CMFAS Module 1B Key Notes
What are the regulatory requirements for the grant of capital markets services licence?
CMS licence holders are licensed and operated under the SFA.
It is necessary to confirm that only financially sound and reputable corporations that are managed and directed by competent and outstanding officers are granted a CMS licence.
Additionally, a corporation needs to satisfy the Base Capital Requirements (BCR) for its proposed regulated activities.
Ability to meet the minimum financial requirements prescribed under the SFA.
There are many other general criterias to ensure the success of getting a CMS license.
What do you understand by the Base Capital Requirements (BCR) for proposed regulated activities?
The applicant should be able to satisfy the base capital requirements [“BCR”] for its proposed regulated activities.
For instance, a clearing member Dealing in securities is required to have 5 million S$ as a BCR.
Similarly a non clearing member dealing in securities have to provide 1 million S$ as BCR.
Are there any conditions for CMS license holders to get penalized? If yes, then Elaborate.
CMS licence holders are heavy penalized if they continue to carry on business after its license had lapsed or been suspended or revoked.
Fines of up to $150,000 will be imposed upon conviction.
There is a further fine of not exceeding $15,000 will be imposed on regular basis if the offence continues after conviction.
This is to make sure that customers are not misled into dealing with fake CMS licence holders.
Explain the role of Sponsors for Catalist listings:
The company that aims a listing on Catalist should must have a sponsor approved by SGX.
Sponsors are responsible for the admission and proceeding with commitments of companies listed on Catalist.
The sponsor should have an in hand experience in
corporate finance and compliance advisory work.
Sponsors take direct monitoring responsibility of the company listed on Catalist but SGX retains the
power to discipline them for violations of rules and regulations.
What is the significance of Offer Document for Catalist?
It is important for the company to lodge an Offer Document on SGX Catalodge website before registering with Catalist.
The Offer Document is to be lodged with SGX, operating as agent of MAS.
The Offer Document has to comply with the same disclosure requirements as a prospectus prepared according to the securities and futures regulations.
Explain the one representative-one-principle-rule. Where is this rule applicable?
A representative can act for only one principal unless it acquires the approval of MAS to act for more than one principal.
This rule is applicable for processing CMS license application.
There are basically two objectives of one-representative-one-principle-rule:
- To get confidence of the investors about the status of representatives while also addressing their complaints
- To make sure that the principals closely monitor and supervise their representatives at all times.
What are the minimum entry and examination requirements for approved representatives?
1. Be at least 21 years old.
2. Have a minimum education level equivalent to:
At least 4 GCE ―O‖ Level credit passes; or
At least 2 GCE ―O‖ Level credit passes if he has 3 continuous years of relevant working experience
over the last 5 years.
3. Have satisfied the CMFAS examination requirements for those regulated activities he will deal in.
4. Be a fit and proper person, which includes:
Possessing qualities of honesty, integrity and sound reputation.
Explain the circumstances for Cessation of Status of Representatives?
- The principal notifies MAS of such cessation.
- The appointed representative did not act as a representative for a continuous period of one month OR the principal has not notified MAS of his cessation as a representative.
- MAS has revoked the status of the appointed representative.
The company is required to apply to MAS to add regulated activities to its CMS license.
The application should be made in prescribed form, which is Form 5 pursuant to Securities and Futures.
Upon approval, MAS will issue a new elicence to reflect the additional regulated activities.
Product financing is a regulated activity under the SFA.
Any company carrying out business in product financing is required to hold a CMS licence in respect of product financing.
A company which holds a CMS licence in product financing is exempted from the requirement to hold a Moneylender’s licence.
What types of licences are granted under the SFA?
Under the SFA, a person who wishes to carry on a business in any regulated activity is required to hold a CMS licence for that regulated activity.
A CMS licence is granted only to a corporation.
An individual who conducts that regulated activity for the holder of a CMS licence is required to be an appointed, provisional or temporary representative of the CMS licence holder for that regulated activity.
Is there a need for a holder of a CMS licence to renew its licence?
There is no need for a holder of a CMS license to renew its license.
The license is valid until –
(i) its holder ceases to carry on business in every type of the regulated activities to which the license relates
(ii) its license is revoked by MAS; or
(iii) its license lapses in accordance with section 95 of the SFA
- MAS’ prior approval is required for:
the appointment of a Chief Executive Officer. - The appointment of a director of a CMS licence holder which is incorporated in Singapore.
- The change in nature of appointment from a non-executive director
to an executive director o
The Public Register on MAS’ website lists the status of a representative of a CMS licence holder or exempt financial institution.
The public can access such information on their
representative from the Public Register.
Anyone can search by keying in the representative’s name or representative number.
False Trading means:
Creating or having the bad intention to create an appearance of active trading on any securities
Buying and selling any securities that do not involve a change in beneficial ownership of those securities to cause fluctuations in the market price of the securities in the market.
Creating transactions that are intended to give a false and misleading appearance with respect to the market
price of any securities.
What is considered as a market manipulation? Give examples.
Market manipulation is done in a variety of ways.
It involves intentional interference with the free forces of supply and
demand to deceive or defraud investors.
Examples:
Bear raiding – attempting to push down the price of a stock by heavy selling or short selling.
Wash trading – selling and re-purchasing the same security or substantially the same security to generate activity and increase the price.
Is there a need for a holder of a CMS license to renew its license?
There is no need for a holder of a CMS license to renew its license.
The license is valid until –
(i) its holder ceases to carry on business in every type of the regulated
activities to which the license relates (which the license holder
would need to notify MAS by submitting Form 7 within 14 days
of such cessation);
(ii) its license is revoked by MAS; or
(iii) its license lapses in accordance with section 95 of the SFA.
Yes. An appointed representative, provisional representative or temporary representative is required to inform his principal company.
They need to inform within 7 days after the
date of the change of the particulars.
How will a CMS licence holder accomodate money received on Account of Customer?
The money should be deposited in a trust account or in another account directed by the customer no later than the next business day 60 after receiving the money.
Similarly, the customer’s money must not be mixed up with other funds.
It should also not be used as margin or guarantee for, or to secure any transaction ofany person other than the customer.
The CMS license holder may collect monies from different customers into the same trust account.
But in this case, he must be responsible for maintaining separate account for the monies and assets of each customer.
Highlight the duties of CMS License Holders upon Receipt of Customers’ Assets.
The CMS licence holder must deposit a customer’s assets in a custody account held on trust for the customer.
He must ensure that the customer’s assets are not mixed with any other assets.
They should make arrangements for a custodian to maintain the custody account.
The CMS licence holder shall deposit the customer’s assets in the custody account immediately following the day on which they receive the assets or is notified of the receipt of such assets.
Can a CMS License holder withdraw money from a customers’ trust account?
No, CMS license holder cannot withdraw money from a customers account.
Here are the few exceptions. He/She can only withdraw money in following circumstances:
- Making a payment to another person entitled thereto.
- Making a payment to meet obligation of a customer whose money is deposited that account.
- Making a payment to another person or account with written instruction of the customer. etc
What do you understand by a Wash sale transaction?
A wash sale is a transaction effected through the market which involves no change in the beneficial ownership of any securities.
A wash sale occurs when a person places 5 orders to buy a certain number of shares of Company D through a broker.
He then places another number of orders to sell the same number of shares in Company D through another broker.
Effectively the same number of shares in a company is bought and sold through different brokers but by the same person with no change of ownership.
Inside or “insider” information is information that is not generally available, and if known would or would be likely to have a material effect on the price of value of securities.
The reason insider trading is illegal is because it gives the insider an unfair advantage in the market.
It is illegal when the material information is still non-public, and this sort of insider trading comes with harsh consequences.
What details are needed to include in a contract note?
A contract note is of significant importance for the purchase or sale of securities or futures contracts.
The contract note must contain information specified in Regulation 42 of the SFR (LCB). Such details include:
- The name under which the CMS licence holder carries on its business of dealing in securities, and the address of the principal place of business;
- A statement informing the customer that the CMS licence holder is dealing in securities as a principal if the CMS licence holder is doing so;
- The name and address of the recipient of the contract note;
- The date of the transaction;
- The quantity and type of the securities that was transacted;
- The price per unit of the transaction;
- The total amount of money involved in settling the transaction;
- Any amounts that are to be added or deducted from the transaction;
- The rate and amount of commission (if any) charged; and
- The amount of all stamp duties or other duties or taxes payable in connection with the transaction.
What does securities hawking mean?
Securities hawking means to make an offer of securities in an unsolicited meeting.
Representatives are restricted to offer or invite any subscription or purchase of securities, during any unsolicited meetings with clients or other investors.
What is a CPF Investment Account?
A CPF Investment account is an account opened with a CPFIS agent bank.
This helps to facilitate the settlement of a member’s purchases & sales of investment.
It also aids in keeping track of his/her investment holdings and transactions in his/her CPF Investment Account.
What is the procedure of appointment of CPFIS agent banks?
CPFIS agent banks are appointed by the CPF Board.
- Moreover, the role of three local banks is also important i.e. Oversea-Chinese Banking Corporation Ltd (“OCBC”)
- United Overseas Bank Ltd (“UOB”)
- DBS Bank Ltd (“DBS”).
The agent banks are appointed by the CPF Board for their extensive branch network and facilities.
How many steps are there in the process of money laundering?
There are generally three steps in the process of money laundering:
- The Placement stage
- The Layering stage
- The Integration stage
The Placement stage refers to the physical disposal of benefits for criminal conduct.
The Layering stage refers to the separation of benefits of criminal conduct from their sources by creating layers of financial transactions designed to disguise the audit trail.
The Integration stage refers to the provision of apparent legitimacy to the benefits of criminal conduct.