What are the principal objectives of Monetary Authority of Singapore?
Its principal objectives are:
(a) to act as the central bank of Singapore, including the conduct of monetary policy, the issuance of currency, the oversight of payment systems, and serving as the banker to and financial agent of the Government;
(b) to conduct integrated supervision of financial services and financial stability surveillance;
(c) to manage the official foreign reserves of Singapore; and
(d) to develop Singapore as an international financial centre.
What is the purpose of practice notes?
Practice Notes are meant to guide specified institutions or persons on administrative procedures relating to, such as licensing, reporting and compliance matters. They do not have any legal effect, unless a procedure stated in the practice note is also required by an Act or regulation.
What is the vision and mission Life Insurance Association of Singapore?
The vision of LIA member companies is to provide individuals with peace of mind and to promote a society where every person is prepared for life’s changing cycles and for those situations unforeseen. They are committed to being a progressive life insurance industry by collectively enhancing consumer understanding, promoting industry best practices, and through the association fostering a spirit of collaboration and mutual respect with government and business leaders.
What are the types of financial advisory services regulated under the FAA?”
The types of financial advisory services regulated under the FAA are as
follows:
(a) Advising others, either directly or through publications or writings, and whether in electronic, print or other form, concerning any investment product, other than:
(i) in the manner set out in point (b) below; or
(ii) advising on corporate finance within the
meaning of the Securities & Futures Act
(b) Advising others by issuing or promulgating research analyses or research reports, whether in electronic, print or other form, concerning any investment product.
(c) Marketing of any collective investment scheme; or
(d) Arranging of any contract of insurance in respect of life policies, other
than a contract of reinsurance.
What are the grounds for refusal of an application for the grant of a financial adviser’s license?
FAA details the grounds under which the MAS may refuse an application for the grant of a financial adviser’s licence. Among these grounds for refusal are:
(a) if the applicant is not a corporation;
(b) if the applicant is unable to meet or continue to meet such minimum financial requirements or such other requirements as the MAS may prescribe, either generally or specifically; and/or
c) if the applicant does not have in force a Professional Indemnity Insurance
policy, the cover of which is consistent with such limit and deductible requirements as may be prescribed, or any other measure as may be
approved by the MAS in lieu of a Professional Indemnity Insurance policy.
What are the principles on the type of statements that a financial adviser can make?
The principles on the type of statements that a licensed financial adviser can make
are highlighted in Section 26 of the FAA, which states that:
(a) No licensed financial adviser shall, with intent to deceive, make a false or
misleading statement as to:
- any amount that would be payable in respect of a proposed contract in
respect of any investment product; or - the effect of any provision of a contract or a proposed contract in respect of any investment product; or
- the connection with the provision of any financial advisory service;
(b) Making a misleading statement includes a reference to omitting to disclose any
matter that is material to the statement; and
(c) Any licensed financial adviser who contravenes Section 26 of the FAA shall
notwithstanding that a contract does not come into being, be guilty of an
offence and shall be liable on conviction to a fine not exceeding S$50,000, or
to imprisonment for a term not exceeding 12 months or to both.
(a) a licensed financial adviser, in making a recommendation to a person, does not have a reasonable basis for making the recommendation;
(b) the person, in reliance on the recommendation, does a particular act, or
refrains from doing a particular act;
(c) it is reasonable, having regard to the recommendation and all other relevant circumstances, for the person to do that act, or to refrain from doing that act, as the case may be, in reliance on the recommendation; and
(d) the person suffers loss or damage as a result of doing that act, or refraining
from doing that act, as the case may be,
then, without prejudice to any other remedy available to that person, the licensed financial adviser is liable to pay damages to that person in respect of that loss or damage.
What is meant by excluded investment products?
“Excluded Investment Product” means:
(a) any stocks or shares issued or proposed to be issued by a corporation or body unincorporate, other than where such corporation or body unincorporate is a collective investment scheme;
The financial adviser shall enter into a written agreement with the introducer. It shall ensure that the agreement so entered into spells out clearly the scope of introducing activities to be carried out by the introducer. It shall also monitor the conduct of the introducer to satisfy itself that the introducer operates within the specified terms and conditions of the agreement.
What are the prohibitions in respect of representations made by exempt persons?
Exempt persons are exempted from the requirement to hold a FA licence in acting, whether directly or indirectly, as a financial adviser in giving advice in Singapore, either directly or through publications or writings, or by issuing or promulgating research analyses or research reports, concerning any investment product (other than life policies), to not more than 30 accredited investors on any occasion.
The principal shall ensure that any individual proposed to be a provisional representative is able to satisfy the following minimum entry requirements:
(a) he is at least 21 years old;
(b) he is in the process of relocating or has already relocated to Singapore;
(c) he possesses at least three years of working experience relevant to the type of financial advisory service that he will provide as a provisional representative; and
(d) he possesses at least a Bachelor’s degree or equivalent, or a professional qualification
Every appointed representative of a financial adviser must:
(a) undergo structured CPD training8 which is relevant to the type of financial advisory services that he provides; and
(b) obtain and retain relevant supporting evidence that he has completed the minimum hours of structured CPD training
What is included in the investigations under the report of the misconduct of the representative?
For the purpose of complying with the requirements, a financial adviser is expected to conduct internal investigations and keep proper records of the following:
(a) a summary of the facts of the case;
(b) interviews with relevant parties, such as the representative, his supervisor and the client;
(c) documentary evidence of the alleged misconduct;
(d) the investigator’s assessment and recommendation; and
(e) disciplinary action taken against the representative, if any.
Where an investigation has been carried out by a financial adviser in respect of any misconduct committed by any of its representatives, the financial adviser shall, at the request of the MAS, furnish the records as set out above to the MAS.
What should be disclosed by the relevant person to the client when selling an unlisted debenture?
When selling an unlisted debenture, the relevant person shall disclose and explain to the client:
(a) the time frame for the client to reconsider his purchase of an unlisted debenture;
(b) the terms and procedures for exercising his right to cancel his purchase of the unlisted debenture;
(c) that the risk of any fall in value of the unlisted debenture during the cancellation period would have to be borne by the client.
What appropriate steps would be taken by a financial adviser for risk assessment?”
(a) documenting the financial adviser’s risk assessments;
(b) considering all the relevant risk factors before determining the level of overall risk and the appropriate type and extent of mitigation to be applied;
(c) keeping the financial adviser’s risk assessments up-to-date; and
(d) having appropriate mechanisms to provide its risk assessment information to the Authority.
A financial adviser shall:
(a) develop and implement policies, procedures and controls, which are approved by senior management, to enable the financial adviser to effectively manage and mitigate the risks that have been identified by the financial adviser or notified to it by the Authority or other relevant authorities in Singapore;
(b) monitor the implementation of those policies, procedures and controls, and enhance them if necessary;
(c) perform enhanced measures where higher risks are identified, to effectively manage and mitigate those higher risks; and
(d) ensure that the performance of measures or enhanced measures to effectively manage and mitigate the identified risks, address the risk assessment and guidance from the Authority or other relevant authorities in Singapore.
A financial adviser shall perform the measures as required when:
(a) the financial adviser establishes business relations with any customer;
(b) there is a suspicion of money laundering or terrorism financing, notwithstanding that the financial adviser would not otherwise be required to perform the measures as required
(c) the financial adviser has doubts about the veracity or adequacy of any information previously obtained.
How the identity of the customer would be verified by the financial adviser?
A financial adviser shall verify the identity of the customer, using reliable, independent source data, documents or information. Where the customer is a legal person or legal arrangement, a financial adviser shall verify the legal form, proof of existence, constitution and powers that regulate and bind the customer, using reliable, independent source data, documents or information.
What are the CDD measures for non face to face business relations?
A financial adviser shall develop policies and procedures to address any specific risks associated with non-face-to-face business relations with a customer or transactions for a customer.
A financial adviser shall implement the policies and procedures referred to in the paragraph above to when establishing business relations with a customer and when conducting ongoing due diligence.
Where there is no face-to-face contact, the financial adviser shall perform CDD measures that are at least as stringent as those that would be required to be performed if there was face-to-face contact.
When a financial adviser shall not perform simplified CDD measures?
A financial adviser shall not perform simplified CDD measures:
(a) where a customer or any beneficial owner of the customer is from or in a country or jurisdiction in relation to which the FATF has called for countermeasures;
(b) where a customer or any beneficial owner of the customer is from or in a country or jurisdiction known to have inadequate AML/CFT measures, as determined by the financial adviser for itself or notified to financial advisers generally by the Authority, or other foreign regulatory authorities; or (c) where the financial adviser suspects that money laundering or terrorism financing is involved.
Compliance
A financial adviser shall develop appropriate compliance management arrangements, including at least, the appointment of an AML/CFT compliance officer at the management level.
A financial adviser shall ensure that the AML/CFT compliance officer, as well as any other persons appointed to assist him, is suitably qualified and, has adequate resources and timely access to all customer records and other relevant information which he requires to discharge his functions.
Audit
A financial adviser shall maintain an audit function that is adequately resourced and independent, and that is able to regularly assess the effectiveness of the financial adviser’s internal policies, procedures and controls, and its compliance with regulatory requirements.
A financial adviser shall take all appropriate steps to ensure that its employees, officers and representatives (whether in Singapore or elsewhere) are regularly and appropriately trained on:
(a) AML/CFT laws and regulations, and in particular, CDD measures, detecting and reporting of suspicious transactions;
(b) prevailing techniques, methods and trends in money laundering and terrorism financing; and
(c) the financial adviser’s internal policies, procedures and controls on AML/CFT and the roles and responsibilities of employees, officers and representatives in combating money laundering and terrorism financing.
What are the two methods of the audit of the ILP sub-funds?
The insurer shall appoint an external auditor to carry out an audit annually by one of the following methods:
(a) audit on the financial statements of each ILP sub-fund (“audit by way of the first method”); or
(b) audit on the internal control and processes of the ILP sub-funds (“audit by way of the second method”).
Which payments cannot be made from the ILP sub funds by the insurer?
The insurer shall not pay or cause or permit to be paid, out of the assets of the ILP sub-fund:
(a) any marketing or promotion expenses such as, expenses for advertisements in the media, mailers, fact sheets;
(b) any fees from ILP sub-fund that have not been provided for in the product summary and policy contract; and
(c) any payment which is unfair to, or materially prejudices the interests of, any policy owner or prospective investor.
What are the disclosure requirements of the performance fees payable by the ILP sub fund?
(a) Where performance fees are payable by the ILP subfund, the product summary should disclose:
(i) that a performance fee is payable and to whom it is payable;
(ii) if applicable, that a performance fee can be levied even if the return of the ILP sub-fund is negative;
(iii) the maximum amount or percentage of the ILP sub-fund‘s NAV that the performance fee might represent in an annual accounting period; and
(iv) whether the ILP sub-fund:
- achieves equalisation of performance fees; or
- where it does not achieve equalisation of performance fees, to state the fact and how the absence of equalisation may affect the amount of performance fees borne by the policy owner; and provide illustrations, such as numerical examples, of how the performance fee is calculated.
What are the prohibited activities for the ILP sub fund?
An ILP sub-fund should not engage in:
a. direct lending of monies;
b. the granting of guarantees;
c. underwriting; or
d. short selling except where this arises from financial derivatives
How the name of ILP sub fund is assessed?
In assessing whether a name is undesirable or misleading, the MAS will consider factors including whether the name:
(a) is substantially similar to the name of another ILP sub-fund;
(b) implies that the ILP sub-fund has merits which are not, or might not be, justified;
(c) implies that the manager of the ILP sub-fund has particular qualities, which may not be justified;
(d) is inconsistent with the ILP sub-fund’s investment objective or approach;
(e) implies that the ILP sub-fund is not an ILP (for example, describing the ILP sub-fund as a “plan” or “account”); and
(f) might mislead prospective policy owners into thinking that persons other than the manager are responsible for the ILP sub-fund.
What is the criteria on the fit and proper test of the relevant persons regulated by the MAS?
The criteria for considering whether a relevant person is fit and proper include, but are not limited to the following:
(a) honesty, integrity and reputation;
(b) competence and capability; and
(c) financial soundness.
What are the areas in the due diligence check conducted by the FIs?
The MAS expects FIs to conduct rigorous and independent checks on the fitness and propriety of their representatives. The due diligence checks to be conducted by the FIs include the following areas:
(a) Probity checks on representative’s identity;
(b) Probity checks on representative’s past records;
(c) Probity checks on representative’s financial status;
(d) Not to furnish false or misleading documents or information; and
(e) Periodic declaration and checks.
What is meant by the objectivity of the financial adviser?
A financial adviser should exercise reasonable care and judgement to achieve and maintain objectivity in conducting its business.
A financial adviser should avoid situations that could impair its ability to make objective recommendations.