed, guaranteed benefits.

Takeaway: The primary distinction under the Singapore Insurance Act is that participating funds involve profit-sharing with policyholders through bonuses and require separate fund accounting, while non-participating funds offer fixed benefits without surplus participation.

Correct: Under the PDPA in Singapore, when an organization (the insurer) uses a data intermediary (the service provider) to process personal data on its behalf, the insurer remains responsible for ensuring the data is protected. Specifically, the insurer must ensure the data intermediary complies with the Protection Obligation and the Retention Limitation Obligation. This is typically enforced through clear contractual terms that define the security standards and data disposal requirements.

Incorrect: The idea that an insurer is absolved of liability upon transfer is incorrect because the principal organization retains responsibility for data processed by its intermediaries. The claim that the intermediary must handle Access and Correction obligations directly is also incorrect; the principal organization (the insurer) is generally responsible for responding to such requests. Finally, the PDPA and regulatory best practices in Singapore require more than verbal confirmation; organizations must take proactive steps, usually through written contracts and audits, to ensure compliance by intermediaries.

Takeaway: In Singapore, an insurer remains legally responsible for personal data processed by third-party intermediaries and must contractually ensure they meet PDPA protection and retention standards.

Correct: Under the Singapore Insurance Act, an insurer is required to maintain separate insurance funds for different classes of business (e.g., Life Insurance vs. General Insurance). The assets of a specific insurance fund must be kept separate from the insurer’s shareholder fund and other insurance funds. These assets are to be applied only for the purposes of that specific fund and are not available to meet the insurer’s other debts or liabilities, thereby protecting the interests of the policyholders within that fund.

Incorrect: The suggestion that assets can be commingled during liquidity crises is incorrect as the Insurance Act requires strict ring-fencing of fund assets at all times. While Participating and Non-Participating policies are both part of the life business, they have distinct accounting and management requirements to protect the interests of Participating policyholders. Cross-subsidization, such as using a Life Fund surplus to cover General Insurance losses, is prohibited to prevent the depletion of assets intended for specific policyholder groups.

Takeaway: The Singapore Insurance Act requires strict separation of insurance funds to ensure that assets of a specific fund are reserved exclusively for the liabilities and expenses of that fund.

Correct: Under the Insurance Act of Singapore, no person shall carry on any class of insurance business in Singapore unless they are licensed by the Monetary Authority of Singapore (MAS). The licensing process requires the applicant to satisfy MAS regarding its financial standing, including meeting minimum paid-up capital and solvency margin requirements, as well as ensuring that its management meets the fit and proper criteria.

Incorrect: Registering with ACRA is a requirement for business incorporation but does not grant authority to conduct insurance business, and marketing insurance without a license is a violation of the Insurance Act. A Capital Markets Services license under the SFA is for regulated activities like dealing in securities, but it does not replace the requirement for an insurance license under the Insurance Act for underwriting life policies. Representative offices in Singapore are prohibited from carrying on insurance business, including the signing of contracts or underwriting risks.

Takeaway: Any entity wishing to conduct insurance business in Singapore must be specifically licensed by the Monetary Authority of Singapore (MAS) under the Insurance Act and meet stringent financial and regulatory standards.

Correct: Under the Financial Advisers Act (FAA), an individual is prohibited from providing any financial advisory service unless they are an appointed or provisional representative. The Representative Notification Framework (RNF) mandates that the principal firm must notify the Monetary Authority of Singapore (MAS) of the appointment, and the individual’s name must be successfully entered into the Public Register of Representatives before they can legally perform any regulated activities.

Incorrect: The suggestion that services can commence immediately upon submission is incorrect because the law requires the name to actually appear on the Public Register first. There is no provision for a 14-day grace period for unlisted individuals to provide financial advice, even under supervision. Furthermore, the requirement to be an appointed representative applies to all financial advisory services provided under the FAA, regardless of whether the target clients are retail or accredited investors.

Takeaway: An individual must be formally appointed and listed on the Public Register of Representatives before they can provide any financial advisory services in Singapore.

Correct: The Life Insurance Association (LIA) Singapore emphasizes high standards of conduct. Member companies are expected to have a whistleblowing policy that encourages employees to report concerns about unethical behavior or non-compliance. A critical component of this is the protection of the whistleblower from any form of retaliation or victimization, alongside maintaining confidentiality to ensure the integrity of the reporting process.

Incorrect: Forwarding all reports to the police immediately is incorrect as many reports involve internal compliance or LIA code breaches that are handled internally first. Requiring a financial deposit or affidavit creates a barrier to reporting and contradicts the intent of whistleblowing protections. Disclosing the whistleblower’s identity to the accused party is a violation of confidentiality and would discourage individuals from coming forward due to fear of reprisal.

Takeaway: LIA standards require member companies to maintain confidential whistleblowing channels and protect employees from retaliation to uphold industry integrity and consumer trust in Singapore’s insurance sector.

Correct: According to Section 57 of the Singapore Insurance Act, a person is deemed to have an insurable interest in their own life, the life of their spouse, and the life of their child or ward who is under the age of 18. For life insurance policies (including investment-linked policies), the law requires that the insurable interest must exist at the time the policy is ‘effected’ (at inception). If this requirement is not met, the contract is considered void from the beginning.

Incorrect: The suggestion that insurable interest must exist at the time of death is incorrect for life insurance; that rule generally applies to general insurance (indemnity) contracts. The claim that all immediate family members like parents and siblings are ‘deemed’ to have an insurable interest is also incorrect, as the Act specifically limits this deemed interest to spouses and children/wards under 18; for others, a pecuniary (financial) interest must usually be proven. Finally, a policy without insurable interest is void by law, not merely voidable or dependent on the insurer’s ability to prove a gaming intent.

Takeaway: In Singapore, insurable interest for life policies must exist at the time of inception and is legally presumed for one’s spouse and children under the age of 18.

Correct: Under the MAS Guidelines on Business Continuity Management, financial institutions (including life insurers and financial advisers) are expected to conduct a complete review and testing of their BCP at least once a year. This ensures that recovery strategies remain effective and that staff are prepared for various disruption scenarios. Testing should also be conducted whenever there are material changes to the institution’s business, systems, or operating environment.

Incorrect: The suggestion that testing is only reactive to disruptions or SGX directives is incorrect because MAS requires proactive, periodic testing regardless of market conditions. Shifting the regulatory focus to ACRA is incorrect as MAS is the primary regulator for BCM in the financial sector, and intermediaries are not exempt from testing requirements. While recovery time objectives are important, MAS does not mandate that all tests be facilitated by government-appointed auditors or set a universal twenty-four-hour limit for all business functions.

Takeaway: MAS requires life insurers and intermediaries to maintain operational resilience by testing their business continuity plans at least annually or upon significant business changes.

Correct: Under the PDPA’s Purpose Limitation Obligation, an organization may collect, use, or disclose personal data only for purposes that a reasonable person would consider appropriate and for which the individual has given consent. Using sensitive health data (originally collected for underwriting) for a new purpose like marketing profiling is a significant change in purpose. Therefore, the bank must obtain fresh, explicit consent from the individuals before their data can be used for this new, specific activity.

Incorrect: Deemed consent by silence or failure to opt-out is generally not applicable for new, secondary purposes that were not originally disclosed, especially involving sensitive data. General consent clauses are often too broad to cover specific, high-risk activities like health-based profiling. Furthermore, under the PDPA and MAS guidelines on outsourcing, the primary organization (the bank) remains accountable for the protection of personal data and cannot contractually transfer its statutory compliance obligations to a third-party vendor.

Takeaway: The PDPA requires fresh consent when personal data is used for a new purpose not previously disclosed, particularly when the data is sensitive or used for profiling.

Correct: Under the Insurance Act, the Monetary Authority of Singapore (MAS) requires any entity seeking to carry on insurance business to meet specific financial requirements, including minimum paid-up capital and solvency margins. Additionally, the ‘fit and proper’ criteria ensure that the directors and key executive officers possess the necessary integrity, competence, and financial standing to manage the insurer responsibly.

Incorrect: Membership in the Life Insurance Association (LIA) is an industry association requirement for established insurers but is not a statutory prerequisite for the initial granting of a license by MAS. The number of licensed representatives is a commercial operational matter rather than a licensing requirement for the insurer entity itself. There is no statutory requirement in the Insurance Act for 75% of an insurer’s voting shares to be held by Singapore Citizens or Permanent Residents.

Takeaway: Licensing as an insurer in Singapore is contingent upon meeting MAS-mandated financial capital thresholds and passing rigorous fit and proper assessments for leadership.

Correct: Under Section 27 of the Financial Advisers Act (FAA), a financial adviser is prohibited from making a recommendation unless they have a reasonable basis for doing so. This requires the adviser to have considered the client’s investment objectives, financial situation, and particular needs. For complex products like ILPs, the representative must demonstrate that the product’s risk profile is consistent with the client’s stated risk tolerance and financial goals, especially for vulnerable clients like retirees.

Incorrect: Option b is incorrect because a risk disclosure waiver does not exempt a representative from the statutory duty to provide suitable advice under the FAA. Option c is incorrect because providing guaranteed returns on investment-linked components is generally prohibited and does not address the ‘reasonable basis’ requirement. Option d is incorrect because MAS does not provide individual approvals for client risk profiles; the responsibility for suitability and compliance rests with the licensed financial adviser and its representatives.

Takeaway: The Financial Advisers Act mandates that all recommendations must be supported by a reasonable basis derived from a thorough ‘Know Your Client’ (KYC) and suitability analysis process.

Correct: In accordance with the requirements set by the Monetary Authority of Singapore (MAS) and the Life Insurance Association (LIA) Singapore, financial advisers must provide the relevant Your Guide to Life Insurance or Your Guide to Investment-Linked Insurance Policies to prospective clients. This must be done at the point of recommendation or, at the latest, before the client signs the application form. This ensures the client has access to standardized information to make an informed decision.

Incorrect: Providing the booklets only after policy issuance is a breach of regulatory timing requirements, as the information is intended to assist in the pre-purchase decision-making process. Verbal summaries, while helpful, do not fulfill the legal requirement to provide the actual document (whether in hard copy or electronic form). The requirement to provide these guides applies to all retail clients, not just those classified as vulnerable or those who specifically request them.

Takeaway: Financial advisers must provide the mandatory Your Guide booklets to all retail clients at or before the point of application to comply with Singapore’s disclosure standards.

Correct: Under the Financial Advisers Act (FAA) and the Representative Notification Framework (RNF), an individual must not act as a representative or hold himself out as doing so unless his name is entered in the Public Register of Representatives. The principal firm is responsible for conducting due diligence to ensure the individual is fit and proper, but the legal authority to conduct regulated activities only begins once the registration is reflected on the MAS Public Register.

Incorrect: Providing services under supervision without registration is not permitted for regulated activities under the FAA. Simply submitting a notification is insufficient; the individual must be officially listed on the Public Register before commencing work. Previous registration with another firm does not grant an automatic right or internal discretion to bypass the current registration process for a new principal firm.

Takeaway: An individual must be officially listed on the MAS Public Register of Representatives before they can perform any regulated financial advisory services in Singapore.

Correct: Approach 1 is correct because the Policy Owners’ Protection (PPF) Scheme in Singapore is a compulsory scheme for all direct life and general insurers licensed by the Monetary Authority of Singapore (MAS). It is administered by the SDIC and provides protection for guaranteed benefits under life policies, subject to caps such as S$500,000 for the aggregate guaranteed sum assured and S$100,000 for the aggregate guaranteed surrender value per life insured per insurer. For ILPs, only the guaranteed insurance components (like death benefits) are covered, not the investment performance of the units.

Incorrect: Approach 2 and its related options are incorrect because the PPF Scheme does not cover investment losses or market risks associated with ILPs; the policyholder bears the investment risk. Furthermore, the scheme is not voluntary; it is a statutory requirement for MAS-licensed direct insurers. The coverage is also not unlimited; it is strictly subject to the caps defined under the Deposit Insurance and Policy Owners’ Protection Schemes Act. The SDIC does not act as a sovereign guarantor for non-guaranteed benefits or market-linked fluctuations.

Takeaway: The PPF Scheme provides a mandatory, capped safety net for guaranteed life insurance benefits in Singapore but does not protect against investment risks or market losses in ILPs.

Correct: According to Section 57 of the Singapore Insurance Act, a life policy is void unless the person effecting the insurance has an insurable interest in the life of the insured at the time the policy is issued. In a commercial or ‘keyman’ context, this requires a pecuniary interest, meaning the policyholder must have a legal financial interest in the continued life of the person insured. Unlike general insurance, life insurance in Singapore only requires the insurable interest to exist at the time the policy is taken out (inception).

Incorrect: The suggestion that insurable interest must exist both at inception and at the time of claim is incorrect for life insurance, as the Singapore Insurance Act only mandates it at the time the policy is effected. The idea that consent or specific sum assured thresholds waive the requirement for insurable interest is false; the Act does not provide such exemptions for life policies. Furthermore, the Securities and Futures Act does not govern the fundamental legal requirement of insurable interest for life insurance policies, nor is there an ‘automatic presumption’ for business consultants.

Takeaway: Under the Singapore Insurance Act, a life insurance policy is legally void if the policyholder does not have a valid insurable interest in the life of the insured at the time the policy is issued.

Correct: The Singapore College of Insurance (SCI) is the designated body for conducting specific CMFAS examination modules, including M9 (Life Insurance and Investment-linked Policies) and M9A. To ensure the integrity of the financial advisory industry, the SCI must remain an impartial and independent examiner. This ensures that all individuals licensed under the Financial Advisers Act (FAA) meet the minimum competency requirements set by the Monetary Authority of Singapore (MAS). Any attempt to influence SCI staff through gifts or entertainment threatens the objective assessment of these professional standards.

Incorrect: The SCI is an industry-led non-profit professional body, not a government department or a subsidiary of MAS. While the Institute of Banking and Finance (IBF) also conducts CMFAS exams, the SCI is specifically the provider for the insurance-related modules like M5, M8, M8A, M9, and M9A. The SCI does not adjust passing marks based on industry recruitment needs; its role is to maintain a consistent and high standard of professional competency as required by regulation.

Takeaway: The SCI is the authorized independent body for insurance-related CMFAS exams, and its integrity is essential for maintaining the professional standards required by MAS.

Correct: Under the Singapore Insurance Act, insurers must maintain separate insurance funds for participating and non-participating policies. For participating (Par) funds, policyholders share in the profits of the fund. A key regulatory and industry standard in Singapore is the 90/10 rule, which dictates that at least 90% of the surplus distributed from the Par fund must be allocated to policyholders (usually in the form of bonuses), while the shareholders’ share is limited to the remaining 10%.

Incorrect: Non-participating funds do not share surplus with policyholders, so classifying a product with non-guaranteed performance-linked bonuses as non-participating is incorrect. The Insurance Act specifically requires the separation of participating and non-participating funds to protect the interests of different classes of policyholders; they cannot be combined into a single pool for surplus distribution purposes. Bonuses in a participating fund are not fixed at inception; they are discretionary and depend on the fund’s performance, mortality experience, and expenses.

Takeaway: Participating funds in Singapore require a separate accounting fund where policyholders typically receive at least 90% of the distributed surplus through non-guaranteed bonuses.

Correct: Under the Financial Advisers Act (FAA), the Monetary Authority of Singapore (MAS) has the authority to issue Prohibition Orders (POs) against individuals. This power allows MAS to bar persons from the industry who are not fit and proper or who have breached specific conduct requirements, such as providing misleading information. This is an administrative power used to maintain market integrity and protect consumers, ensuring that only suitable persons operate in the financial sector.

Incorrect: The suggestion that a court order is required is incorrect because the FAA grants MAS direct administrative powers to issue Prohibition Orders to protect the public interest. The claim that MAS only regulates firms and not individuals is false; the FAA framework specifically includes the supervision and sanctioning of individual representatives through the Representative Notification Framework. Finally, the idea that an insurer’s license is automatically revoked due to a representative’s failure is incorrect; while MAS supervises insurers’ oversight of intermediaries, license revocation is a severe measure reserved for systemic or fundamental failures of the insurer itself, not isolated representative misconduct.

Takeaway: MAS possesses the administrative power to issue Prohibition Orders against individuals to ensure that only fit and proper persons provide financial advisory services in Singapore.

Correct: Under the Insurance Act of Singapore, specifically Section 8, no person shall carry on any class of insurance business in Singapore unless they are registered by the Monetary Authority of Singapore (MAS) as an insurer for that class of business. A representative office is strictly limited to non-commercial activities such as liaison work and market research; it is not authorized to engage in core insurance activities like underwriting, issuing policy documents, or collecting premiums. Engaging in such activities without registration constitutes a violation of the Act.

Incorrect: The suggestion that premium thresholds allow for unregistered business is incorrect as the Insurance Act does not provide a ‘de minimis’ volume exemption for carrying on insurance business. The idea that foreign underwriting exempts a local entity from registration is false; any entity ‘carrying on business’ in Singapore must be registered locally. Finally, while the Securities and Futures Act (SFA) provides certain exemptions for accredited investors in the context of capital markets, the Insurance Act requires registration for any entity carrying on insurance business in Singapore regardless of the client’s classification.

Takeaway: In Singapore, any entity carrying on insurance business, including premium collection and policy issuance, must be formally registered as an insurer with the Monetary Authority of Singapore (MAS) under the Insurance Act.

Correct: Under the Singapore Insurance Act, insurers are required to maintain separate insurance funds for different classes of insurance business (Life vs. General) and, within life insurance, separate funds for different categories such as Participating, Non-Participating, and Investment-Linked. This segregation ensures that the assets of a specific fund are primarily available to meet the liabilities of that fund and protects policyholder interests. Commingling these distinct categories into a single ‘Consolidated Life Fund’ is a violation of these statutory requirements, regardless of administrative convenience.

Incorrect: The suggestion that internal ledger accounting is sufficient to replace the physical and legal separation of funds is incorrect, as the Insurance Act requires the actual establishment of separate funds. There is no regulatory provision that allows for a ‘grace period’ or a premium volume threshold (such as SGD 100 million) to bypass fund separation requirements. Furthermore, the appointment of an external fund manager under the Securities and Futures Act does not exempt an insurer from its fundamental obligation under the Insurance Act to maintain separate insurance funds for its life business categories.

Takeaway: Singapore law requires the strict segregation of insurance funds by category, such as non-participating and investment-linked, to ensure policyholder protection and proper asset-liability management.

Correct: Under the Financial Advisers Act (FAA) and the Representative Notification Framework (RNF), a principal firm is responsible for ensuring that any individual it appoints as a representative is fit and proper according to MAS guidelines. The principal must notify MAS of the appointment via the electronic RNF system. Crucially, the individual cannot commence providing financial advisory services until their name is successfully entered into the public Register of Representatives maintained by MAS.

Incorrect: The suggestion of a 14-day grace period is incorrect as the FAA requires the notification and entry into the Register of Representatives to occur before the commencement of regulated activities. The requirement to be an appointed representative is based on the provision of financial advisory services (like advising on ILPs), not whether the individual handles client money. While MAS oversees the process, the RNF is a notification-based system where the principal affirms the representative’s fitness; MAS does not issue individual ‘approval letters’ for every representative appointment as a standard prerequisite for internal directory listing.

Takeaway: A principal firm must verify the fitness and propriety of a representative and complete the MAS notification process before the individual can legally perform any financial advisory services under the FAA.

Correct: According to Section 57 of the Singapore Insurance Act, a life policy is void if the person effecting the insurance does not have an insurable interest in the life insured at the time the policy is issued. While individuals have an unlimited insurable interest in their own lives and the lives of their spouses, interest in other relatives (like a nephew) generally requires proof of pecuniary (financial) interest or legal dependency. Familial affection alone between an uncle and an adult nephew does not satisfy the statutory requirement.

Incorrect: The suggestion that consent replaces the legal requirement is incorrect; while consent is often required for underwriting, it does not override the statutory necessity of insurable interest. The claim that all blood relatives have automatic interest is false, as the Act specifically defines limited categories (self, spouse, child/ward under 18) for automatic interest. The idea that interest must only exist at the time of claim is a characteristic of general insurance indemnity, whereas for life insurance in Singapore, the interest must specifically exist at the inception of the contract.

Takeaway: Under the Singapore Insurance Act, a life insurance policy is void from the outset if insurable interest is not present at the time the contract is effected.

Correct: Under the Financial Advisers Act (FAA) and specifically MAS Notice FAA-N16, financial advisers are required to have a reasonable basis for any recommendation made to a client. This involves a process of gathering and analyzing information regarding the client’s financial objectives, risk tolerance, and financial situation. Crucially, the representative must document the rationale for the recommendation to demonstrate how the specific product meets the client’s identified needs.

Incorrect: Using generic statements or relying solely on client declarations of understanding does not satisfy the FAA requirement to provide a reasoned basis for a recommendation. While risk profiling is a part of the process, a simple match between a risk score and a product rating is insufficient without a documented rationale. The duty to have a reasonable basis for recommendations applies to all retail clients, not just those categorized as Selected Clients, although Selected Clients may trigger additional procedural safeguards.

Takeaway: The Financial Advisers Act requires representatives to document a specific, reasonable basis for every investment product recommendation based on the client’s unique financial profile and needs.