DGIRM Diploma In General Insurance And Risk Management

Correct: Under Section 199 of the Securities and Futures Act (SFA), it is an offense to make a statement that is false or misleading in a material particular if it is likely to induce the subscription for or sale of capital markets products. The fund manager must ensure that all information is balanced, includes material risks, and that any performance claims are accurate and not misleading. This aligns with the MAS Guidelines on Fair Dealing, which emphasize that customers must receive clear, relevant, and timely information to make informed financial decisions.

Incorrect: Highlighting only successful periods (cherry-picking) is misleading as it fails to disclose material facts regarding volatility and risk. Providing guaranteed return figures based on historical averages is deceptive because it implies certainty in market-based investments where no such guarantee exists. Relying on verbal disclosures to fix written inaccuracies is a failure of compliance, as the written materials themselves must be accurate and not misleading at the time of dissemination.

Takeaway: To comply with the SFA, fund managers must ensure all investment communications are fair, balanced, and supported by reasonable grounds, avoiding any material omissions that could mislead investors.

Correct: Under the GIPS standards, which are recognized by the Investment Management Association of Singapore (IMAS) and used by fund managers in Singapore, compliance cannot be claimed for a single product or composite. The firm must be defined as an entity, sub-division, or department that is held out to clients or potential clients as a distinct business entity. Once the firm is defined, compliance must be met on a firm-wide basis, ensuring that all fee-paying, discretionary portfolios are included in at least one composite.

Incorrect: Defining the firm based on outperforming strategies is incorrect as GIPS requires the inclusion of all discretionary portfolios to prevent cherry-picking. Defining the firm solely by its ACRA legal registration is too restrictive, as GIPS allows for distinct business units to be defined as the ‘firm’ if they are marketed as such. Linking the definition of the firm to MAS Environmental Risk Management guidelines is irrelevant to the structural requirements of GIPS performance reporting.

Takeaway: GIPS compliance must be applied on a firm-wide basis, where the firm is defined as a distinct business entity held out to clients, ensuring transparency and preventing selective performance reporting.

Correct: Under the Securities and Futures (Licensing and Conduct of Business) Regulations, a Licensed Fund Management Company (LFMC) is required to notify the Monetary Authority of Singapore (MAS) of any change in its substantial shareholding within 14 days of the change. This ensures that the regulator maintains an accurate and up-to-date record of the controllers of licensed entities, which is critical for ongoing supervision and fit and proper assessments.

Incorrect: Waiting until the end of the financial year is incorrect because the Securities and Futures Act and its regulations mandate specific timelines (usually 14 days) for reporting changes in particulars that are independent of annual reporting cycles. Notifying the SGX first is incorrect because the primary regulatory authority for fund management licensing and shareholding oversight in Singapore is the MAS; SGX requirements apply to listed companies and do not supersede MAS notification rules. Limiting notification to only ‘active’ shareholders is incorrect because the legal requirement is triggered by the threshold of substantial shareholding (typically 5% or more) regardless of the shareholder’s level of involvement in daily operations.

Takeaway: Fund Management Companies in Singapore must notify MAS of changes in substantial shareholding within 14 days to comply with the Securities and Futures (Licensing and Conduct of Business) Regulations.

Correct: Under the regulatory framework established by the Monetary Authority of Singapore (MAS) and the Securities and Futures Act (SFA), Fund Management Companies (FMCs) are expected to maintain robust corporate governance. Documenting the substantive rationale behind decisions, including dissenting views, is a critical control. It provides a clear audit trail that the board and investment committee exercised due diligence and fulfilled their fiduciary duties, especially when making complex decisions that could impact client assets.

Incorrect: Focusing only on consensus decisions fails to capture the deliberation process and may hide significant risks or unresolved conflicts of interest. Verbatim transcripts without board review are insufficient because they lack the necessary synthesis of the decision-making rationale required for regulatory compliance. Delaying the preparation of minutes until the annual general meeting is a failure of timely record-keeping and prevents the board from ensuring the accuracy of the records while the discussions are still fresh in their minds.

Takeaway: Effective minute-taking for Singapore fund managers must capture the ‘why’ behind decisions and the deliberation process to provide a defensible audit trail of fiduciary conduct and regulatory compliance.

Correct: Under the MAS simplified regulatory regime for Venture Capital Fund Managers (VCFMs), the fund must meet specific criteria: it must be closed-ended (meaning it does not provide redemption rights to investors at their discretion) and it must only be offered to accredited investors (AIs) or institutional investors (IIs). Allowing semi-annual redemptions and marketing to non-AIs violates these fundamental eligibility conditions for the VCFM status.

Incorrect: VCFMs are specifically exempt from the base capital and risk-based capital requirements that apply to other Licensed Fund Management Companies (LFMCs), so the SGD 250,000 requirement is not applicable. The investment criteria require at least 80% (not 100%) of committed capital to be in unlisted business ventures that are no more than 10 years old (not 5 years). Additionally, VCFMs are exempt from several business conduct requirements, including the mandatory requirement for an independent internal audit function that applies to other LFMCs.

Takeaway: To qualify for the simplified MAS regime, a VCFM must manage closed-ended funds offered exclusively to accredited or institutional investors.

Correct: According to the Financial Advisers Act (FAA) and MAS Guidelines, a financial adviser (including fund managers providing advisory services) is restricted from using the term ‘independent’ unless it operates without any influence from product providers. Specifically, it must not receive any commission, brokerage, or other benefit from a product provider which may reasonably be expected to bias its recommendations, unless such benefits are fully rebated to the clients.

Incorrect: Providing a disclosure statement about trailer fees is a general transparency requirement but does not satisfy the specific legal threshold required to use the restricted term ‘independent’. Offering products from a specific number of providers (such as six) is a common industry benchmark for a ‘wide range’ but does not override the prohibition on receiving commissions if the ‘independent’ label is used. Functional separation between departments is a core compliance principle for managing conflicts of interest but is insufficient to meet the strict statutory definition of independence regarding product remuneration.

Takeaway: In Singapore, the term ‘independent’ is strictly regulated and cannot be used if the firm receives and retains commissions or benefits from product providers that could bias their advice.

Correct: In accordance with the MAS Guidelines on Technology Risk Management and the Notice on Cyber Hygiene, financial institutions in Singapore are required to implement robust security measures for online systems. This includes the use of multi-factor authentication (MFA) for sensitive transactions and administrative access, ensuring strong encryption for data in transit and at rest, and performing regular vulnerability assessments and penetration tests to identify and remediate security gaps.

Incorrect: The approach of using single-factor authentication for convenience fails to meet the minimum standards for securing sensitive financial transactions. Outsourcing security does not transfer regulatory responsibility; the FMC remains ultimately accountable for its technology risk management under MAS expectations. Allowing indefinite session tokens is a significant security flaw that increases the risk of unauthorized session hijacking, contrary to sound risk management practices.

Takeaway: Fund managers must implement multi-factor authentication and regular independent security testing to comply with MAS technology risk and cyber hygiene standards for online portals.

Correct: Under Part VII of the Securities and Futures Act (SFA), any person (including a corporation) who becomes a substantial shareholder (holding 5% or more of voting shares) or experiences a change in the percentage level of their interest must notify both the listed corporation and the Monetary Authority of Singapore (MAS) within 2 business days of becoming aware of the transaction or change.

Incorrect: Notifying only the Singapore Exchange (SGX) is incorrect as the SFA specifically mandates notification to the issuer and MAS. The timeframe of 7 or 14 business days is incorrect, as the statutory limit is 2 business days. The 10% threshold is irrelevant for substantial shareholder reporting, which is triggered at the 5% level for all investors regardless of whether the shares were acquired via a gift or a trade.

Takeaway: Substantial shareholders in Singapore must disclose their interests to both the listed entity and MAS within two business days of reaching or crossing the 5% threshold.

Correct: According to MAS guidelines for Collective Investment Schemes (CIS), the Product Highlights Sheet (PHS) is a mandatory disclosure document for retail offers. It must be a standalone document, separate from the prospectus, and is designed to be concise (generally not exceeding 8 pages). It must follow a prescribed modular format to ensure that key information, such as investment objectives, risks, and fees, is easily accessible and understandable for retail investors.

Incorrect: The suggestion that the PHS can be incorporated into the prospectus is incorrect because it must be a distinct, standalone document. The idea that it is only mandatory for new investors is false, as it must be provided to all retail investors at the point of offer. Stating that the length and format are at the manager’s discretion is incorrect because MAS provides specific guidelines on the structure, modularity, and conciseness of the PHS to protect retail interests.

Takeaway: In Singapore, the PHS must be a concise, standalone, and modularly formatted document designed to help retail investors quickly grasp the essential features and risks of a fund.

Correct: Under the Securities and Futures Act (SFA) and the MAS Guidelines on Business Conduct, front running is a prohibited practice. It occurs when a person trades in a security for their own account while in possession of non-public information regarding a pending client order that is likely to affect the market price. The manager’s justification of ‘priming the market’ does not negate the fact that they used confidential client information for personal gain at the potential expense of the client.

Incorrect: The claim that trading ahead is allowed to ‘minimize market impact’ is incorrect as it still prioritizes the manager’s interest over the client’s and exploits non-public information. There is no regulatory threshold, such as 10% of daily volume, that defines front running; the act itself is a violation regardless of size. Disclosure after the fact does not rectify the breach of the SFA or the ethical failure to prioritize client orders.

Takeaway: Front running is a serious market misconduct offense in Singapore that involves prioritizing personal trades over client orders based on non-public, price-sensitive information.

Correct: Fundamental analysis in the Singapore context involves a deep dive into a company’s financial health, management quality, and the broader economic environment, often utilizing the rigorous disclosure standards set by the MAS and SGX. It increasingly incorporates Environmental, Social, and Governance (ESG) factors as per MAS Guidelines on Environmental Risk Management. Technical analysis serves as a complementary tool, focusing on market psychology and historical data to determine optimal entry and exit points, rather than the underlying value of the business.

Incorrect: The suggestion that MAS mandates technical analysis for long-term valuation is incorrect, as fundamental analysis is the industry standard for determining intrinsic value. The claim that fundamental analysis constitutes market manipulation under the SFA is a misunderstanding of the law; the SFA prohibits actions intended to create a false or misleading appearance of active trading, not legitimate research. Finally, fundamental analysis is not prohibited for retail funds; in fact, it is a core component of professional fund management, provided that managers adhere to SFA regulations regarding insider trading and do not trade on material non-public information.

Takeaway: In the Singapore fund management industry, fundamental analysis determines what to buy based on intrinsic value and ESG factors, while technical analysis helps determine when to buy based on market trends.

Correct: In accordance with the Securities and Futures (Licensing and Conduct of Business) Regulations and MAS expectations, a fund manager must ensure that custodial arrangements are transparent. If assets are held in a foreign jurisdiction, the fund manager must disclose the fact that the assets are held overseas and the risks associated with such an arrangement, including the impact of foreign laws on the recovery of assets. Issuing a formal addendum is the appropriate professional step to rectify a material omission in disclosure and ensure all investors are treated fairly.

Incorrect: Suspending redemptions and waiting for MAS instructions is an extreme and inappropriate response for a disclosure update that can be handled via an addendum. Relying on generic risk disclosures or website updates is insufficient because the Securities and Futures Act and relevant regulations require specific and clear communication of material risks directly to the investors. Limiting disclosure to new investors only is a breach of the fund manager’s fiduciary duty and the principle of fair treatment to existing clients who are equally exposed to the custodial risks.

Takeaway: Fund managers must provide specific, timely, and transparent disclosure regarding custodial arrangements and the legal risks of foreign jurisdictions to all affected investors to maintain regulatory compliance and ethical standards.

Correct: According to MAS Notice SFA04-N02 (Prevention of Money Laundering and Countering the Financing of Terrorism), a financial institution is required to maintain all relevant CDD information, account files, and business correspondence, as well as transaction records, for at least five years. For CDD information, the five-year period begins following the termination of the business relationship. For transaction records, it is five years following the completion of the transaction.

Incorrect: The suggestion to start the clock from the date of account opening is incorrect because CDD retention is tied to the end of the relationship. The idea that business correspondence can be disposed of earlier is incorrect as MAS specifically includes business correspondence in the record-keeping requirements. While the Limitation Act in Singapore generally provides for a 6-year period for certain claims, the specific MAS AML/CFT regulatory requirement for record retention is a minimum of 5 years.

Takeaway: Under MAS regulations, fund managers must retain CDD and transaction records for at least five years after the business relationship with the customer has ended or the transaction has been completed.

Correct: According to the MAS Guidelines on Outsourcing, a financial institution (FI) remains fully responsible for the outsourced activity. The board and senior management of the CMS licensee must ensure that there is continuous monitoring of the service provider’s performance and that the provider complies with all relevant Singapore laws and regulations, including AML/CFT requirements under the SFA.

Incorrect: The suggestion that monitoring can be reduced to every three years based solely on reputation is incorrect as monitoring must be risk-based and proactive. Regulatory accountability cannot be transferred via indemnity clauses or SLAs; the FI remains responsible to MAS. Relying only on initial due diligence without ongoing monitoring fails to meet the requirement for continuous oversight of outsourced risks.

Takeaway: In Singapore, fund managers retain ultimate regulatory accountability for outsourced functions and must maintain active, ongoing oversight of their service providers regardless of the provider’s reputation.

Correct: In the context of Singapore’s regulatory environment, benchmark selection must be appropriate to the fund’s specific mandate. Benchmark hugging (or closet indexing) is a significant ethical and regulatory concern because it involves charging active management fees for a portfolio that closely mimics a benchmark. This practice can be viewed as a breach of the manager’s duty to act in the best interests of the client and a failure to provide the services for which the client is paying, potentially violating the fair dealing principles expected by MAS.

Incorrect: Option b is incorrect because a benchmark must be relevant to the fund’s strategy; using the STI for a non-correlated strategy would be misleading. Option c is incorrect because Singapore regulations do not provide a specific numerical threshold (like 95%) to define benchmark hugging; it is assessed based on the substance of the management style versus the disclosures. Option d is incorrect because benchmark hugging is not an ‘acceptable’ strategy for an active fund, as it misrepresents the nature of the investment service provided to the client, regardless of market volatility.

Takeaway: Fund managers must ensure benchmarks are relevant to the investment mandate and avoid closet indexing to maintain ethical integrity and comply with MAS fair dealing expectations.

Correct: Under the Securities and Futures (Licensing and Conduct of Business) Regulations in Singapore, a holder of a capital markets services license is required to ensure that customer assets are segregated from its own money. These assets must be deposited into a trust account or a custody account maintained with an eligible custodian, such as a bank licensed under the Banking Act or a licensed depository. This segregation is critical to protect client assets from the firm’s creditors in the event of insolvency.

Incorrect: Maintaining an internal ledger while funds are in a corporate account is insufficient because it does not satisfy the legal requirement for asset segregation at the depository level. Commingling client funds with corporate funds, even with a high balance, is a direct violation of MAS’s conduct of business rules. An internal compliance department does not qualify as an ‘eligible custodian’ under the Securities and Futures Act; a custodian must be a separate, qualified entity like a licensed bank or a designated depository to ensure independent safekeeping.

Takeaway: The Securities and Futures Act requires strict segregation of client assets from a firm’s own funds through trust accounts held with eligible custodians to ensure investor protection.

Correct: According to Section 95 of the Securities and Futures Act (SFA), a Capital Markets Services (CMS) license shall lapse if the holder has ceased to carry on the regulated activity for which it is licensed for a continuous period of 6 months. In this scenario, the firm has not conducted regulated activities for seven months, which exceeds the statutory limit, leading to the lapse of the license regardless of capital maintenance.

Incorrect: The maintenance of base capital and payment of fees does not prevent a license from lapsing if the business has ceased for the 6-month statutory period. There is no provision in the SFA for a ‘dormant’ status that allows for automatic reactivation after a 6-month cessation. Revocation is a separate process initiated by the MAS for specific failures; however, a ‘lapse’ occurs automatically by operation of law when the 6-month inactivity threshold is crossed.

Takeaway: A CMS license in Singapore automatically lapses if the holder ceases to carry on the regulated activity for a continuous period of 6 months.

Correct: In accordance with the Securities and Futures (Licensing and Conduct of Business) Regulations and MAS guidelines, fund managers must ensure fair and equitable treatment of all clients. This involves having a robust, pre-determined trade allocation policy (typically pro-rata) that prevents any single client from being unfairly disadvantaged. Documenting the rationale for the allocation is a key requirement for transparency and compliance during MAS inspections.

Incorrect: Allocating based on fee structures is a direct conflict of interest and violates the duty to act in the client’s best interest. Using historical volatility as a basis for allocation is arbitrary and does not satisfy the requirement for equitable treatment of all participating accounts in a block trade. Delaying the recording of trades to ‘smooth’ out prices is a form of price manipulation or inaccurate record-keeping, which violates MAS regulatory requirements for timely and accurate transaction recording.

Takeaway: Fund managers must strictly follow and document a fair, pre-defined allocation policy to ensure no client is unfairly advantaged or disadvantaged during trade execution and distribution.

Correct: In accordance with MAS expectations for governance and the Guidelines on Outsourcing, Licensed Fund Management Companies must maintain robust records of their internal deliberations. Minutes of board and investment committee meetings must be sufficiently detailed to reflect the substance of the discussions, the rationale behind decisions, and the evidence of active oversight over outsourced functions. This ensures that the LFMC can demonstrate it retains ultimate responsibility and control over the outsourced activities.

Incorrect: Recording only final resolutions is insufficient because it fails to demonstrate the process of deliberation and the exercise of professional judgment required by MAS. Allowing a service provider to draft the minutes of an oversight meeting regarding their own performance creates a conflict of interest and undermines the independence of the LFMC’s governance. Using a simple checklist for routine reviews is inadequate as it does not capture the qualitative assessment and rationale necessary for comprehensive regulatory record-keeping.

Takeaway: Minutes of board and investment committee meetings must document the deliberation process and oversight actions to demonstrate effective governance and accountability, especially concerning outsourced functions in Singapore’s regulatory framework.

Correct: In accordance with MAS Notice SFA04-N02 on the Prevention of Money Laundering and Countering the Financing of Terrorism, when no natural person is identified as a beneficial owner through ownership interest (the 25% threshold), the financial institution must identify the natural person(s) exercising control through other means. If no such natural person can be identified, the institution must identify the natural person(s) who hold the position of senior managing official.

Incorrect: Recording the entity as having no beneficial owners is incorrect as the regulations require the identification of natural persons, specifically senior managing officials if no owners are found. Simplified due diligence cannot be used to bypass the identification of beneficial owners in complex structures. Identifying only the immediate parent company fails the requirement to look through the layers to identify the ultimate natural person who owns or controls the customer.

Takeaway: If no individual meets the ownership threshold, fund managers must identify persons exercising control through other means or, as a final step, the senior managing officials of the client.

Correct: Under MAS Guidelines on Risk Management Practices, clear segregation of duties between the front office (trading and portfolio management) and back office (settlement, valuation, and accounting) is a fundamental internal control. This independence is necessary to prevent fraud, errors, and the concealment of unauthorized activities. Allowing a portfolio manager to confirm their own trades bypasses the independent verification process required to mitigate financial and reputational risk.

Incorrect: Requiring a secondary sign-off from another portfolio manager is insufficient because it still keeps the settlement function within the front office, failing the requirement for functional independence. Focusing on the Personal Data Protection Act (PDPA) is incorrect as the primary issue is an internal control failure regarding trade lifecycle management, not data privacy. Focusing on system performance ignores the core regulatory requirement for functional segregation to prevent the concealment of unauthorized trades or errors.

Takeaway: Functional segregation between front and back office is a mandatory internal control in Singapore to ensure independent verification of trades and prevent the concealment of unauthorized activities.

Correct: According to the MAS Guidelines on Technology Risk Management and the Guidelines on Business Continuity Management, financial institutions in Singapore are responsible for the resilience of their outsourced services. They must ensure that third-party providers have robust BCP and DR arrangements in place. This includes verifying that the provider’s RTO and Recovery Point Objective (RPO) are consistent with the firm’s requirements, often achieved through reviewing test results or participating in joint testing exercises.

Incorrect: Relying solely on a vendor’s reputation or a standard SLA without verification is insufficient under MAS expectations for risk management. Legally transferring all responsibility for recovery is not possible, as the financial institution retains ultimate accountability for its business functions and regulatory compliance. Excluding third-party systems from the BCP scope creates a significant vulnerability and fails to meet the requirement for a comprehensive, end-to-end view of operational resilience.

Takeaway: Financial institutions in Singapore must actively validate the disaster recovery capabilities of third-party IT providers to ensure they meet the firm’s specific recovery objectives and MAS regulatory standards.

Correct: Under the Securities and Futures Act (SFA) and the MAS Guidelines on Fair Dealing, fund managers in Singapore have a fiduciary duty to ensure that investment products and strategies are suitable for their clients. A well-constructed IPS must balance the return objectives with the client’s specific constraints, such as liquidity needs for annual payouts and risk tolerance. By integrating these elements, the manager ensures that the portfolio is managed in a way that meets the client’s actual financial obligations and risk capacity, rather than just chasing returns.

Incorrect: Prioritizing capital preservation while treating payouts as merely aspirational fails to respect the client’s stated operational needs and mandate. Managing liquidity constraints through informal memos rather than the formal IPS lacks transparency and increases the risk of mandate breaches. Treating the return objective as the sole primary goal while ignoring quantitative risk limits is a violation of sound risk management practices and suitability requirements expected by the Monetary Authority of Singapore (MAS).

Takeaway: A robust Investment Policy Statement must align return objectives with the client’s specific constraints and risk tolerance to fulfill fiduciary duties and ensure investment suitability.

Correct: Under Section 48 of the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (CDSA) of Singapore, it is a criminal offense to disclose to any person any information which is likely to prejudice an investigation. This includes informing a client that an STR has been filed or is being considered. The firm must provide a neutral response that does not alert the client to the suspicious transaction reporting process to avoid the risk of tipping off.

Incorrect: Disclosing the STR filing to an institutional client even under a confidentiality agreement is a violation of the CDSA as it alerts the party to the investigation. Referring the client to the Monetary Authority of Singapore (MAS) or disclosing the filing to the client’s own compliance department are also prohibited actions because they provide specific information that an investigation is likely underway, which constitutes tipping off under Singapore law.

Takeaway: The prohibition of tipping off under the CDSA is absolute and prevents any disclosure that might alert a client that a Suspicious Transaction Report has been filed or that an investigation is pending.

Correct: Under the MAS Guidelines on Risk Management Practices and the SFA requirements for fund managers, a robust internal control environment must include the segregation of duties to prevent conflicts of interest. Specifically, the valuation function should be independent of the investment/portfolio management function. This ensures that asset values are not manipulated to artificially inflate performance fees or hide investment losses, which is a critical safeguard for investor protection in Singapore.

Incorrect: Approach X is incorrect because allowing an investment head to approve valuations creates a significant conflict of interest, regardless of their market knowledge. The Guidelines on Individual Accountability and Conduct (IAC) promote accountability but do not override the fundamental requirement for segregation of duties. The requirement for independent valuation and robust internal controls applies to all LFMCs as part of their licensing obligations under the Securities and Futures Act, regardless of whether they serve retail or accredited investors, making the distinction in client type irrelevant for this core control principle.

Takeaway: A robust internal control environment in Singapore requires the strict segregation of investment decision-making from the valuation and middle-office functions to ensure objective oversight and mitigate conflicts of interest.

Correct: Under the Securities and Futures (Licensing and Conduct of Business) Regulations, a Capital Markets Services (CMS) licensee is required to submit its audited financial statements and the auditor’s report to MAS within five months from the end of its financial year. Establishing internal milestones ensures that the firm has sufficient time to address audit queries and finalize the report before the statutory deadline, thereby mitigating the risk of late submission.

Incorrect: Relying solely on an auditor’s engagement letter is insufficient because the ultimate responsibility for timely submission lies with the licensee, and the deadline is five months after the financial year-end, not at the end of the year. Submitting unaudited management accounts does not satisfy the specific regulatory requirement for audited statements. MAS does not grant standing extensions for filings; any extension must be applied for on a case-by-case basis with valid justifications before the deadline expires.

Takeaway: CMS licensees must ensure that audited financial statements are submitted to MAS within five months of the financial year-end to comply with the Securities and Futures Act framework in Singapore.

Correct: In Singapore, under the MAS Guidelines on Risk Management Practices, the Investment Committee (IC) is responsible for providing oversight and ensuring that the investment process remains consistent with the fund’s stated objectives and risk constraints. When a breach of concentration limits occurs, the IC must act as a governance body to ensure the fund stays within its mandate. Proper documentation of the IC’s deliberations and decisions is a regulatory expectation for CMS licensees to demonstrate robust internal controls and fiduciary responsibility.

Incorrect: Delegating final authority to the Portfolio Manager without oversight (option b) fails the requirement for independent checks and balances. Prioritizing performance over mandate limits (option c) is a breach of fiduciary duty to investors and ignores the requirement to manage risks according to the Information Memorandum. Limiting the IC’s role to ethics while ignoring technical compliance (option d) is incorrect because the IC is responsible for the holistic oversight of the investment strategy, including risk limit adherence.

Takeaway: The Investment Committee in a Singapore-licensed fund manager acts as a critical governance layer that ensures all investment decisions align with the fund’s disclosed mandate and regulatory risk standards.

Correct: According to the MAS Guidelines on the Code of Conduct for Fund Managers, a fund manager who receives soft dollars must ensure that the goods and services are of demonstrable benefit to the clients, that best execution is maintained, and that there is no ‘churning’ (unnecessary trading to generate commissions). Crucially, the manager must make adequate disclosure to the clients regarding the nature of these arrangements. Approach Y aligns with these requirements by being specific about the benefits and the protection of the client’s interests.

Incorrect: General or vague disclosures are insufficient under Singapore’s regulatory framework as they do not allow the client to properly assess potential conflicts of interest. While transparency is key, MAS does not mandate a specific quantitative dollar-for-dollar valuation of every research report in monthly statements, making that approach unnecessarily prescriptive. Suggesting that disclosure is only required upon request or that these are ‘internal commercial arrangements’ ignores the fiduciary duty and specific disclosure obligations set out in the Code of Conduct.

Takeaway: In Singapore, fund managers must provide clear and specific disclosures regarding soft dollar arrangements to demonstrate that the benefits received directly assist in the investment process and do not prejudice best execution.

Correct: In accordance with MAS Guidelines on Risk Management Practices and the Securities and Futures (Licensing and Conduct of Business) Regulations, fund managers must ensure that asset valuation is performed independently of the investment management function. For unquoted or illiquid assets, the valuation policy must be robust, prioritizing observable market data (Fair Value) where available and ensuring that internal models are validated by independent parties to mitigate conflicts of interest and ensure the NAV is not overstated.

Incorrect: Maintaining a cost-plus model despite evidence of impairment fails to reflect the fair value principle and misleads investors regarding the fund’s true performance. Allowing the portfolio manager to make subjective adjustments violates the requirement for segregation of duties and independence in the valuation process. While external auditors provide oversight, the fund manager is legally responsible for maintaining proper valuation procedures and accurate NAV reporting on an ongoing basis, not just annually.

Takeaway: Effective valuation of unquoted assets requires independence from the investment team and a policy that prioritizes observable market inputs over internal models to ensure fair value compliance under MAS guidelines.