The concept of independence has been considered by many to be an important condition for customer interests. However, experience from other established markets has shown that this has not been borne out. Therefore, it has been considered more important that representatives of financial advisers put customers’ interests at the forefront by giving good objective advice and be guided by the concept of reasonable basis in providing advice. Consequently, the principles and guidelines on the determination of “independent” have been laid down in Regulation 21 of the FAR and the “Guidelines On The Use Of The Term “Independent” By Financial Advisers”.

Under Section 6(1) of the FAA, no person shall act as a financial adviser in Singapore in respect of any financial advisory service, unless he is authorised to do so in respect of that financial advisory service by a financial adviser’s licence, or is an exempt financial adviser.

Under Section 2(1) of the FAA, a “financial adviser” means a person who carries on the business of providing any financial advisory service, but does not include Excluded Financial Advisers as listed in the First Schedule of the FAA.

Section 23(1) of the FAA provides that the following persons shall be exempted from holding a financial adviser’s licence to act as a financial adviser in Singapore in respect of any financial advisory service:
(a) A bank licensed under the Banking Act (Cap. 19);
(c) A company or society licensed under the Insurance Act (Cap. 142);
(d) A holder of a capital markets services licence under the Securities and Futures Act (Cap. 289);
(e) A finance company which has been granted an exemption from Section 25(2) of the Finance Companies Act (Cap. 108) to carry on a business of providing any financial advisory service;

Under the First Schedule of the FAA, the following persons are defined as “excluded financial advisers” and do not fall within the definition of “financial adviser” under the FAA:
(a) (i) Any advocate and solicitor, law corporation,Formal Law Alliance or Joint Law Venture,which is approved or registered under the Legal Profession Act (Cap. 161); or
(ii) any public accountant who is registered under the Accountants Act (Cap. 2), or accounting corporation which is approved under that Act,
(iii) Any public statutory corporation established under any Act in Singapore.
(iv) Any approved trustee under Division 2 of Part XIII of the Securities and Futures Act

Any person who is a proprietor of a newspaper and holder of a permit under the Newspaper and Printing Presses Act (Cap. 206), where:
(i) the newspaper is distributed generally to the public in Singapore;
(ii) any advice given, or analysis or report issued or promulgated, is given,issued or promulgated only through that newspaper;
(iii) that person receives no commission or other consideration, apart from any fee received from subscription to or purchase of the newspaper,for giving the advice, or for issuing or promulgating the analysis or report; and
(iv) the advice is given, or the analysis or report is issued or promulgated, solely as incidental to the conduct of that person’s business as a newspaper proprietor.

Any person who owns operates or provides an information service through an electronic, or a broadcasting or telecommunications medium,
where:
(i) the service is generally available to the public in Singapore;
(ii) any advice given, or analysis or report issued or promulgated, is given, issued or promulgated only through that service;
(iii) that person receives no commission or other consideration, apart from any fee received from subscription to the service, for giving the advice,or for issuing or promulgating the analysis or report; and
(iv) the advice is given, or the analysis or report is issued or promulgated,solely as incidental to that person’s ownership,operation or provision of that service.

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(Cap. 289).
(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.

The range of products under the ambit of the FAA includes only products that are of an investment nature. Section 2(1) of the FAA provides that “investment product” means:
(a) any capital markets product1 as defined in Section 2(1) of the Securities and Futures Act (Cap. 289);
(b) any life policy as defined under the First Schedule to the Insurance Act (Cap. 142); or
(c) any other product as may be prescribed by the MAS.

The following products are excluded from the definition of investment products:
(a) General insurance policies;
(b) Deposit-taking products; and
(c) Loans and mortgages.

In assessing an application for a financial adviser’s licence, the MAS takes into consideration the following factors:
(a) track record, management expertise and financial soundness of the applicant and its parent company or major shareholders;
(b) ability to meet the minimum financial requirements and professional indemnity insurance requirements as prescribed under the FAA
(c) strength of internal compliance systems;
(d) business plans and projections; and
(e) fitness and propriety.

In respect of factor (e) above, the applicant shall satisfy the MAS that:
(i) it is a fit and proper person to be licensed;
(ii) all of its directors and chief executive officer are fit and proper persons to hold the office; and
(iii) all of its substantial shareholders and representatives are fit and proper persons.

With effect from 26 November 2010, all existing financial adviser’s licences would no longer have to be renewed. Instead, once issued the licence would continue to be valid, subject to the payment of an annual licence fee, unless:
i.the licence holder ceases to carry on business in any of the regulated activities to which the licence relates;
ii. the licence lapses (due to the winding-up of the licence holder or other prescribed circumstances); or
iii. the licence is revoked or suspended by the MAS.

Section 9(1) of the 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.

Section 9(4) of the FAA stipulates that the MAS may refuse an application for the grant of a financial adviser’s licence on any of the following grounds without giving the applicant an opportunity to be heard:
(a) the applicant is in the course of being wound up or otherwise dissolved, whether in Singapore or elsewhere;
(b) a receiver, a receiver and manager or an equivalent person has been appointed, whether in Singapore or elsewhere, for or in respect of any property of the applicant;
(c) a prohibition order under Section 59 of the FAA has been made by the MAS, and remains in force, against the applicant; and/or
(d) the applicant has been convicted, whether in Singapore or elsewhere, of an offence involving fraud or dishonesty or the conviction for which involved a finding that it had acted fraudulently or dishonestly.

The FAA also provides for a category of persons to be exempted from holding a financial adviser’s licence. This group of persons called “exempt persons” are persons.

These are persons who conduct regulated activity(ies) or provide financial advisory service(s) in Singapore and are exempted from holding a financial adviser’s licence,with clientele restrictions as follows:
(i) exempt fund managers who serve up to 30 qualified or accredited investors;
(ii) exempt corporate financial advisers and exempt leveraged foreign exchange traders who limit their clientele to accredited investors; and/or
(iii) exempt financial advisers who serve up to 30 accredited investors on any occasion.

As required under the Second Schedule to the SFR and the FAR, an exempt person must maintain its operations in Singapore, and have adequate resources, including compliance arrangements commensurate with the size and scale of its business activities in Singapore. To demonstrate that it has meaningful operations in Singapore and is able to satisfy the competence and capability requirement, an exempt person is expected to operate from an office premise in Singapore and is strongly encouraged to employ a minimum of two professionals, each with at least five years of relevant working experience in reputable jurisdictions.

An “accredited investor” as stated in Section 4A(1)(a) of the SFA read with Regulation 2 of the SFR (Prescribed Specific Classes of
Investors) 2005 and Regulation 2 of the FAR refers to:
(a) an individual:(i) whose net personal assets exceed S$2 million in value (or its equivalent in a foreign currency)
(b) a corporation with net assets exceeding S$10 million in value (or its equivalent in a foreign currency)
(c) the trustee of a trust of which all property and rights of any kind whatsoever held on trust for the beneficiaries of the trust
exceed S$10 million in value.
(d) an entity (other than a corporation) with net assets exceeding S$10 million in value (or its equivalent in a foreign currency);

A “qualified investor”, as stated in paragraph (5)(3) of the Second Schedule to the SFR (Licensing and Conduct of Business) refers to:
(a) an accredited investor, other than:
(i) one who is a participant in a collective investment scheme referred to in subparagraph (b) below;
(ii) one who is a holder of a unit in a closed-end fund referred to in sub-paragraph (c) below;
(iv) a corporation or an entity which is a collective investment scheme or a closed-end fund the units of which are, after 28 May 2008, the subject of an offer or invitation made to any person who is not an accredited investor;

Regulation 21(1) of the FAR provides that no licensed financial adviser or exempt financial adviser shall use the word “independent” or any of its derivatives in any language, or any other word or expression in any language that is of like import to “independent”:
(a) in the name, description or title under which it carries on business in Singapore;
(b) to promote or advertise its services; or
(c) in respect of its provision of any financial advisory service.

In respect of its provision of any financial advisory service, unless the financial adviser:
(i) does not receive any commission or other benefit from a product provider which may create product bias and does not pay any commission to or confer other benefit upon its representatives which may create product bias;
(ii) operates free from any direct or indirect restriction relating to any investment product which is recommended; and
(iii) operates without any conflict of interest created by any connection to or association with any product provider.

The RNF Regime is applicable to individuals carrying out financial advisory activities as representatives of:
(a) licensed financial advisers; and
(b) financial advisers which are exempted by the FAA from having to apply for a licence (this category includes banks, merchant banks, insurance companies and finance companies).

Under Section 63A(1) of the FAA, the MAS shall keep in such form as it thinks fit records of the following information of each appointed representative and provisional representative:
(a) his name;
(b) the name of his current principal and every past principal (if any);
(c) the current and past types of financial advisory service provided by him, and the date of commencement and cessation (if any) of such service;

Appointed Representatives
They are persons who meet in full the entry and examination requirements prescribed by the MAS. These requirements are prescribed in the “Notice on Minimum Entry and Examination Requirements for Representatives of Licensed Financial Advisers and Exempt Financial Advisers

Provisional Representatives (Refer Also To Section 12 Below)
They are persons who meet the entry requirements, but who have not yet passed the relevant examinations. As a policy, they are given a grace period of three months to pass the requisite examinations. This category of representatives was introduced to accommodate the relocation of experienced individuals currently licensed in an overseas jurisdiction.

Individuals must fulfil the following requirements before they can be an appointed representative:
(a) be at least 21 years old;
(b) satisfy the minimum academic qualification and examination requirements as prescribed in the Notice on Minimum Entry and Examination Requirements for Representatives of Licensed Financial Advisers and Exempt Financial Advisers.
(c) satisfy the fit and proper criteria set out in the Guidelines on Fit and Proper Criteria [Guideline No: FSG-G01] issued by the MAS; and
(d) any other criteria stipulated by the MAS.

Individuals must fulfil the following requirements before they can be an appointed representative be at least 21 years old;

Section 23B(1) of the FAA provides that no person shall act as a representative in respect of any type of financial advisory service or hold himself out as doing so, unless he is:
(a) an appointed or provisional representative; or
(b) a representative of an exempt financial adviser, in so far as the type, scope and manner in which the financial advisory service provided are the same as the exempt financial adviser.

Individuals must fulfil the following requirements before they can be an appointed representative:
(a) be at least 21 years old;
(b) satisfy the minimum academic qualification and examination requirements as prescribed in the Notice on Minimum Entry and Examination Requirements for Representatives of Licensed Financial Advisers and Exempt Financial Advisers.