PROHIBITION ORDERS
The objective of a prohibition order is to keep unfit persons from engaging in any or all of the financial advisory services regulated under the FAA, or taking part in the management of, or acting as a director or substantial shareholder of a licensed or exempt financial adviser. An order will be issued only in cases where very serious offences have been committed.

FAA provides that the MAS has the power to issue a prohibition order to prohibit a person, whether permanently or for a specified period, from providing any financial advisory service, or taking part in the management of, acting as a director of, or becoming a substantial shareholder of a licensed financial adviser or exempt financial adviser.

FAA provides that the MAS may, from time to time and in such form or manner as it considers appropriate, publish information relating to all or any of the following:
(a) the lapsing, revocation or suspension of the licence of any person;
(b) the removal of any officer;
(c) the making of any prohibition order against any person;
(d) the acceptance by any person of an offer to compound an offence under Section 89 of the FAA;

Under Section 83(5) of the FAA, an “officer”, in relation to a body corporate, means a director, member of the committee of management, chief executive, manager, secretary, or other similar officer of the body, and includes a person purporting to act in any such capacity.

An “officer”, in relation to an unincorporated association (other than a partnership), means the president, secretary and members of the committee of the association or a person holding a position analogous to that of president, secretary, or members of a committee,and includes a person purporting to act in any such capacity.

Section 85(1) of the FAA stipulates that any officer, auditor, employee, or agent of a licensed financial adviser or an exempt financial adviser, who wilfully makes a false entry, or omits, alters, extracts, conceals or destroys an entry in any book, report, slip, document or statement of the business, affairs, transactions, conditions or assets of the financial adviser shall be guilty of an offence and be liable on conviction to a fine not exceeding $100,000, or to imprisonment for a term not more than two years or to both.

The following are the in-force MAS Notices relating to the FAA:
(a) Notice On Recommendations On Investment Products [Notice No: FAAN16];
(b) Notice On Appointment And Use Of Introducers By Financial Advisers [Notice No: FAA-N02];
(c) Notice On Information To Clients And Product Information Disclosure [Notice No: FAA-N03];
(d) Notice To Financial Advisers On Prevention Of Money Laundering And Countering The Financing Of Terrorism [Notice No: FAA-N06];

Under the new measures, the intermediary must conduct a Customer Knowledge Assessment to assess whether a customer has the relevant knowledge or experience to understand the risks and features of an unlisted SIP. In the case of listed SIPs, the intermediary must conduct a Customer Account Review to ascertain whether the customer has the relevant knowledge or experience to understand the risks and features of derivatives, before approving the customer’s account to trade such products. The intermediary will inform the customer if he is assessed not to possess the relevant knowledge or experience.

Notice No: FAA-N16 shall apply to the following classes of persons:
(a) licensed financial advisers;
(b) exempt financial advisers;
(c) representatives of financial advisers;
(d) persons who are exempt under Regulation 29 of the Financial Advisers Regulations [“FAR”];

Notice No: FAA-N16 does not apply to the following circumstances:
(a) any recommendation made with respect to simple life policies sold as an ancillary product to loans with a simple payment basis for the insurance cover.
(b) to any transaction where:
(i) only factual information is provided with respect to any Excluded Investment Product,
(ii) prior to such transaction no advice or recommendation is made by the licensed financial adviser, exempt financial adviser or their representatives to the client.

A financial adviser that is involved in making recommendations on investment products to clients shall comply with the requirements set out in the “Notice On Recommendations On Investment Products [Notice No: FAA-N16]” in relation to the following aspects:
(1) know your client;
(2) needs analysis; and
(3) documentation and record keeping.

In order for a financial adviser to make a recommendation that takes into account a client’s investment objectives, financial situation and particular needs, the financial adviser shall take reasonable steps to collect and document the following information from the client:
(i) the financial objectives of the client;
(ii) the risk tolerance of the client;
(iii) the employment status of the client;
(iv) the financial situation of the client, including assets, liabilities, cash flow and income;

For the purpose of the Customer Knowledge Assessment, a financial adviser shall take into consideration information on a client’s educational qualifications, investment experience and work experience. Where a client does not provide information on his educational qualifications, investment experience or work experience, the financial adviser shall deem the client not to possess knowledge or experience in the unlisted Specified Investment Product concerned.

Where the client does not wish to receive advice concerning the unlisted Specified Investment Product from the financial adviser,the financial adviser shall document the decision of the client and highlight to the client in writing that it is the client’s responsibility to ensure the suitability of the unlisted Specified Investment Product selected. The financial adviser shall also warn the client in writing that the client has chosen not to receive advice and will therefore not be able to rely on Section 27 of the Act to file a civil claim in the event that he alleges that he has suffered a loss, and confirm in writing if the client wishes to proceed without advice.

Where a client is assessed to have the knowledge or experience to transact in an unlisted Specified Investment Product, the financial adviser may allow the client to transact in such unlisted Specified Investment Product for a period of one year from the date of the Customer Knowledge Assessment. After a year has elapsed, the financial adviser shall conduct a new Customer Knowledge Assessment on the client, before it provides any recommendation on any unlisted Specified Investment Product to the client.

Section 27 of the Act requires a financial adviser to analyse the information provided by the client and identify the product that is suitable for the client based on the information obtained from the client.

Where a financial adviser is:
(i) making a recommendation on life policies;
(ii) arranging contracts of insurance in respect of life policies; or
(iii) carrying out both of the above activities,
it is expected to comply with the LIA Minimum Standard for Life Insurance Advisory Process issued by the Life Insurance Association of Singapore.

The financial adviser shall make reasonable efforts to document the basis for the recommendation, and such documentation shall include the following:
(i) the client’s statement of his investment objectives, financial situation and particular needs;
(ii) the financial adviser’s reasonable basis for making the recommendation to the client having regard to the information obtained from the client; and
(iii) the financial adviser’s assessment of the disadvantages of the investment product based on circumstances of the client.

A financial adviser shall furnish to its client a document containing the following when making a recommendation in respect of an investment product to the client:
(i) a summary of the information gathered by the financial adviser
(ii) any recommendation made to the client by the financial adviser and the basis for the recommendation, and, where applicable, also furnish to its client a statement that the client does not want to provide any information requested by the financial adviser, or accept the recommendation of the financial adviser and has chosen to transact in another investment product which is not recommended by the financial adviser.

In the case of a collective investment scheme or a debenture, a copy of the prospectus or profile statement and Product Highlights Sheet (if applicable) issued in respect of the collective investment scheme or the debenture, and/or any other offer document as may be prescribed by the relevant laws, including a supplementary prospectus or supplementary profile statement issued in respect of the collective investment scheme or the debenture, and a replacement prospectus or replacement profile statement issued in respect of the collective investment scheme or the debenture.

In considering whether a switch is detrimental, the MAS may have regard to a number of factors, including:
(i) whether the client suffers any penalty for terminating the original product;
(ii) whether the client will incur any transaction cost without gaining any real benefit from such a switch;
(iii) whether the replacement product confers a lower level of benefit at a higher cost or same cost to the client, or the same level of benefit at a higher cost; and
(iv) whether the replacement product is less suitable for the client.

Notice No: FAA-N03 sets out the general principles that apply to all disclosures by a financial adviser to its client. It also sets out specific requirements as to the form and manner of disclosure that financial advisers
have to comply with in relation to Sections 25 and 26 of the FAA, as well as to the following matters:
(a) general information about the financial adviser and status of a representative;
(b) remuneration of the financial adviser;
(c) conflict of interest;
(d) designated investment products;

The general standards which a financial adviser is expected to meet in all product information disclosures and information given to clients are as follows:
(a) Clear
(b) Adequate
(c) Not False Or Misleading

Not False Or Misleading
(i) Information disclosed to clients should not be ambiguous in language or presentation.
(ii) Information relating to investment products should be disclosed in an objective and unbiased manner.
(iii) Where an opinion is expressed, there should be a reasonable basis for expressing the opinion, and it should be unambiguously stated that it is a statement of opinion.
(iv) Documents to be given to clients should be kept up-to-date and reviewed at least annually.

A financial adviser shall disclose the following, in writing, to a client:
(a) its business name, business address and telephone number;
(b) the type(s) of financial advisory service that it is authorised to provide under the FAA;
(c) the type(s) of investment product in respect of which it is authorised to provide financial advisory service;
(d) any other type(s) of activity carried out by the financial adviser which is not regulated by the MAS, if any

A representative shall disclose the following, in writing, to the client:
(a) his name;
(b) the financial adviser(s) for which he acts;
(c) the type(s) of financial advisory service that he is authorised to provide under the FAA; and
(d) the type(s) of investment products in respect of which he is authorised to provide financial advisory service.

When making a recommendation on any designated investment product to a client, a financial adviser shall disclose the following information to the client in a form and manner that is clear, adequate and not false or misleading.
i. Nature And Objective Of The Product.
ii. Details Of The Product Provider.
iii. Contractual Rights
iv. Client Profile.

Nature And Objective Of The Product
The financial adviser shall disclose and explain to the client the nature and objective of the product, including:
(a) whether the product is a life policy or units in a collective investment scheme;
(b) whether the product is meant for protection, savings or investment; and
(c) the investment strategy of the product.

Details Of The Product Provider
The financial adviser shall disclose to the client details relating to
the:
(a) product provider;
(b) relationship between the product provider and the financial adviser; and
(c) business address of the product provider

Client Profile
The financial adviser shall disclose and explain to the client the intended client profile of the product, including the:
(a) product’s intended investment horizon;
(b) ease of converting the investment in the product to cash; and
(c) expected level of risk tolerance of the client.