M5 Chapter Review

CMFAS Module 5 Strictly for Internal Use Only
CMFAS MODULE 5
(4th Edition)
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(Reprinted in July 2013)
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Chapter Review
Chapters 1 to 12
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Prepared by Julia Sim. Based on 4th Edition, Reprint in July 2013. 1
Chapter 1 – The Regulatory Bodies and Associations
1. Monetary Authority of Singapore
1. Mission: To sustain non inflationary economic growth and promote a sound and progressive
financial services sector.
2. Objectives:
 To act as a central bank of Singapore, including the conduct of monetary policy,

issuance of currency, oversight of payment systems, and serving as a banker to the
financial agent of the Government;
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 To conduct integrated supervision of financial services and financial stability
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surveillance;
 To manage the official foreign reserves of Singapore;
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 To develop Singapore as an international financial centre.
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3. MAS is responsible for the following:
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Have the force of law, contravention

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Not having the force of law.

is an offence.
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Acts Codes
Contains statutory laws under the purview of Sets out a system of rules governing the
MAS conduct of certain specified activities. They
are non statutory but may have certain
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consequences if fail to abide.

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Subsidiary Legislations Practice Notes

Spells out greater details the requirements Guidelines on administrative procedure, such
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that financial institutions or specified persons as licensing, reporting and compliance

have to adhere to. matters.
Directions Circulars
Ensure compliance by explaining specific Documents sent out for information or
instruction in details to financial institutions or published on MAS website.
other specified persons.
Guidelines
Set out principles or “best practice standards”.
Encouraged to observe.
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4. 6 Tenets of Effective Regulation
Tenet 1 “Outcome Focused “ To uphold sound regulation calls upon MAS to give
considerations to all the other 6 tenets so that good
regulatory outcomes can be achieved.
Tenet 2 “ Shared Responsibility” Regulatory outcomes can be more effective with

MAS, financial institutions, investors and consumers
each taking specific responsibilities.
Tenet 3 “Risk Appropriate” Regulation should set standard requirements of broad

applications to provide for the exercise of supervisory
judgment to set higher standards or permit
exemptions when merited.
Tenet 4 Regulation should be updated as market practice
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“Responsive to change
and cycles” changes. Pre – emptive build up in financial institution
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to weather a downturn.
Tenet 5 “Impact Sensitive ” Ensure costs and impact of regulation are not
disproportionate to the benefits so that unintended
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and unnecessary disruption to the market practice is
minimized.
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Tenet 6 “Clear and Consistent ” Regulation should be clear and consistent so that
financial institutions have reasonable certainty to their
legal obligations.
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2. Singapore Exchange Limited (SCX)

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1. SGX is the first demutualised, integrated securities and derivatives exchange in Asia Pacific.
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2. SGX owns and operates the only integrated securities exchange (SGX – ST) and derivatives
exchange (SGX- DT) in Singapore and their clearing houses.
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3. SGX- ST operates the fully electronic and floorless exchange in Asia.

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4. Regulatory functions includes:

a. Issuer Regulations
o review listing applications, monitor compliance, provide support on regulatory issues
to listed companies.
b. Member Supervision
o Process membership applications, monitor members’ compliance with SGX rules and
investigate complaints.
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c. Market Surveillance - Maintain surveillance of all trading activities.
d. Enforcement
o Investigates complaints and perform necessary disciplinary follow up.
e. Risk Management
o Monitor and manage SGX counterparty risk exposure and clearing members for SCX
trades
3. Investment Management Association of Singapore (IMAS)
1. It is a representative body of investment managers spearheading the development and growth

of the industry in Singapore.
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2. Objectives of IMAS:
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 To promote professionalism and exemplary practice among members in their conduct of
the investment management business;
 To provide a forum for members to discuss issues relating to the industry;

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To represent members collectively or assist member to make any representation to any
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government or authority which are concerned to the industry;
 Educate investing public on investments and investment management industry;

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 Promote professionalism and standards of research and management expertise in

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Singapore;
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 Promote the investment and fund management industry.

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3. IMAS code of Ethics

Members shall :
 Conduct themselves with integrity and professionalism and act in an ethical manner in
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dealings with public, customers, regulators and fellow members;

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 Act with competence and strive to maintain and improve competency;
 Exercise due diligence and professional judgment with proper care in the conduct of their
businesses.
4. IMAS Standards of Professional Conducts cover the following areas:

 An investment manager;
 Business conduct;
 Client relations;
 Investment conduct.
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4. Life Insurance Association of Singapore (LIA)
1. LIA is a not for profit trade body of life insurance product providers and life reinsurance
providers based in Singapore, licensed by MAS.
2. Vision and Mission of LIA

 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;
 Enhancing consumer understanding, promoting industry best practices and fostering a spirit
of collaboration with government and business leaders.
3. Values Underpinning LIA and its Members
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 Unified – to deliver innovative solutions individual’s needs are best met.
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 Professional – in ways they conduct themselves and counsel they give.
 Ethical – ensure policyholders’ interests are managed with integrity.

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Fair – to provide favorable come to their policyholders and shareholders.
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 Open & Honest – to build an environment of trust and transparency.
 Proactive – skills and knowledge to provide sound solutions.

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5. Associations of Banks in Singapore (ABS)

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ABS promotes and represents the interests of the banking community in Singapore. It works closely
with MAS and other governmental bodies in supporting their role, in developing and maintaining a
sound financial system in Singapore.
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6. Association of Financial Advisers (Singapore) – AFA(S)
AFA(S) is formed primarily to represent licensed Financial Advisers (Firms) who provide and advice
on the sale of financial products; to provide a forum for members to develop opinions,
recommendations all of which contribute to the further development of the financial services
industry. Exempt Financial Advisers are associated members.
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Chapter 2 – Financial Advisers Act (FAA) and Financial

Advisers Regulation (FAR) – Financial Advisers and
Representatives
1. Purpose of FAA:
 On 1 Oct 2002, FAA (Cap 110) came into regulation to regulate the sale of investments
products in Singapore.
 Consolidates the Securities Industry Act, Futures Trading Act and the Insurance
Intermediaries Act into a Single Legislation. This will provides a consistent set of regulations
for engaging in similar activities across investment products.
 FAA governs financial advisory activities in respect of namely life insurance policies, and
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collective investment schemes, including unit trusts. It also governs the conduct of person
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providing such services.
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2. Purpose of FAR:
It is a subsidiary legislation to effect the provisions of FAA. It includes licensing approval or
registrations requirements, exemptions as well as provides revocation or variation of any
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condition under the FAA.
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3. 4 Key Principles of FAA and FAR:

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Customer Interest
Financial Advisors are required to have reasonable basis for their recommendations .
To do this, FA must first “know your client”.
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Consistency
Financial Advisors from different distribution channels would be subjected to the same rules
and standards.
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Accountability
“One Representative, One Principal” rule. This is to ensure there is absolute clarity to the
investors to whom they can turn to for accountability. No Representative can represent more
than one financial advisor unless they are related corporations.
Independence
Reps of FAs to put customer’s interest first by giving good objective and guided by the concept
of reasonable basis. Commission is not due to product biases . (refer Chapter 8)
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4. Definition of Financial Advisory services under the Second Schedule of the FAA. (Pg 19)
a. Advising others either directly or through publications or writings, whether in electronic

print or other form concerning any investment products other than:
o advising others by issuing or promulgating research analyses or research

reports, whether in electronic, print or other form, concerning any investment
product.
o advising on corporate finance within the meaning of the Securities and Futures Act;
b. Marketing of any collective investment scheme;
c. Arranging any life policy other than a contract of reinsurance.
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5. Definition of Investment Product under the FAA.
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 Capital market products; (means securities, futures contracts)
 Life policy;
 Any other as may prescribed.

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With effect from 2/12/2005, structured deposit is an investment product.
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6. The following are not investment products
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Products Reason
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 General insurance polices Consumption based.
 Bank deposits Low end of risk spectrum product

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 Loans and mortgages Liability management

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7. Who is a Financial Adviser?

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a. Exempt Financial Advisers and their Representatives.

Exempt financial advisers are exempted from holding a financial adviser’s license to act as a
FA in Singapore as they are covered under their respective Acts. They are:
 Licensed Bank ;
 Merchant Bank;
 Companies registered under the Insurance Act;
 Holder of Capital Markets Service License;
 Finance Companies;
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 Any other as may prescribed;
 Securities Exchange, Future Exchange or an approved holding company in respect of

the provision of any financial advisory service that is solely incidental to its operations as
the case may be.
(Cross Ref Pg 24)

These are persons who are exempted from holding a FA’s licence, with conditions:
1. Exempt fund managers, and FAs can serve up to a total of 30 accredited or

qualified investors on any occasion.
Definition of “Accredited Investor” (Pg 25)

a. An individual
 Whose net person assets exceed S$2 m in value (or its equivalent in a
foreign currency) or;
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 Whose income in the preceding 12 months is not less than S$300,000.
b. A corporation
 Whose net assets exceed S$10m in value (or its equivalent in a foreign
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currency);
 The trustee of a trust which exceed S$10m (or its equivalent in a foreign
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currency);
 An entity (other than a corporation) with net assets exceeding $10m (or its
equivalent in a foreign currency);
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 A partnership or corporation in which owner of the business is an accredited

investor.
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Definitions of a “Qualified Investor” – is an accredited investor other than the details

at Pg 28 of text
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2. Prerequisites to be met by Exempt Persons (Pg 24)

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 Exempt Persons to be fit and proper;

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 Must have adequate resources including compliance arrangements to

commensurate the size of its business in Singapore;
 Competence and capability – operate from an office in Singapore and to

employ a minimum of two professionals, each with at least five years of
relevant working experience in reputable jurisdictions;
 At least one resident CEO or executive director who can exercise

management oversight of its operations;
 Financial Viability – maintain min paid up capital sufficient to cover its set up
costs and at least six months of operational costs.
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7b. Excluded Financial Advisers(First Schedule of the FAA)(Pg 17)

The following persons mentioned in the Text at Point 4.3 of text are excluded from the
definition of “Financial Advisers” under the FAA as providing service is solely incidental
to them carrying out its business for which it is licensed to do.
7c. Licensed Financial Advisers (Pg 20)

1. Financial Advisers shall fill up Form 1 accompanied by a non refundable application fee
to apply to MAS for the grant of a FA’s licence. MAS will take into consideration these
factors:
 Track record, financial soundness of the applicant and its parent company or major
shareholders;
 Ability to meet financial requirements and professional indemnity insurance
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requirements;
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 Strength of internal compliance systems;
 Business plans and projections;
 Fulfill fit and proper criteria.

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2. With effect from 26 November 2010, all existing FA’s licence would no longer have to be
renewed, as licence will continue to be valid, subject to payment of an annual
licence fee, unless licence holder ceases to be in business, or licence is revoked by
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MAS.
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3. MAS may refuse to grant FA’s licence if:

 Applicant is not a corporation;
 Unable to meet minimum financial requirements or have in force a professional
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indemnity insurance policy.
4. Grounds for refusal to grant FA’s licence without giving the applicant an opportunity to
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be heard if:
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 Applicant is wound up , dissolved or in receivership whether in Singapore or

elsewhere;
 A prohibition order remains in force against the applicant;
 Convicted for fraud or dishonesty.
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5. An applicant shall meet the following minimum financial requirements:

Minimum Financial Requirements
Paid up capital of not less than Paid up capital of not less than
S$300,000 S$150,000
In the case of providing advising others In other cases than providing futures contracts
concerning futures contracts, contracts
or arrangement for the purpose of
foreign exchange trading.
Contravention of the above shall be liable on conviction to a fine not exceeding S$25,000
6. Continuing Financial Requirements
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Licensed Financial Advisers
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Not being a foreign company Being a foreign company
To maintain a net asset value of not less To maintain net head office fund of not less than:
than :
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a. In the case where it does not have a. In the case where it does not have an
an immediately preceding financial immediately preceding financial year – the
year – three quarters of the min paid minimum head office funds required under
up capital required under Regulation Regulation 15 of FAR
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15 of the FAR.
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b. In any other case b. In any other case

i. one quarter of its relevant annual i. one quarter of its relevant annual
expenditure of the immediately expenditure of the immediately
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preceding financial year or preceding financial year or
ii. 3 quarters of the min paid up ii. the min net head office funds required
capital required under FAR, under FAR,
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whichever is higher. whichever is higher.

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Definition of relevant annual expenditure :

Total expenditure of the FA for that year – (staff bonuses + employees & directors’
share of profits + commission of reps )
8. Use of the term “Financial Adviser” or “Life Insurance Broker “

“Financial Adviser” or “Life Insurance Broker” can only be used by licensed or exempt
financial advisers approved by MAS.
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9. Use of the term “Independent”

No Licensed Financial Advisers or Exempt Financial Advisers may use the term “Independent”
unless commission received is not a result of product biases, and they operate free from any
direct and indirect restriction.
10. Representative Notification Framework (RNF regime)

 Was launched on 26 November 2010. Representatives of FA need not be licensed any
more. The onus is on the principals to accept only fit and proper individuals as their
representatives. RNF is applicable to:
a. Licensed financial advisers;

b. Financial advisers which are exempted by FAA from having to apply for a licence
(includes banks, merchant banks, insurance companies and finance companies).
 RNF regime does not apply to entities which are exempted from licensing under the FAA.
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Examples include fund managers who serve no more than 30 accredited investors.
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 Under the new RNF regime, reps providing financial advisory services will have the following
information recorded under the Public Register of Representatives, kept by MAS:
o His name;
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o Name of his current principal and every past principal( if any);
o The current and past types of financial advisory service provided by him;
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Disciplinary proceedings taken against him by MAS;

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Any information as may prescribed by MAS.

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 The Public Register is accessible to the public thro MAS website to promote greater
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transparency and encourages consumer to verify the status of the reps whom they are
dealing with.
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11a. There are 2 classes of Representatives (Pg 30-35)

Appointed Representatives (AP) Provisional Representatives(PP)
(Similarities)
Criteria to be a representative
 Must be at least 21 years old;

 Must be fit and proper;
 Whose status as a rep has not been revoked;
 Whose principal is licensed or exempted to provide the type of FA services.
(Differences)
Criteria to be a representative
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Appointed Representatives (AP) Provisional Representatives(PP)
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 Satisfy entry requirements and exam  Satisfy entry requirements. Intends to undergo
requirements exams to satisfy exams requirements. PP are
given a grace period of 3 months to pass
requisite exams. During the 3 month grace
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period, they are allow to provide FA services.
This is to facilitate relocation of experienced
professionals to Singapore to allow them to begin
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work as soon as possible.
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 PP must be currently or previously licenced,

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authorized or regulated for at least 12 months

(but not more than 12 months ago) in relation to
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a comparable type of FA service in an overseas

jurisdiction with a regulatory regime that is
comparable to that of Singapore.
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 Whose name is entered in the Public Register as

 Whose name is entered in the Provisional Rep. Principal has notified MAS thro
Public Register as an Appointed lodgment of Form 3D (within the 3 months
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Rep. grace period) the reps’s fulfillment of relevant

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exams and his name has been entered in the

Public Register as an Appointed Rep.
11b. No representative are allowed to act as a representative unless he has met:

 The entry and exam requirements;
 His name has been entered in the public register for the FAA.
11c. Contravention of the rule will result in :

 Individual
o A fine not exceeding S$25,000 or
o An imprisonment for a term not exceeding 12 months or both
and in the case of a continuing offence, a further fine not exceeding S$2,500 for
every day or part thereof during which the offence continues after conviction.
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 Principal (for employing such individual to provide financial advisory services)

o A fine not exceeding S$50,000 and in the case of a continuing offence, a further
fine not exceeding S$5,000 for every day or part thereof during which the offence
continues after conviction.
12.
Notification Procedure (Pg 36- 37)
Principals who wish to appoint individuals as appointed or provisional reps shall lodge
Form 3A and 3B with MAS in the manner prescribe:
a. Notice of intent by principal to appoint the individual as an appointed rep or
provisional rep;
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b. A certificate by the principal that the individual is fit and proper ; and
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c. In the case of a provisional rep, an undertaking by the principal to undertake
responsibilities in relation to the rep.
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Retention Period for Documentation
Principal shall keep copies of all information and documents which the principal relied on
in giving the certificate for a period of 5 years from the date of lodgment
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When a change occurs in any particulars of the rep, principal shall furnish no later than
14 days after the occurrence of such change in the prescribe Form 18 to MAS.
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after payment of fees

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Names of reps are entered into the Public Register.

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Undertaking of responsibilities for Provisional Representatives by the

Principal:
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a. To properly trained and supervise the activities and conduct of the rep,
including measures to ensure all obligations and liabilities incurred are
properly fulfilled. To ensure rep understands the Singapore law relevant
to provision of financial advisory service.
b. To ensure rep is at all time accompanied by an authorized person when
meeting clients in the course of providing financial advisory service
c. To ensure rep sends concurrently to any authorized persons all
electronic mail that he sends to any client when providing financial
advisory service.
d. To ensure rep does not communicate by telephone with any client when
providing financial advisory service other than by telephone conference in
the presence of authorized persons.
e.
f.
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13. An individual shall cease to be an appointed representative under the following:

a. he ceases to be the principal’s representative or to provide that type of FA service on
behalf of the principal;
b. his principal ceases to provide that type of FA service;
c. the licence of his principal is revoked or lapses or a prohibition order is made against his
principal prohibiting it from providing that type of FA service;
d. the individual dies;
e. as MAS may prescribe.
14. MAS may refuse to entry or revoke or suspend status of appointed rep or provisional rep if:
a. he fails or ceases to act as a rep in respect of all the types of financial advisory
services that were notified to MAS;
b. he or his principal has not provided MAS with information or document as required;
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c. he is financially unsound - an undischarged bankrupt or entered in compromise with
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his creditors;
d. he or his principal has fail to satisfy MAS the he is not fit and proper
ie. acted fraudulently or has been convicted of an offence under FAA;
e.
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he did not satisfy educational or other qualifications in relation to that type of financial
advisory service he is to performed.
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15. A principal or an individual who lodges any document to MAS that is false or misleading or
omits to state any material matter without which the document is misleading, shall be guilty
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of an offence with a fine not exceeding S$50,000, unless he can prove that omission was not
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false or misleading.
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16. Any person who is aggrieved by the refusal of MAS to enter his name or type of financial
advisory services in the register or the revocation of suspension of his status as an appointed
or provisional rep, may within 30 days after he is notified of the decision of MAS, appeal to
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the Minister whose decision shall be final.

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Chapter 3 – FAA & FAR - Conduct of Business, Powers

of Authority and Offences
Part III of the FAA : Conduct of Business
Division 1 – General
1. Section 25(1) of the FAA

A licensed FA shall disclose to every client and prospective client all material information
relating to any designated investment product that he is recommending, including:
 Terms and conditions of the designated investment product;
 Benefits and risk ;
 Premiums, cost , expenses, fees and charges ;
 If the designated investment product is a unit in a collective investment scheme, the
name of the manager of the scheme and the relationship between the licensed FA and
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the manager;
 If the designated investment product is a life policy, the name of the registered insurer
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and the relationship between the licensed FA and the insurer.
2. Section 26 of the FAA

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No licensed FA shall with the intent to deceive make false or misleading statement or omit to
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disclose material statement in respect of amount payable in the proposed contract or provision
of the contract.
Contravention – Fine not exceeding $50,000 or imprisonment of a term not exceeding 12

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months or both
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Section 27 of FAA provides that a licensed FA shall not make a recommendation with respect to
any investment product, to a person, unless it has a reasonable basis for making that
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recommendation to that person.
It is considered to have a “Reasonable Basis” if:

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 Recommendation is made having regard to the information obtained like investment

objectives, financial situations, needs of the person etc.
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 If FA does not have a reasonable basis for making the recommendations to a person, then it
is liable to pay damages in respect of that loss or damage suffered by the person.

Section 28 of FAA and Regulation 19 deals with receipt of client’s money or property. Money
collected shall be handed over to the following (right party) not later than the business day
immediately following the day on which the licencee receives the money, unless client’s written
consent to hand over after the specified date:
 The provider of the collective investment scheme.
 A holder of a capital markets services under the SFA.
 A person exempt under the SFA from holding a capital markets service license but
authorized by the client to receive the client’s money or property.
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Division 2 – Life Insurance
5. Under Section 32(1) of FAA and Reg 20(1) of FAR, Insurance Broking Premium Account must
be maintained by Licensed FA which receives insurance broking premium.
Insurance Premium Account
2 situations money deposited in account 4 situations money withdrawn from account
 Received from insured (premium);  Person entitled to receive;
 Received from Insurer (claims).  Payment to insurer;
 Deposits placed with a bank;
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 Prepayment of money paid into account by
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error.
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 FA must refund an amount equal to the difference between amount invested and the amount
realized for any investments made through this account.
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 Interest earned in the account due to the insurer for cover that commences on or after
1/10/2002, may be retained by the FA for its own benefits with the insurer’s prior consent,
however after the credit period it must be paid over to the insurer.
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Credit period – payment due to the insurer under a contract of insurance or 90 days
from the date of commencement of cover whichever is earlier.
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6. Section 33(1) - Unregistered Insurer

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 FA cannot negotiate or place risk with unregistered insurer unless permitted by MAS. This is
to ensure that no FA is being used by unregistered overseas insurers to assist them to write
Singapore domestic risks since it is not allowed.
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 Does not apply to reinsurance business risk relating to risk outside of Singapore.
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7. Section 34(1) – Representations made by Licensed FA

No licensed FA shall with the intent to deceive make false or misleading statement, or omit to
disclose to the insurer any material matter, or induce the insured to do the same, in relation to:
 Proposed contract of Insurance;
 A claim under the contract of Insurance
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Division 3 – Securities
8. Section 36(1) of the FAA – Conflict of Interest

 Section 36 of the FAA is to avoid conflict of interest situations. A licensed FA has a duty to
disclosed potential and actual conflict of interest that might impair its ability to make
unbiased recommendations to its client prior to establishing a client relationship.
 Contravention: Fine not exceeding S$25,000; imprisonment not exceeding 12 months or

both.
 MAS requires all licensed FAs and its reps who provide financial advisory service in respect
of securities to maintain in Form 12, a register of his interest in securities. At the same time
the relevant FA will have to give notice to MAS on a prescribed Form 13, the place at which
the register of its interest in securities is kept.
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Part IV of the FAA- Conduct of Business
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9. Reg 18 (1) of FAR states that FA cannot grant unsecured loans or credit facility, unless amount
is not more than S$3000 in aggregate to any of its employees, eg. officers, directors, and
representatives.
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Definition of “Unsecured Loan”:
 Any advance or loan without security or
 Any loan or advance with security but the amount owing exceeds the value of the security.
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Part V of the FAA- Powers of Authority

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10. Section 56(1) of the FAA provides that licensed FAs are required to seek prior approval of MAS,
via submission of Form 11 for the appointment of its Chief Executive Officer or director. This
do not apply to the appointment of a director of a foreign company who is not directly
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responsible for the financial adviser’s business in Singapore

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10a. Criteria to be appointed as the Chief Executive Officer or Director:

 Whether licensed FA has provided MAS with relevant information relating to the appointee
or director;
 Whether the appointee or director

o had a prohibition order made against him that is still inforce;
o is not financially sound – bankrupt or in a compromise of arrangement with creditors;
o has been convicted for an offence involving fraud or dishonesty;
o has been convicted of an offence under the FAA;
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o has relevant qualifications and experience;
o is fit and proper;
o will conduct himself with professionalism or act in ethical manner in the discharging
his duties.
10b. In determining whether the Chief Executive Officer and Director has failed to discharge his
duties, MAS shall have regard to whether they have:
 implemented effective written policies and ensured compliance with such policies, on all
operational areas of the FA in compliance with laws and rules governing the operations of
FA;
 put in place compliance function and arrangements that commensurate with the scale and
complexity of the business of the licensed FA, in order to protect investors;
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 identified, address and monitored the risks associate with the activities of FA;
 set out in writing the limits of the discretionary powers of each officer, committee of the
FA;

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ensured FA keeps written record to monitor compliance with its policies;
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 ensured accuracy and completeness of any report submitted by the FA to MAS.
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10c. MAS may direct the licensed FA to remove an officer from his office if they view that he is not
fit and proper, for the protection of the investors under Section 57(1)(h) of the FAA.
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11. Prohibition Orders (PO)

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 MAS has the power to issue a prohibition order to prohibit a person from providing any
financial advisory service or acting as a director, or becoming a substantial shareholder
of Licensed and Exempt FA.
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 Where a PO is made against a person and notified to a licensed or exempt FA, these FAs
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shall not employ the person to provide any financial advisory service or use his services to
the extent as prohibited by the order.
Contravention : Fine not exceeding S$50,000.
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12. Offences
 Section 83 of the FAA – where an offence committed by a body corporate has been proven
to be attributable to the negligence of an officer (director, chief executive, member of the
committee etc), the officer and the body corporate shall be guilty of an offence.
 The fine not exceeding S$100,000 or an imprisonment for a term not exceeding 2 years or
both apply to the following :
o Any officer of a licensed FA who fails to take all reasonable steps to ensure
compliance with any provision of the FAA, or ensure correctness of any statement
submitted to MAS. No officer shall be sentenced to imprisonment unless he
committed the offence willfully.
o Any officer, auditor, employee, agent of a licensed FA or an exempt FA, who

willfully makes false entry, omits, conceals destroy documents, reports of the
business of FA.
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Chapter 4 – MAS Notices (Part I)

This Chapter covers 3 notices:
 Notice on Recommendations On Investment Products (Notice FAA- N16)
 Notice on Information to Clients & Product Information Disclosure (Notice FAA-N03)
 Notice on Dual Currency Investments (Notice FAA –N11)
Note: Appendix 4B is a testable item.
1. Differences between Regulations, Notices and Guidelines.

Regulations Notices Guidelines
Difference Subsidiary legislation to Specify more the details Intend to provide general
give effects to the the standards expected of guidance; best practices.
provisions of the FAA. FAs in the conduct of their
business compared to Not legally enforceable
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Regulations
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Similarity Legally enforceable Legally enforceable
1. Notice on Recommendations on Investment Product

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Specified Investment Products (SIPs)
Unlisted SIPs Listed SIPs

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(Eg: Investment Linked Life Policies) (Eg: Futures and Exchange Traded Funds)
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Customer Knowledge Assessment (CKA) Customer Account Review

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To assess whether a customer has relevant  Whether the customer has relevant knowledge
knowledge or experience to understand the or experience to understand the risks and
risks and features of an unlisted SIPs features of derivatives before approving the
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customer’s account to trade such products.

 Intermediary to inform customer if he is
assessed not to possess relevant knowledge
or experience
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 If the customer still intends to proceed with the

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transaction, intermediary must offer advice.

MAS will not allow “execution only” service for
such a case.
2. This notice does not apply to the following circumstances:
1) Any recommendation made with respect to simple life policies sold as an ancillary
product to loans with simple payments e.g. car loans, personal loans. It excludes
mortgage reducing term assurance plans.
2) Where there is no recommendation made, or where only factual information is provided with
respect to any excluded investment product. Examples through mail, TV, radio etc, or
transaction where no advice need to be given to the client.
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3. Section 27 of the FAA requires FAs to have a reasonable basis of any recommendation made.
This notice covers the following aspects:
1. Know Your Client

2. Needs Analysis
3. Documentation and Record Keeping
1. Know Your Client (Pg 64 to 67)
Unlisted Specified Investment Product
FA should conduct
Consider Client’s Information
Customer Knowledge  education qualification
Assessment (CKA)  investment experience
 work experience
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Positive outcome
Suitable Not suitable
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FA to offer advice on products Client does not wish to provide
information on the above, he is
deemed not to possess knowledge
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for unlisted SIP
Allow to transact unlisted SIPs for
one year from the date of CKA,
after which a new CKA shall be
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conducted before it provides any

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recommendation on unlisted Client still choose to transact in unlisted

SIPs. SIPs. :
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1. FA shall inform the client in writing:

 the outcome of CKA & obtain
the client’s written confirmation
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that he still wish to proceed;

Client does not wish to receive
advice, FA should:  that it is the client’s responsibility
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 Document decision of client; to ensure suitability of product.

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 Highlight in writing, it is the 2. Senior management of FA who is

Client’s responsibility to not involved in the sales transaction
ensure suitability of unlisted and not connected to the client has:
SIPs;  confirmed with the client that
he has been informed of all
 Client cannot file a civil claim facts & implications;
in the event he suffered a loss;
 given approval for the FA to
 To confirm in writing if client proceed with client’s request.
wishes to proceed without
advice.
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2. Needs Analysis 3. Documentation & Record Keeping

(Pg 67) (Pg 68 - 70)
 FA shall put in place system  Collective Investment Scheme or a

and process for its reps to debenture
determine whether the product FA must provide a copy :
recommended is suitable for the  Profile statement;
client.  Prospectus;
(Supplementary or replacement)
 Analyse information gathered and  Product Highlights Sheet.
identify suitable products.
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 If no suitable product to inform  In Life Policy
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client accordingly. FA must provide:
 Product Summary;
 Explain to client the basis for its  Benefit Illustration;
recommendations.  Product Highlights Sheet.
 If client does not want to provide

information, chooses to buy another ad
 For recommendation of a Investment
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product, FA should proceed Product
with client’s request, document  FA to document basis of
decision of client & highlight in recommendation having regard to
writing that it is the client’s information obtained from client and to
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responsibility to ensure suitability keep such documentation for record

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of product selected. keeping purposes

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 FA shall provide client an abridged

version of the above documentation
and summary of information gathered.
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 FA shall document the CKA

conducted for its clients & approval of
its senior management for the FA to
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proceed with client’s request.

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 FA to maintain records of all

communications with client relating to
SIPs which is listed or quoted in a
securities market.
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4. Switching of Designated Investment Products (Detrimental Switches)

In considering whether a switch from one product to another is detrimental, MAS may consider:
(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.
5. FA shall disclose in writing to a client any fees and charges if client were to switch from one
designated investment product to another to ensure client is able to make an informed decision.
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Note :
Under Section 58(5) of the Act, any person who contravenes any requirement specified in
a written direction issued by MAS which include FAA- N16 shall be liable on conviction to
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a fine not exceeding S$25,000, and in the case of continuing offence, to a further fine not
exceeding $2,500 for every day.
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2. Notice on Information to Clients and Product Information Disclosure
1. This notice consists of :

a. Section 25 of the FAA
Obligations to disclose all material information to client including the form and manner in
which information shall be disclosed.
b. Section 26 of the FAA

FAs cannot make false and misleading information to the client regarding investment
product.
2. Notices cover these areas: -

General Disclosure Principles Information must be clear (plain language, jargon
explained), adequate & not false and misleading. Where an
opinion is expressed, it should be unambiguously stated it is
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a stated that it is a statement of opinion.
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General info about FA and FA shall disclose in writing to a client
Representative  its business name , address , contact number
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 types of investment products and services it is
authorized to provide
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A Rep shall disclose in writing to a client the same item as
above.
Both should inform the client in writing of any change

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to such information in subsequent dealings with the client.

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Remuneration  FA must disclose in writing all remuneration related to

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provision of FA services, except for Life Policy; only need

to disclose “distribution cost” found in the benefit
illustration.
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 Where a financial adviser receives trailer commission

soft commission, or such other benefits from a product
provider, it shall disclose to the client.
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 Where the amount of remuneration, commission, fee or

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benefit is not quantifiable, the FA shall furnish its client

with a description of how it will be remunerated.
 If the precise rate of remuneration is not known in

advance, FA shall estimate the rate likely to apply.
Designated Investment Product  This section deals with information that must be disclosed
to the client when recommending a product. It includes
nature & objectives of the product, risks & benefits of
the products, charges and fees.
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 For Life Policy and Collective Investment Scheme(CIS)

FA to explain:
o Contractual rights of client
For CIS – where the units are held on behalf of the
client under a nominee company’s name, FA shall
explained that to the client that his rights may be only
enforced through the nominee company.
For ILP – client is responsible for the accuracy of the

information given to the insurer in the application of a
life policy and when making a claim.
o Pricing of the product

o Dual pricing scheme
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o Bid (sell) and offer (buy) prices.
o Single pricing scheme.
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o Free look period for ILP and cancellation period for
Unit Trusts, any fall in value of the underlying
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investments is borne by the client .
o Warnings, exclusions and disclaimers shall be

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disclosed and explained.
Past & Future Performance  FA must advise that past performance is not
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necessarily indicative of future performance.

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 Draw attention of the client to all assumptions, warnings

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& disclaimers.
 When advising on CIS, FA is to advise where the last day

of the period to which the past performance relates is
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more than 3 months prior to the date of disclosure,

informs the client of this fact.
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Marketing Materials Materials must be approved by FA and materials for direct

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response medium, must display that client may wish to

seek advice from a FA before buying, otherwise they must
consider suitability .
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3. Notice on Dual Currency Investment
1. This notice applies to all Financial Advisers or its representatives except where advice
is given to :
a. accredited investor, expert investor as defined in the FAR;
b. high net worth Individual as define in the Guidelines;
c. to any individual outside of Singapore, who is not a Singaporean/ PR, or a person with
no commercial or physical presence in Singapore.
2. Dual currency investment is not “Deposit ” or “Structured Deposit” as it may cause

investors to misconstrue the product is principal guaranteed in terms of the base
currency.
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3. Every FA and its representatives shall observe product disclosure and warnings to all
clients. They are :
a. Issuer has the right to repay you at a future date in an alternative currency which
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may be different from the currency in which the initial investment is made. Part or all
of the interest earned on this investment represents the premium on this option.
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b. The currencies from which the client can select at the time of investment
c. Subject to foreign exchange fluctuations. Exchange controls may be applicable

to the currencies the investment is linked to, hence may incur a loss on the principal sum.
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d. An explanation on how the foreign exchange control restrictions imposed by the home
country of a foreign currency could impact the investment held by the client.
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Note : Appendix 4B is a testable item

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Chapter 5 – MAS Notices (Part II)

This Chapter covers 6 Notices:
 Notice on Appointment and Use of Introducers by Financial Advisers (FAA- N02)
 Notice on Prohibition Representations made by Persons Exempted under Reg 27(FAA-N10)
 Notice on Entry Requirements of a Provisional Rep(FAA-N12)
 Notice on Minimum Entry and Exam Requirements for Reps (FAA-N13)
 Notice of Reporting of Misconduct of Reps(FAA-N14)
 Notice of Cancellation Period for Unlisted Debentures (FAA- N15)
1. Notice on Appointment and Use of Introducers by FAs
1. Definitions:
An introducer introduces any clients to an introducee (FA) in relation to the provision of any type
of financial advisory services through 2 ways. They are: -
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 recording and forwarding clients’ particulars (with client’s consent) to any introducee.
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 providing factual information to any client on investment products.
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2. Introducer, if it is a corporation, introducing cannot be its sole business activity, if it is a person,
introducing should not be his full time occupation.
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3. Financial adviser shall ensure none of its employees or representatives enters into any
arrangement with an introducer, other than on behalf of the financial adviser.
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4. FA should institute adequate control systems and process to ensure proper conduct of
introducers. They are:
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 Written agreement between FA and introducer.
 FA must also provide a script for introducers to provide guidance on what factual
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information to provide on the FA, and the investment products.
 Introducer cannot recommend, give advice nor collect money for any investment product.
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 Introducers to disclose remuneration given by the FA, if requested by the client.

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 FA to maintain a Register of Introducers. These are included in the register:
o Names
o Place of business
o Contact numbers
o Business registration numbers(company)
o Identity card numbers (individual)
o Date of appointment or date of termination (where applicable)
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2. Notice on Prohibited Representations made by persons exempted under

Regulation 27 (1)(D) of the FAR(RG 2).
1. Representatives of exempt persons who are exempted from the requirement to hold a FA
licence, to act as appointed or provisional representatives under the FAA, in advising advice in
Singapore, whether directly or indirectly as a financial adviser , through publications or in
writing, or by issuing or promulgating reports concerning any investment products (other than
Life Policies) to not more than 30 accredited investors on any occasion.
3. Notice on Entry Requirements of a Provisional Representative
1. This notice is covered in part in Chapter 2
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2. The provisional representative scheme is meant to facilitate the relocation of experienced
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individuals who wish to provide financial advisory service under FAA. There are given a grace
period of 3 months to pass the relevant exams to satisfy the exam requirements under FAA.
3.
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The principal shall ensure Provisional Representative satisfy the following minimum
requirements, failing which MAS may refuse entry of them:
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 He is at least 21 years old;
 He is in the process of relocating or relocated to Singapore;

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 He possesses at least 3 years of relevant working experience as a provisional rep;

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 He possesses at least a Bachelor’s degree or equivalent, or has a professional

qualification.
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4. The appointment of a provisional rep shall be valid for a period of 3 months from the date his
name is entered into the public register as a provisional rep. The principal shall ensure he
passed all relevant exams before he submits to MAS, the onetime notification for a provisional
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rep to be an appointed rep.

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4. Notice on Minimum Entry and Exam Requirements
1. This notice apply to all Licensed FA and Exempt FA.
2a. The following table sets out the applicable modules under the CMFAS Examination for each of
the financial advisory services.
Module
Types Of Financial Rules & Product Knowledge & Analysis
Advisory Service Regulations
5 6 *7 6A 8 8A 9 9A
Advising others X X
concerning securities
(excluding CIS)
From 1 Jan 2012 , X X X
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advising others
concerning securities
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(excluding CIS) that are
Specified Investment
Products
Advising others concerning

futures contracts
X
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X X
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Advising others concerning X
contracts or arrangements
for the purposes of Either
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leverage foreign exchange Module

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trading (prior to 1/1/2012)

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Advising others concerning X X

contracts or arrangements
for the purposes of
leverage foreign exchange
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trading (with effect from

1/1/2012)
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Advising on and/or X X X
marketing of Collective
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Investment Scheme
Advising on and/or X X X
arranging life policies
(whether or not including
investment linked life
policies
*Module 7 to be discontinued with effect from 1 Jan 2012, replaced with 6A

Module 6, 6A & 7 – Administered by Institute of Banking and Finance
Module 5, 8, 8A,9, 9A – Administered by Singapore College of Insurance
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2b. MAS Notice 117 apply to appointed representatives of financial advisers who provide financial
advisory services concerning any life policy with accident and health benefits, but exclude
policy that pay out in the event of :
 an injury, disability as a result of an accident;
 total and permanent disability;
 death by accidental cause;
 combination of above
3a. Minimum entry requirements for an Appointed Representative:

 be at least 21 years old;
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 minimum academic qualification requirements
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o qualifications higher than or equal to at least 4 GCE “O” level credit;
o at least 4 GCE “O” level credit passes or;

at least 2 GCE “O” level credit passes and a pass in Basic Competency Exam
administered by SCI
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3b. These qualifications do not apply to any individual who has been carrying out provision of
financial advisory services before1 October 2002. (the advisers who came into the industry
before 1/10/02)
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4a. Circumstances under which CMFAS Exam do not apply:
CMFAS Exam Do Not Apply To Representative

Pg 106 to108
Reps who possess Specified Qualifications or Work

Experience listed in Annexes 1,2,3,and 4 of Notice
FAA- N13 is not require to pass Module 6,7,8,9
19 October 2011 Does not apply to

1 July 2005
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 Prior to 19/10/11, reps who possess  Does not apply to those who have fulfill
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specified qualifications or work experience other criteria or attained the equivalent
(listed above) is not require to pass Module to passing the specific exams under
6,7,8,9. FAAN13 Annex 1,2,3,or 4 before 1/7/05
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 With effect from 19/10/11, reps who possess
relevant qualifications & experience, need  Have been providing FA services as a rep
not pass Module 6,7,8,9 if : before 1/7/05 and continues to do so.
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o he has been conducting relevant
regulated activities as a rep immediately
before the 19/10/11 and continues to do
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so;
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o his principal has lodged with MAS Apply to

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relevant documents in relation to his

appointment as an appointed rep before
1/1/2012; An individual who cease to act as a
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representative of any FA after 1July 2005.

o there is no break in service of more
than 6 months between his last working
experience as rep and the date of his
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principal’s lodgment with MAS as an

appointed rep.
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4b. Circumstances under which CMFAS Exam do not apply:

Pg 108 to B109
CMFAS Module 5 Exam Do Not Apply To An Individual

concerning futures contracts
If prior to 27 Feb 2008
 (regardless whether he holds a licensed commodity future rep license) has at least
3 years of relevant continuous work experience in Singapore in the provision of
financial advisory services in respect of futures contracts and there is no break in
service of more than 6 months between the person’s last working experience and
the date of his license application prior to 26 Nov 2010 or principal’s lodgment with
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MAS documents in relation to his appointment as an appointed representative.
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 is exempted from holding a commodity futures broker’s representative licence
under CTA;
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 is employed by or acting for a bank licensed under the Banking Act.
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4c. Circumstances under which CMFAS Exam do not apply:

Pg 110
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CMFAS Exam Do Not Apply To Representative who provides

specified type of FA services
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in respect of
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a. Any capital market product to an expert investor;

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b. Any investment product to an accredited investor, institutional investor, related

corporation of FA, and any person outside of Singapore;
c. Any Singapore Government Securities.
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5a. Retake of Module 5 :

a. passed Module 5 but did not commence provision of financial advisory services with a
FA within 3 years from the date of passing
b. (i) passed Module 5 or

(ii) exempted from M5 exam, but require to complete the non examinable course on
Module 5 by the stipulated deadline 30 November 2003, but subsequently ceased
providing financial advisory services without recommencing such services for a
financial adviser within 3 years from the date of cessation.
5b. CMFAS Module 5 does not apply to:

 a rep of an exempt FA providing execution related advice, and has completed the non
examinable course on Module 5 by 17 August 2004 unless he has ceased provision of
execution related advice for an exempt FA for a period exceeding 3 years.
6. A financial adviser shall maintain a register and enter in the register:
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 the type of financial advisory services conducted by its reps;
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 the date on which the rep completed the exams or non examinable courses where
applicable; and names of reps who is not required to pass certain modules of the
CMFAS exam.
7.
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MAS expectation on Continuing Education Requirements For Appointed Representative
Principals should review and follow up on their appointed rep continuing education needs on an
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annual basis, document this assessment and attendance on any training in a Continuing
Education Register.
Representatives providing advice on life policies are expected to observe the ‘Guidelines on
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Company’s Training and Competency Plan” and “Guidelines on Continuing Professional

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Development Requirements for Life Insurance Advisers” issued by LIA.

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8. (Ref: 5.3.2c and 5.8)

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Module exempted a. Degree or higher qualification in finance, financial

6A, 8A, 9A engineering or computational finance
b. Chartered Financial Analyst (CFA)
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Not exempted if providing advice on

Specified Investment Product for:
a. Existing reps on or before 1 Jan 2012

Must passed by
b. Outstanding notifications lodged with MAS 30 June 2013
on or before 1 Jan 2012 by his principal
c. Notifications submitted after 1 Jan 2012 to provide FA services is required to pass the above
exams prior to lodgment of the notification by his principal.
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5. Notice on Reporting of Misconduct of Representatives by FAs
1. Financial Advisers are responsible for the ethical conduct of their representatives.
They should take appropriate disciplinary action against their reps for any misconduct.
2. Report of misconduct of representative
Misconduct of Representative
a b c d
Acts involving fraud, Acts involving Failure to Other misconduct:
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dishonesty or offence inappropriate satisfy the a. non compliance
of similar nature, eg Guidelines on with FAA.
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advice,
forgery, cheating, misrepresentation or Fit and Proper
misappropriation of inadequate Criteria. b. serious breach
fund, criminal breach disclosure of of FA’s internal
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of trust information, make policy or code of
false and misleading conduct
statement
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 FA to lodge a Police Report
 Submit to MAS a copy of the
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Police Report within 14 days

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of such discovery.
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 FA is expected to conduct internal investigation and keep proper record of the following:
o A summary of the facts;
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o Interview with relevant parties- reps, supervisor and client;

o Documentary evidence of alleged misconduct;
o Investigator’s assessment and recommendation;
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o Disciplinary action taken.

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 Submit to MAS the relevant information set out in the “Misconduct Report” not later than 14 days
after the discovery of such misconduct. If there is no misconduct to file for the year, FA shall
submit a declaration to MAS to that effect not later than 14 day after 31 December of that calendar
year.
 FA to submit to MAS an “Update Report” where a FA has not concluded its investigation or has
not taken any disciplinary action against the rep concerned. Both the report shall be lodged by FA
through MASNET.
 FA is not required to lodge a report for failing to meet the continuing education requirements.
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3. A FA is expected to conduct investigations and keep proper records of the following:

a) a summary of the facts of the case;
b) interviews with relevant parties, eg reps, supervisors, client;
c) documentary evidence of alleged misconduct;
d) investigator’s assessment and recommendation and
e) disciplinary action taken against the representative, if any.
4. Disciplinary action taken by FA against its reps includes:

 suspension from providing any financial advisory service;
 restitution of misappropriated moneys;
 fine;
 formal warning;
 demotion;
 termination of the representative’s service.
5. FA should ensure consistency in their application of disciplinary action.
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6. FA should have an internal process for addressing appeals by the representatives for
disciplinary action taken against them.
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6. Notice on Cancellation Period For Unlisted Debentures
1. This notice sets out the obligations of persons in relation to the cancellation period of an
unlisted debenture whether the relevant authorised person sell directly or indirectly to a client.
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2. This Notice does not apply to

 unlisted debentures with tenures of 3 months or shorter;
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 unlisted debentures which are exempt from the prospectus requirements under SFA;
 the purchase of unlisted debentures where the client is not an individual.
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3. Sale of Unlisted Debenture
 A relevant person shall not sell to a client any unlisted debenture which does not contain a
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right, given by the issuer, to cancel the agreement to purchase such debenture.
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 A relevant person shall conduct due diligence on issuers of such unlisted debenture to
ensure that the issuers have put in place steps and processes that would satisfy the
Guidelines on Cancellation Period for Unlisted Debenture.
4. Disclosure of Cancellation Period for Unlisted Debenture

A relevant person shall disclose and explain to the client:
 the time frame for the client to reconsider his purchase;
 the terms and procedures for exercising his right to cancel the purchase;
 the risk that any fall in value of the unlisted debenture and during the cancellation period
shall be borne by the client.
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Chapter 6 – MAS Notice No: FAA – N06 – Prevention of

Money Laundering & Countering the Financing of
Terrorism – Financial Advisers
Note : This Chapter contains both the Notice and Guideline of the above.
1. This Notice applies to all Licensed / Exempt Financial Advisers (FA) and Insurance
Brokers and is based on the following principles that a FA should observe:
a) Exercise due diligence when dealing with customers, and on persons acting on
customer’s behalf.
b) Conduct its business in conformity with high ethical standards.
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c) Assists and co operate with law enforcement authorities.
2. Customer Due Diligence (CDD) means process of identifying the customer and obtaining
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information.
Customer Due Diligence (CDD)

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Stages Details
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When a) FA establishes business relations with any customers.

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(CDD measures are b) Suspicion of money laundering or terrorist financing.

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to be performed)
c) Doubts about the veracity or adequacy of information obtained.
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How Identification of Customers

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(Obtain and record  Persons

information of customer) o obtain information of customers. Eg name, I/C,
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passport no; address; date of birth , nationality.
 Company
o incorporation no; address; telephone no. etc.
o identify the directors of the company;
o identify partners in a partnership;
o identify persons having executive authority in that company.
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How i) Using reliable independent sources.

Eg . verification of a person – documents that contains the
a. Verification of Photograph of that person.
Identity.
(Includes both Notice ii) Retain all reference documents used to verify the identity of
& Guidelines) the customers. If this is not possible to record the following :
 Information (verification) contain in the original document;
 Title and description of the original document including
unique features and condition;
 Reasons why copy of that documentation cannot be made;
 Name of the officer who had carried out the verification.
b. Identity of Natural a) Identify the persons that are appointed to act on behalf of the
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Persons acting on customer.
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the customer’s
behalf. b) Verify the identity using reliable, independent sources.
c) Retain all reference documents to verify and indentify of these persons.
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d) Verify the due authority of such persons by :
 Documentary evidence that customer has appointed the person to
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act on its behalf.
 Specimen signatures of the person appointed.
e) Where the customer is a Singapore Government Entity, obtain

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information that customer is as asserted.

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c. Beneficial Owners 1. FA should take reasonable steps to obtain the following for
verification :
a) If it is a Person - identify and verify the identities of the
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beneficial owner;
b) If it is Company – verify the ownership and control structure

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of the customer.
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2. No need to inquire if there exist any beneficial owner in relation to a

customer that is:
 A Singapore government entity;
 A foreign government entity;
 An entity listed on the Singapore Exchange or outside of
Singapore that is subject to regulatory disclosure requirements;
 A financial institution supervised by the MAS or outside of
Singapore but comply with the standards set by FATF;
 An investment vehicle where the mangers are financial institutions
supervised by the MAS or if incorporated outside of Singapore but
comply with requirements set by FATF .
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On Going Monitoring a) Observe the conduct of the customer’s account and scrutinize
transactions undertaken to ensure consistency in so far as
customer’s business and risk profile.
b) Periodically review the adequacy of information obtained in

customer identification, beneficial owners particularly for
higher risk categories of customers.
Non face to face a) Implement policies and procedures to address any specific risks
Verification associated with non face to face business transactions.
(Both Notices &
Guidelines) b) Non face to face verifications must be as stringent as those used for
face to face verification.
c) Ways for non face to face verifications
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 Telephone no; address of customer;
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 Consent with the customer for verification with its employer’s
personnel dept;
 Salary details on bank statements;
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 Identification documents by lawyers or notary publics;
 Using a cheque drawn on the customer’s personal account with a
bank in Singapore.
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Timing for Verification a) Notice allows FA to establish business relations before completing the
verification process of the customer and beneficial owners, as it is
essential not to interrupt the normal conduct of business, if the risk of
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money laundering and terrorist financing can be effectively managed.

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b) FA can do (a) but it should observe the following time frame to

complete the verification process :
 Complete such verifications no later than 30 working days after the
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establishment of business relations; failing which business will be

suspended. (except to return funds to its source)
 FA will terminate business relations with the customer if such
verification remains uncompleted 120 working days after its
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establishment.
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Joint Account
FA shall perform CDD measures on all joint account holders as if each of
them were individual customers.
Existing Customers FA shall perform CDD measures on its existing customers as may be
appropriate. As a guide FA should perform CDD when :
 A transaction is significant;
 A substantial change in the FA’s own customer documentation
standards.
 A change in the ownership, constitution of the customer.
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3. Simplified Customer Due Diligence

Includes both Notice and Guideline here:
1. This Notice allows FA to apply simplified CDD measures in cases where the risk of
money laundering or terrorist financing is low.
2. Where FA performs simplified CDD measures, it shall document:

a) Details of its risk assessment;
b) Nature of the simplified CDD measures
3. Examples of when the FA might adopt lesser or reduced CDD measures are:
a) where reliable information on customer is publicly available to FA;
b) where the customer is a financial institution whose AML/CFT controls is familiar

to FA;
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c) where the customer is a financial institution whose AML/CFT requirements is
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consistent with standards set by FATF.
4. However simplified CDD measures cannot be performed under these circumstances:
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a. Where customers are from countries and known to have inadequate AML/CFT
measures.
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b. Where the FA suspects that money laundering or terrorist financing is involved.
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4a. Enhanced Customer Due Diligence - PEPs
1. Definition of Politically Exposed Persons (PEPs):

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a) A natural person who is or has been entrusted with prominent public functions in
a foreign country. Eg head of state; government ministers; military officials; senior
civil servants, senior executives of state owned corporation etc.
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b) Immediate family of such a person ;

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c) Close associates of such a person

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2. Enhanced customer due diligence includes:
a) Implement appropriate internal policies, procedures and control to determine if

customer or beneficial owner is a PEP.
b) Obtain approval from FA’s senior management to establish or continue business

relations.
c) Establish by reasonable means, the source of wealth or funds.
d) Conduct enhanced monitoring of business relations with the customer, during the
course of the business.
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4b. Enhanced Customer Due Diligence – Other high risk categories.
1. FA may performed enhanced CDD measures to :

a) any person who may present a higher risk for money laundering and terrorist
financing.
b) any person with inadequate AML/CFT measures in or outside of Singapore.
5. Performance Of CDD Measures by Intermediaries
1. A FA may rely on an intermediary to perform CDD measures if the following requirements

are met:
a) intermediary is consistent with requirements with AML/CFT requirements;
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b) intermediary has not been precluded by the Authority from relying;
c) intermediary would relayed information or document needed by FA without delay;
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d) No FA shall rely on an intermediary to conduct ongoing monitoring of customers.
FA shall remain responsible for its obligation to this Notice even if it should outsource
the CDD functions to a third party.
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6. Record Keeping
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1. A FA shall prepare, maintain and retain documents on all its business relation transactions
with its customers such that :
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a) all requirements imposed by law are met;
b) able to reconstruct any transactions undertaken by FA, if necessary;

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c) relevant authorities may be able to assess to FA’s transactions;

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d) FA can satisfy within a reasonable time frame, enquiry from relevant authorities.
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2. Document Retention Period:
a) A period of at least 5 years following the termination of business relation for customer
identification information, as well as files and business correspondence or records.
b) FA shall retain records longer period than necessary if the subject matter is under
investigation.
c) May retain documents in original, electronic form, microfilm, provided they are
admissible as evidence in a Singapore court of law .
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7. Suspicious Transactions Reporting (STR)

Includes both Notice and Guideline here:
1. This notice provides for establishment of internal procedures for reporting suspicious
transactions. FA is required to have adequate process and systems. They include:
a) A single reference point within the organisation for reporting of suspicious transaction
being connected with money laundering or terrorist financing, to STRO;
b) A FA shall submit Suspicious Transactions Report to STRO (not exceeding 15

working days) of a case being referred by the staff.
2. A FA shall consider filing a Suspicious Transactions Report (STR) where:

a) FA is for any reason unable to complete CDD measures;
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b) Customer is reluctant, or unable to provide information; decides to withdraw pending
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application or terminate business relations.
3. For urgent disclosure, where a transaction is known to be part of an ongoing investigation,

FA should give initial notification to STRO by telephone or email, and follow up with other
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means of reporting as STRO may direct.
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8. Internal Policies, Compliance, Audit and Training
1. Group Policy
a. A FA that is incorporated in Singapore shall develop a group policy on AML/CFT and
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extend it to all its branches outside Singapore.

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b. Should the branch have inadequate measures, FA shall ensure that its group policy on
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AML/CFT is strictly observed by the management of that branch.
c. Where the AML/CFT requirements in the host country is different from Singapore, FA
shall require that the overseas branch apply the higher of the two standards where
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permissible. However if it is in conflict with Singapore law, FA’s head office shall report
this to the Authority.
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2. Compliance
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a. FA shall appoint a management level officer as the AML/CFT compliance officer.
b. FA shall ensure that the officer and others appointed to help him, has timely access to
all relevant information.
3. Training
A FA shall take steps to ensure its staff is regularly trained on its:
a. AML/CFT laws and regulations, CDD measures, detecting and reporting suspicious
transactions.
b. FA’s internal policies, procedures and control in combating money laundering and
terrorist financing.
c. Refresher training should be provided at least once every 2 years.
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9. Money Laundering
1. Definition of Money Laundering

A process intended to mask the benefits derived from criminal conduct so that it appears to
originate from a legitimate source.
2. List the three stages of money laundering.

 Stage 1 – Placement
The physical disposal of benefits of criminal conduct.
 Stage 2 - Layering
Disguise origin of initial deposit through creating layers of financial transactions to
disguise audit trail.
 Stage 3 – Integration
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Integrate the laundered funds back into the economy so that they re enter the financial
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system appearing to be legitimate business funds.
10. Terrorist financing
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1. Sources of terrorist financing may be legitimate or illegitimate . It may be derived from
kidnapping, drug trafficking or from legitimate income such as membership dues, donations
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etc.
2. Terrorist financing involves amounts that are not always large and associated transactions
may not necessarily be complex given that some sources of terrorist funds may be
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legitimate.
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3. Methods used by terrorist organizations to move, collect, hide or make available funds for
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their activities remain similar to those used by criminal organizations to launder their funds.
When the funds are from legitimate sources, terrorist organization would still need to employ
the same money laundering techniques to disguise the links.
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Note : Appendix 6A on Examples of Suspicious

Transactions is testable
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Chapter 7 – MAS Notice Nos: MAS 302 & MAS 307

1. MAS 302 Product Development and Pricing
MAS 302
Part 1 Mandatory Part 2 Guidelines
1. Prudent Management Oversight 1. Notifications for Product Launched

that does not require MAS approval.
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 Adequate control and pricing of
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insurance products, and ILP sub-funds.  Shall be made in writing and submitted to
An insurer shall also ensure that the MAS no later than 7 working days after the
Board of Directors approves policies official launch date of the product.
and procedures in respect of the
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development and pricing of insurance
products and ILP sub-funds. Egs of such notifications :-
 Lengthen or shorten policy terms of single
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premium endowment plans;
2. Approval of New Products  Increase the number of dread diseases;
 Shall be made in writing by the insurer  Allowing paying premium at any
and submitted to MAS together with frequency;
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relevant documents no later than  Offer Total Permanent Cover under its
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1 month before the proposed official whole life products.

launch date.
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 Do not apply to :-
 Do not apply to :-  Short term accident or health policy;
 Short term accident or health policy;
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 Term policy with a duration of 5 years or

 Term policy with a duration of 5 years less.
or less.
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2. Failure to comply, MAS consider whether

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to:
3. Contravention shall be an offence and
shall attract penalty under the a. approval on a new product;
Insurance Act.
b. revoke the approval for a product;
c. issue directions for withdrawal of a

product.
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2. MAS 307 – Notice on Investment Linked Life Insurance Policies (“ILPs”).
Part 1 - Mandatory Requirements (Pg 156)
1. Notification to The MAS by an Insurer includes:

a. Intention to launch any ILP sub fund at least 21 days before the ILP sub- fund is
established;
Insurer shall submit the following to MAS for notification purposes the launch of any ILP sub
fund:
 a product summary
 the policy
 a benefit illustration
 the information on the ILP sub fund
 a product highlights sheet
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b.
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Significant Changes to ILP Sub fund
Insurer to inform MAS no later than 1 month Where insurer is unable to determine
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before the changes take effect. whether significant change would occur at
least 1 month before the change is to take
effect, Insurer shall inform MAS and policy
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holders in writing as soon as practicable.
Examples of such changes: Examples of such changes:

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 Change in investment objective, or  Suspension and resumption of dealings

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investment approach. due to exceptional circumstances;

 An increase in remuneration payable to
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insurer or manager  Change that may materially affect the

 Any increase in any other fees or charges risks and returns of a ILP sub fund;
payable out of the ILP sub fund that are
0.1% or more of the net asset value  Change which affect the ability of any
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(NAV) of the ILP sub fund. key counterparty to an over the counter
 Any replacement, removal of manager, financial derivative, securities lending to
sub manager to the ILP sub fund. fulfill its obligations to the ILP sub fund;
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 Any variation of rights or obligations of a

policyholder as set out on the product  The cessation of market making activity
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summary where the variation is prejudicial by designated market makers.

to the policy owners.
 A change in direct investment to feeder
fund structure or vice versa.
 A change to an underlying fund into which
the ILP sub fund feeds significantly (i.e
30% or more of the NAV of the ILP
Sub-fund).
 The closure of the ILP sub fund except
when it is terminated due to the maturity
of the sub fund.
 A change in the collateral policy from that
disclosed in the product summary.
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2a. The units of an ILP sub fund shall be issued, redeemed or repurchase at a price arrived by
dividing the Net Asset Value (NAV) of the ILP sub fund by the number of units outstanding.
Hence Price Per Unit = _____NAV ___________
No. of units outstanding
Example : Calculate the price per unit in an ILP Sub fund, given :
NAV = $122m
No of units = 100m
Price per unit = $122m/100m = $1.224
(Cross Ref : 3.3.18 of Text)

Assuming a policyholder with 10,000 units redeems all his units at $1.22(rounding off) per unit,
the ILP sub fund shall be credited with a rounding difference of ($1.224 - $1.22 ) x 10,000 =
$40.
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2b. At maturity of the capital guaranteed ILP sub fund, the units shall be redeemed at a price
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equal to the higher of the guaranteed amount and the NAV of the ILP sub fund divided by
the number of units outstanding.
3. Audit of an ILP Sub-Funds

Annual audit by an external auditor carried out in 2 ways : ad
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a. First Method - audit on the financial statements of each ILP sub-funds
b. Second Method – audit on the internal control and process of the ILP sub-funds.
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 Insurer to notify MAS in writing before the first change from the first method to the
second method, thereafter no insurer shall without approval from MAS make any
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change to the audit method.
 Insurer shall ensure the audit is completed not later than 3 months after ILP sub fund’s
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year end.
 Period under review of an audit shall be for a period of not less than 12 months.
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 Audit by way of Second Method, insurer shall ensure an audit report includes the
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following :
o Outstanding unit holdings of the insurer’s ILP sub funds are properly
maintained; subscriptions, redemptions and switching of units are properly
accounted;
o Units of the ILP sub funds are properly priced;
o Charges and expenses properly accounted in the correct period and allocate
to the correct ILP sun funds;
o Existing assets and liabilities are properly accrued for each ILP sub- fund;
o Assets and liabilities are properly valued in all ILP sub funds by the insurer.
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4a. Audit of an ILP Sub-Funds that are Terminated or Matured

Insurer shall appoint an external auditor to prepare an audit certificate which sets out the
following:
a. all assets of the ILP sub fund have been realized as at the date of termination or
maturity.
b. all resultant proceeds (net of outstanding liabilities) have been distributed to

the policyholders in the same proportion as their holdings in the ILP sub-fund;
c. Insurer has complied with the Notice MAS 307 in relation to the ILP sub-fund from the
date immediately after the period of the latest completed audit to the date the ILP sub
fund was terminated or matured.
d. a list and description of liabilities which have not been settled but have been accrued
to the ILP sub-fund and excluded from the final distribution.
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4b. Insurer shall ensure:
 Insurer shall ensure the audit certificate is completed within 6 months of the
termination or maturity of the ILP sub fund. Insurer shall send to MAS a copy of the
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audit certificate within 30 days of the completion of the audit.
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 Insurer shall retain a copy of the audit cert for a period of 5 years from the date of
termination or maturity of the ILP sub –fund.
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 Insurer shall make available the audit certificate to the policyholder within 30 days of
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the policyholder’s request, if such request is made within 5 years from the date of
termination or maturity of the ILP sub-funds.
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5.
Disclosure
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a. Guiding Principle  An insurer shall inform existing policyholders of any significant change
made to the ILP or sub fund not later than 1 month before the
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change is to take effect.

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 Notification shall be made in clear and simple language.
 Insurer shall not market any ILP or ILP Sub-Fund with any sales
material containing information updated as of a date more than 12
months prior to such marketing.
b. Product a. Insurer shall ensure that all the required information as prescribed in
Summary, Notice MAS 307 are disclosed in these documents.
Policy & Product
Highlights Sheet b. An insurer shall prepare Product Highlight Sheet for every ILP sub-
(PHS) fund together with product summary.
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(from Appendix H) The PHS is to highlight key features and risks of ILP sub fund to
potential investors. It shall:
c. Product Highlights  clearly disclose the required information in the format prescribed;
Sheet (PHS)  not contain any information that is not included in the product
summary;
 not contain any information that is false and misleading
Requirements in the preparation of PHS

1. An insurer shall avoid using technical jargon in the PHS. Where
technical terms are unavoidable, an insurer shall attach glossary to
explain these terms;
2. An insurer shall include references to websites or to corresponding

sections of the prospectus which set out additional information for
investors in the right hand column of the PHS. Every insurer is
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encouraged to include links to online copies of disclosure documents.
However key information shall be clearly disclosed in the PHS and the
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insurer shall not merely make reference to information in other
sources, such as the product summary;
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3. The PHS shall not be longer than 4 pages (excluding glossary).
For PHS including diagrams (including insurer’s logo) and glossary
would not exceed 8 pages;
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4. Footer information in the PHS shall be in a font size of at least 10
point Times New Roman;
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5. An insurer shall refrain from including disclaimers in a PHS.

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d. Statement and Reports to Policyholders

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Insurer to prepare :
1. Statement to Policyholders
This statement shall be send to all policyholders, within 30 days after each policy
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anniversary or a specified date by the insurer in each policy year. Insurer may send via
electronic means if policyholder has given consent.
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2. Semi Annual Report and Relevant Audit Report

(a) A Semi –Annual Report
 Insurer shall sent out to policyowners within 2 months from the last date of
the period to which the report relates.
(b) The Relevant Audit Report

 Insurer shall sent out to policyowners within 3 months from the last date of
the period to which the report relates
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3. Insurer may send within the same time(above), the underlying fund reports prepared by
the managers if the following conditions are met:
i. The ILP sub-fund feeds substantially into the underlying fund;
ii. Policyholders invested a minimum single premium of USD50,000 or annualized

regular premium of USD5000 or equivalent in other currencies in the ILP sub-fund;
iii. The ILP sub- fund is not available for investment using CPF monies and the
insurer has obtained written consent from policyholders.
4. Insurer is not required to prepare and sent out the reports if :

 The reports covers a period of less than 3 months from the launch of the ILP sub-
funds; (newly launched)
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 The termination or maturity date of the ILP sub-fund is within 1 month from the date
these report is due to be sent to the policyholders. (nearing termination)
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5. Reports may be sent by electronic means if policyholders consented and this includes:
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 email
 electronic storage medium ( CD Rom)
 Posting on Webside
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Insurer shall provide an option to request for hardcopy of reports within 1 month from the
notification of availability of reports, and such reports shall be made available to
policyowner within 2 weeks of request.
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6. Payments from the ILP sub fund are not allowed for:
 Marketing or promotion expenses (including advertisement);
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 Any fees that have not been provided for in the product summary and policy contract;
 Cash rebates and soft dollars (unless see no.7)

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 Costs arising from CPF failed trades.

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7. Insurer shall ensure that the manager shall not :

a. 1. received soft dollars in the management of the ILP sub-fund unless it is for provision
of investment advice or related services of ILP sub fund on the best available terms,
given the market at the time of the transaction.
2. enter into unnecessary trades in order to achieve sufficient volume of transactions

to qualify for soft dollars
b. receive goods and services such as travel , accommodation and entertainment which fall in
the definition of “soft dollars” but do not qualify for the exceptions in the above.
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Part 2 - Non Mandatory Standards
1. An insurer should ensure that an ILP sub-fund complies with the requirements contained in
the relevant appendices of the code.
2. An insurer should pay out redemption proceeds to policyholders:

a. Definition of “Redemption Proceeds”:
Redemption Proceeds” are considered paid on the day policyholder is
credited or a cheque is mailed to the policyholder.
b. Definition of “day T”
T = date of the next pricing of the ILP sub fund immediately following the receipt of a
redemption request by an insurer with all requisite documents.
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a. Bond and Money Market ILP Within T + 4 business days
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sub-funds
“Bond ILP sub fund” – to invest primarily
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in debt securities and does not involve in
equity securities.
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b. Property ILP sub fund Within the period allowed contained in the
code.
c. Hedge ILP sub fund What is stated in the product summary of this
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notice
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d. In another Collective Investment Within T + 7 business days

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Scheme
e. Other types of fund not listed above Within T + 6 business days

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3. Transaction with related parties

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 The manager should not invest funds belonging to the ILP sub- fund under its management
in the insurer or manager’s own securities or those of any related corporation. This
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prohibition does not extend to ILP sub- funds’ managed by the manager or its related
corporations.
 The manager should not lent monies of the ILP sub fund under its management to
related corporations. However deposit made with a bank or finance company is not
considered monies lent.
 The manager should not purchase for any ILP sub fund under its management, real estate
assets owned by the insurer or its related corporations unless such purchases are allowed
under the Property Funds contained in the Code on Collective Investment Schemes.
4. The Insurer or manager should conduct all transactions for an ILP sub fund at arm’s length.
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5. Use of Financial Derivatives in an ILP sub-fund

Manager should ensure that the risks related to such financial instruments are duly measured,
monitored and managed on an ongoing basis.
6. Use of credit ratings

In the event of a difference between the ratings issued by credit rating agencies or the
manager’s internal credit assessment, the lowest ratings should be used.
7.
Dealings in Units Insurer should deal in units in an ILP sub fund in

accordance with the product summary and it should
be at least one dealing day a month.
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Suspension of dealings in an ILP sub fund
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 In exceptional circumstances for the best interest of Policyholders.
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 Insurer should inform MAS immediately of suspension and reasons for it.
 Suspension should cease as soon as practicable, in any event within 21 days of commencement
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of suspension. The period may be extended, subject to weekly review by Insurer.
 Resumption of dealings – insurer to inform MAS .

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8. Valuation of assets in an ILP Sub fund

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Valuation of assets in an ILP Sub fund

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In the case of quoted investments In the case of unquoted investments
The value of the assets of an ILP sub- fund  All assets of an ILP sub-fund should be
should be : valued by a person approved by the
a. the official closing price or the last insurer as qualified to value a fair value to
known transacted price on the organized such assets.
market on which the investment is quoted;
 Where the fair value of an asset cannot be
b. transacted price on the organized determined, manager should suspend
market on which the investment is quoted at valuation and trading in the units of the
a cut off time specified in the product ILP sub-fund.
summary.
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9a. Frequency of Valuation

Insurer should ensure that the units of an ILP sub fund should be valued every business day,
except for :
Sub fund that does not offer dealing Should be valued each regular dealing day, but in
every business any event; at least once a month.
Property ILP sub-funds To have a full valuation at least once yearly.
9b. Insurer should ensure that the value of a unit of the ILP sub-fund is published at least once
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every dealing day.
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10. Rounding differences arises from calculating the price of units in an ILP sub-fund or from
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calculating the number of units to be issued or redeemed, should be credited to the ILP
sub- fund.
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11. Valuation Errors and Compensation
 Notify MAS as soon as practicable.
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Error Compensation
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When a valuation error represents 0.5% Insurer should compensate policyholders and the
or more of the ILP Sub-fund’s NAV per sub fund for any losses incurred by them as a result
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unit after adjustment for the error. of the valuation error.

The compensation due to any single policyholder
should not apply if the amount of compensation
does not exceed $20.
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When a valuation error represents less There is no requirement to compensate the

than 0.5% of the ILP Sub-fund’s NAV per policyholders. However if the insurer chooses to
unit compensate one or more policyholders, then the
insurer should compensate all other policyholders in
the ILP sub-fund on the same basis.
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12. Delegation
1. Definition of “Sub-Managed ILP Sub- fund” :

An ILP sub-fund may be managed in part or in whole by a fund manager(s) other than the
insurer.
 Where more than 10% of the assets of the Insurer together with its
ILP sub-fund is managed aboard; related corporations should
be managing at least
 Where investments of more than 10% of the S$500m of discretionary
assets is in a foreign CIS funds in Singapore
2. Definition of “Feeder ILP Sub-Fund” :

An ILP Sub Fund may be invested in one or more collective investment schemes.
 For a feeder ILP sub fund where 100% of the assets of the ILP sub-fund will be
invested in an authorized CIS, the CIS should follow substantially the core
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investment guidelines for ILP sub-funds set out in the Code.
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13a. Performance fees payable by the scheme should meet the following:
 equitable to all participants;
 ad
calculated and paid after consideration of all other payments;
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 cystallisation of performance fees should be no more frequent than once a year;
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 calculation method to be based on a fulcrum fee or a high water mark arrangement.

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13b. Performance – Calculation Method

 The Fulcrum Fee, as a percentage of the NAV per unit of the scheme, should be applied
in a symmetric manner. The fulcrum fee should increase or decrease proportionately
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with the investment performance of the ILP sub fund as compared to the specified
benchmark. (know the calculation from text).
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 Under the High Water Mark arrangement, the high water mark should be reset to the
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ILP sub fund’s NAV whenever a historical high is reached at the point of performance
fee calculation.(know the calculation from text).
14. Prohibited Activities

An ILP sub fund should not engage in:
a. direct lending of monies;
b. the granting of guarantees;
c. underwriting;
d. short selling except where this arises from financial derivatives which are invested in
accordance with the Code.
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15. Notification Of Breaches

The insurer should inform MAS, within 3 business days after insurer becomes aware, of
any breach of the requirements and standards set out in the Notice No: MAS 307.
The following breaches need not be reported to MAS as long as such breach is rectified in
accordance with the above, but in any case no later than 3 months from the date of the
breach unless specified in the Code:
a. appreciation or depreciation in the value of the ILP sub fund’s underlying
investments;
b. redemption of units or payments from the ILP sub fund;
c. changes in the capital of a company;
d. reduction in the weight of a constituent in the benchmark;
e. downgrade in or cessation of a credit rating.
16. Naming of ILP sub funds
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ILP sub- fund’s name should not to be undesirable and misleading. It takes into
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consideration whether the name:
 is similar to another ILP sub fund;
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 implies that the ILP sub-fund has merits which may not be justified. Eg cannot use “
capital protected” and “principal protected” when it does not comply with the guidelines
concerning capital guaranteed schemes;
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 implies that the manager has particular qualities which may not be justified;
 is inconsistent with the ILP sub-fund’s investment objective;

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 implies the ILP sub-fund is not an ILP eg using “plan”, “account”;

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 mislead the participants into thinking that persons other than the manager are
responsible for the ILP sub-fund .
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Chapter 8 – MAS Guidelines - Part I

This Chapter covers 6 Guidelines & 1 Circular:
 Guidelines On Criteria For The Grant Of A FA's Licence (FAA-G01)
 Guidelines On Fit And Proper Criteria (FSG-G01)
 Circular On Due Diligence Checks And Documentation For Appointment of Reps
 Guidelines On Standards Of Conduct for FAs and Reps (FAA-G04)
 Guidelines On The Use Of The Term “Independent” (FAA-G05)
 Guidelines On Applications For Approval Under Paragraph 11 (FAA-G06)
 Guidelines On Exemption For Specialised Unit Servicing High Net Worh(FAA-G07)
1. Guideline on Criteria for the Grant of a Financial Adviser’s License
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1. A financial adviser’s licence will only be granted to a corporation. The corporation is required
to establish a physical presence in Singapore and meet the following requirements:
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A. Chief Executive Officer, Directors and Reps of the applicant
 Whether the applicant employs at least 2 full time individuals as appointed reps for the
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provision of financial advisory services;
 Whether Chief Executive Officer (CEOs) and all Executive Directors (EDs have
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acceptable academic qualifications, a minimum of 5 years relevant working
experience in respect of financial advisory services, with at least 3 years of managerial
capacity;
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 Whether the applicant’s board of directors comprises a minimum of 2 members with at

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least 1 of whom is a resident in Singapore;

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 Whether the CEO is resident in Singapore;
 Whether CEO or EDs are placed in a position of conflict of interest.

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B. Minimum Financial Requirements

In the case of an applicant providing the following financial advisory services, they must
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ensure the relevant paid up capital:

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(a) Paid up capital of S$150,000

 Advising others concerning investment products other than futures contracts,
foreign exchange trading;
 Marketing of collective investment schemes;
 Arranging of life policies
(b) Paid up capital of S$300,000

 Advising others concerning futures contracts, foreign exchange trading
(c) Paid up capital of S$300,000

 Combination of (a) and (b)
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C. Professional Indemnity Insurance

Must have in force a standalone non hybrid professional indemnity insurance policy (PII) with a
cover of not less than S$500,000 and under which deductible allowed must not be more than
20% of the applicant’s net asset value.
Other alternative forms of PII may be considered as long as applicant does not undermine the
interest of investors. (refer to table in text for other form of PII)
D. Track Record – minimum 3 years proven track record in the financial advisory business.
E. Shareholding – if applicant does not satisfy the 3 year track record requirement, the CEO should
own not less than 20% shareholdings of the applicant. The CEO and Eds should in aggregate
own not less than 50% shareholdings of the applicant.
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F. If an applicant is a foreign company, it should be properly supervised by home regulatory
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authority
G. An applicant should have adequate internal compliance systems and process to commensurate
with the size and complexity of its business.
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H. An applicant, all its officers, employees and representative must satisfy the criteria on Fit and
Proper.
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2. Guideline on Fit and Proper Criteria
1. This guideline underpins the requirements that the relevant persons perform the activities
regulated under the relevant legislation efficiently, honestly and fairly and acts in the best
interests of customers.
2. The onus is on each relevant person to establish that it or he is a fit and proper person rather
than for MAS to show otherwise.
3. If the relevant persons fail to satisfy MAS that it or he is fit and proper, MAS may refuse the
person’s application, revoke the person’s authorization or take appropriate regulatory action
when necessary
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4. MAS will consider 3 factors to assess if the relevant persons are fit and proper. They are: -
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i. Character - (Honest, Integrity and Reputation)
 Whether they are honesty, truthful, and have acted in the best interest of the client.
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 Whether they have been censured, penalized, disciplined, suspended or issue a
prohibition order.
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ii. Financial soundness

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 Whether they have any unsatisfactory financial standing e.g. Representative is an

undischarged bankrupt or whether FA is being wound up, dissolved or in receivership.
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iii. Competency and capability
 Whether Rep and FA and other relevant persons has satisfactory past performance or
expertise , skills and knowledge , fulfill proper educational qualifications and satisfy
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other requirements
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3. Circulars on due diligence checks and documentation for appointment of Reps

This circular sets out MAS’s expectation of the due diligence checks that should be conducted by all
financial institutions (FIs).
1. Fit and Proper Declaration
Roles Responsibility
1. Board and Senior Responsible for putting in place clearly defined and documented
Management of FI policies to ensure it recruit and retain only fit and proper reps.
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2a. Proposed Reps FI to obtain and maintain written self declaration from its
proposed reps that he has read and understood the Guidelines on
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Fit and Proper and that he is aware that it is an offence to provide
false and misleading statements to his principal or to MAS.
2b. What should FI do if

adverse information is
FI should:
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 follow up and access if reps can still be considered as fit and
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given by the proposed proper after the review;
reps?
 Maintain proper records on reasons the reps have fulfill the fit
and proper criteria;
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 Closely monitor and supervise these reps for an appropriate

period;
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 Declare to MAS that it is aware and have assessed the

individual’s adverse information.
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2c. Relying on proposed FI to :

rep’s self declaration is a) verify relevant documents, eg document, certificates,
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insufficient, what is relevant statement from CPF Board evidencing that no

expected of FI to arrears payments of contributions on his own CPF
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determine individual’s account;

fitness and propriety?
b) Conduct independent due diligence checks to ensure the
individual is neither suspected of nor involve in money
laundering or terrorist financing activities;
c) Maintain adequate documentation evidencing the relevant

checks in relation to the provision of the fit and proper
certification.
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2. Due Diligence Checks

MAS expects FIs to conduct these due diligence checks on the reps.
Checks Details
1. Probity checks on 1. Under RNF, when FI submits a notification it is required to

Rep’s identity provide the rep’s:
 National Registration Identity (NRIC) number
 Foreign Identification Number (FIN) number for foreigner
 Passport number if he is a provisional rep who has neither NRIC

or FIN.
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2. FI is required to notify MAS of any change in the rep’s particulars
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within 14 days of the change using Form 18.
1. FI is expected to:
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2. Probity checks on
Rep’s past records a. conduct reference checks with rep’s previous employers to
confirm he has not been dismissed or asked to resign or any
adverse material record (eg warning, disciplinary action);
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b. check the Public Register of Representatives to see of any
past regulatory actions / prohibition orders have been taken
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against him;
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c. conduct probity searches to verify rep’s criminal or

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disciplinary records under the law.
2. FI should note that is an offence to employ any person who has

been issued a prohibition order that is still in effect.
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3. Probity checks on FI to ensure that the rep is not the subject of a bankrupt
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Rep’s financial status petition or declared a bankrupt in Singapore or elsewhere through

conducting checks with credit agencies.
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If the rep was previously self employed, to obtain the individual’s

records from the CPF Board to verify that he is not in arrears
of his contributions to CPF Board as required under the CPF Act.
4. Not to furnish false or For false or misleading information, MAS may:

misleading document a. refuse to enter the name of an individual in the public register;
or information
b. refuse to enter an additional type of regulated activity/financial
advisory service for an appointed rep;
c. revoke the status of an individual as a rep.
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5. Periodic declarations FIs should obtain on a periodic basis (eg annually) written self
and checks declarations from its reps and FIs to conduct the same due
diligence checks on existing reps.
3. Continuing Education
FIs should ensure their reps are trained on features and risks reward characteristic of any
investment product distributed and their reps understand the profile of the target segments of the
product, before they are allowed to advise or sell those products to customers.
4. Conflict Assessment
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FIs should ensure that there are no conflicts of interest in their rep’s personal
circumstances, relationship with connected persons, other business interests
(partnerships, sole proprietorships, directorships, shareholdings etc) or work arrangement
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within the corporation, that will impair the rep’s ability to discharge fair dealing.
Potential conflicts with the rep’s proposed regulated activities (eg dealing in securities
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(execution) and corporate finance advisory) or financial advisory services can arise as a result of
his:
i. shareholdings or business interest;
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ii. other roles within the company, eg back office operations; or

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iii. connected person’s occupation.

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FI should not proceed to appoint the individual as a rep if it compromises the rep’s ability to
discharge his duties and responsibilities under the regulatory requirements
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4. Guideline on Standards of Conduct for Financial Advisers and Representatives.
1. Sets out the standards of conduct expected of FA and their representatives and to enhance
confidence in the financial advisory industry.
Standards Details - Expectation of FAs
Integrity Conduct its business with honesty, fairness, integrity and

professionalism
Objectivity Exercise care and judgment to achieve objectivity.
Confidentiality Not disclose Client’s information to others unless it is to MAS or other
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government agencies or consent is given by client.
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Competence Provide advice in areas they are competent, however to consult other
qualified professionals if FA does not have the skills.
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A rep should keep himself abreast of advances in the financial services
industry and participate in continuing education.
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Where a FA operates a multi-tier structure, it should put in place
arrangements to enable it to supervise its reps at every tier.
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Prompt & Best Execution FA should process orders promptly and in accordance to clients’
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instructions.
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FA should have adequately systems and process in place to ensure

proper supervision of reps and their activities.
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Cessation of Business Ensure all liabilities to clients have been fully discharged and its
clients to be serviced by another FA.
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Fact and Opinion Distinguish between facts and opinions. FA must indicate that it is his
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opinion if he does make one.
Remuneration FA should disclose in writing to its clients all remuneration it has

received or will received for making any recommendation. However for
life policy, to disclose the distribution costs item found in the benefit
illustration.
Record Keeping FA should keep records of all information it has obtained from its
clients , the recommendation made and the basis of such
recommendation.
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Conflict of interest FA should act in the best interest of the client and should disclose in
writing any conflict of interest arising from connection or association
with any product provider promptly.
Complaints handling FA should ensure that :

 Complaints are handled in a fair, timely and appropriate manner;
 Complaints are promptly investigated and responded to;
 An officer designated to handle all complaints.
5. Guideline on Use of the term “Independent” by Financial Advisers
1. To give guidance to FA on the circumstances on the use of the term “Independent”, as
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“Independent” connotes objectivity and impartially to the investing public and does not have
any potential conflict of interest when recommending an investment product, as a result of
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commercial or financial link with a product provider.
2. FA shall use “Independent” if
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 It does not receive any commission or other benefits from a product provider which may
create product biases.
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 It operates without any conflict of interest created by connection to any product provider.
E.g. not selling more of affiliated company’s product.
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 The commission received between different providers is insignificant or same level of

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commission.
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Commission is “Significant” if
o It constitutes more than 20% of FA’s total revenue.
o Difference in the rate of commission amounting to more than 20%.
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 It operates free from any direct or indirect product restriction relating to any product which
is recommended.
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3a. Direct Restriction

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A contractual agreement between FA and product provider; whereby FA is limited to sell

only a range of products selected by the product provider.
3b. Indirect Restriction

FA is required to meet sales target agreed with product provider. This is likely to create
product biases in favor of product provider.
3c. MAS will not normally regard a financial adviser as being independent, if it represents less
than 4 product providers for each class of investment product.
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4. A financial adviser should not promote its services as “independent” if it itself is a bank,
fund management company, (or a wholly owned subsidiary of a fund management
company), life insurance company, as there is likely to be a product bias in favour of their
own products.
In considering whether these ownership links create a product biases, MAS will take into
consideration:
a. the ownership structure of the financial adviser;
b. its relationship with the product provider; and
c. the products on which advice or recommendation is given.
6. Guidelines On Applications for Approval Of Arrangement under Paragraph 11 of

the 1st Schedule to the FAA.
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1. This schedule allows a foreign company whose provision of any FA services is effected under
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an arrangement between the foreign company and its related corporation which is licensed
under the FAA or is an exempted FA. Individuals providing any FA services for the foreign
related corporation are not representatives as defined in the FAA, hence they are not required
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to be an appointed or provisional rep under FAA.
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2. In making an application for approval of the arrangement under Paragraph 11, the Singapore
entity should ensure that its foreign related corporation meets the following criteria:
a. It has maintained a track record of at least past 3 years in the proposed financial advisory
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service;
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b. It possesses competence in the specific area of business that it is proposing to effect;

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c. It discharges its function efficiently, honesty and fairly;
d. It maintains a good ranking in the home country;

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e. It is subject to proper supervision by its home regulatory authority.

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3. MAS will give favorable consideration where key process such as Advisory and Client
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Servicing of the FA services provided are undertaken or controlled by the Singapore entity.
4. MAS have fewer regulatory concerns when target clientele are accredited investors and expert
investors as they are able to safeguard their own interests.
5. An application for approval under Paragraph 11 must state clearly the specific arrangement to
be approved by MAS. This “arrangement” has 3 main aspects:
 The entities involved in providing the financial advisory services;

 The types of clients;
 The types of financial advisory service.
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7. Guidelines on Exemption For Specialised Units Servicing High Net Worth

Individuals Under Section 100(2) of the FAA.
1. This guideline grants exemptions from sections 25,27,28,36 of the FAA and some written
directions, in respect of any FA services provided by the unit of the applicant that services
High Net Worth individual. The applicant may either be a licensed or exempt FA.
2. Definition of “High Net Worth Individual”
a. has a minimum of S$1 million of assets, or equivalent in foreign currencies in

any of these forms:
(i) bank deposits including structured deposits.
(ii) capital markets product.
(iii) life policies.
(iv) other investment products prescribe by MAS.
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b. total net personal assets exceed S$2 million in value or equivalent in foreign currencies;
c. annual income is not less than S$300,000 or equivalent in foreign currencies;
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d. have a potential to become (a) of above within a period of 2 years.
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3. The purpose of the Unit should be to target and serve prospective High Net Worth individuals.
Therefore the Unit should have its own marketing or client service staff, who should not serve
persons, other than the high net worth individuals.
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4. Criteria used by MAS in assessing applicants for exemptions:

a. Whether the clients served are considered high net worth;
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b. The track record and record of the applicant and its parent institution;
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c. The policies and procedures on client acceptance and risk profiling that the Unit has in place;
d. The range of products and services offered by the Unit;

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e. Any other relevant factors.

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Chapter 9 – MAS Guidelines - Part II

This Chapter covers 4 Guidelines:
 Guidelines on conduct of business for execution related advice (FAA-G08)
 Guidelines on structured deposits(FAA-G09)
 Guidelines on switching of designated investment products (FAA-G10)
 Guidelines on Fair Dealing – Board and senior management responsibilities for delivering
fair dealing outcomes to customers(FAA-G-11)
1. Guidelines On Conduct Of Business For Execution Related Advice.
1. This guideline set out standards to be maintained by dealers when they provide “execution
related advice”. They do not apply to circumstances where dealer merely carries out instruction
by a client to sell/buy a product without the dealer making any recommendation or giving advice
in relation to that product.
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2. Definition of “Execution Related Advice”.
Advice provided by exempt FA (dealers) and their representatives, which is solely incidental to
the execution activities of such person where no discrete fee is charged for the advice
rendered.
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3. “Execution activities” means dealing in securities (other than collective investment schemes),
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futures contracts, foreign exchange trading, leverage foreign exchange trading.
4. Recommendations on Capital Market Products.

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 FA to have a reasonable basis for any recommendation made with respect of any product.
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 A dealer should put in place adequate systems and process to commensurate with its
business.
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 A dealer is expected to have sufficient knowledge of the client’s financial needs at the time
when the relationship is first established. On an ongoing basis a dealer should update the
client profile and conduct a needs analysis at a reasonable interval, at least once a year.
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 When a client does not want to provide information, a dealer should proceed with the client’s
request, document decision and to highlight that it is client’s responsibility to ensure
suitability of product recommended.
5. Documentation and Record Keeping

A dealer is expected to maintain proper records to be able to demonstrate the basis of
recommendation made and the warnings provided to the clients either in the form of a file note or
a tape of the telephone conversation. This is sensible protection of the dealer as well as
maintaining good customer relations. As a practice, such records should be kept for at least
6 years.
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6. Disclosure Of Conflict Of Interest

 A dealer should disclose to its clients any actual or potential conflict of interest either orally
or in writing or both.
 A dealer is not required to repeat such disclosure of conflict of interest each time an
execution related advice is rendered under these situations:
o Previous disclosure remains up to date and accurate;
o Whether a client may be reasonably be expected to be fully aware of the long lapse
of time between the previous disclosure; and that previous disclosures may no longer
be applicable in the context of the current recommendation or advice.
2. Guidelines on Structured Deposits.
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1. These guidelines apply to any licensed or exempt FA or its representatives, who advises on any
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structured deposits except to the :
 An accredited , expert investor, institutional investor where advice is given to;
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 High net worth;
 Any person outside of Singapore.

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2. Product Information Disclosure
 Structure Deposit is a relatively safe instrument, returns on such products are variable and
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often depends on the performance of complex financial instruments.

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 There is a potential loss of principal sum invested if investments are not held to maturity.
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 Product information disclosure including marketing materials should be clear, adequate

and not false or misleading.
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Material information includes:

o Nature of the investment;
o Details of the deposit taking institution;
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o The benefits of structured deposit;

o Risk factor;
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o Fees and charges;

o Early termination clauses
 A FA and its Reps should ensure that every client is fully aware of the
tenor of the structured deposit and the fact the principal sum is only
guaranteed if held to maturity. The possibility of losing principal
sum due to early withdrawal should be disclosed to every client.
o Warning, exclusion, disclaimer.
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3. Recommendations on Structured Deposits

1. Warnings
Some clients may not require any recommendations, hence FA may dispense with the usual
fact finding and needs based analysis, however at the minimum, warnings should convey:
a. Structured Deposits unlike traditional deposits, have an investment element and
returns may vary, hence clients may wish to seek advice from their FAs.
b. In the event if clients do not wish to seek advice, they should consider whether
product is suitable for them.
2. Screening
Any client who is likely to withdraw funds prior to the maturity of the structured deposit (eg
elderly person) is encouraged to seek advice from a FA as early termination may result in
loss of the principal sum and client may only be able to recover the value of the underlying
financial instruments
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3. Training and Competency
Representatives of a FA who meets the training and competency requirements set out in the
“Notice on Minimum Entry and Examination Requirements of Licensed FAs and Exempt FAs
’’ will be considered as one equipped with necessary expertise.
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All representatives advising on structured deposit should pass Module 5 and Module 8 or
develop their own specific training programmes on structure deposits to equip their
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representatives with necessary expertise.
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4. Segregation of Duties
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Financial adviser that is a deposit taking institution should ensure that the marketing and
advisory process for structured deposit is distinct from the process through which a client’s
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funds are accepted. Employees in the deposit taking area who are not qualified to provide
advice on investment products, such as bank tellers, should not be involved in the
marketing or recommendation of structure deposit.
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5. Requirements under the Banking Act (Cap 19)

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All FAs and its representatives are to be aware of the requirements under the Banking Act:
a. The restrictions on deposit taking business and soliciting of deposits;
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b. (In relation to banks) – The restrictions on the opening of a new place of business by a
bank. In this regard, a booth or road show location where applications for structured
deposit are received, would be considered a new place of business, for which prior
approval from MAS must be obtained.
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3. Guidelines on Switching of Designated Investment Products.

A financial adviser and its reps should disclose to a client in writing and draw the attention of the
client to any fee or charge that the client would have to bear if they were to switch from the
original product to a replacement product.
Monitoring of switching of Designated Investment Products
1. Front End Monitoring Procedures
1. FA should require the client to declare in writing whether he has been advised by a
representative of the FA to switch products. Such declarations should include whether the
original product is:
 A different type of designated investment product from the replacement product,

purchased from other financial advisers.
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 Whether the representatives have drawn his attention to the cost and possible
disadvantages associated with the switch.
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 Whether he (the client) would like to proceed with the switch, understanding that fees
and charges or disadvantages may arise from the switch.
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2. The representative should declare whether the client is entitled to any free switching, so
that client is fully informed off all free switches.
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3. FA should require the supervisor of the representative to review switching recommendation

made by their reps and indicate in writing, whether he agrees with the recommendation and
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if not, the actions that have been taken to rectify the situation.
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2. Back End Monitoring Procedures
1. FA should institute control, process and procedures to monitor and track switching of
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designated investment products. It includes:

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 Check past transactions and records of clients for new purchase made, to detect
switches not declared by the client.
 Track volume of switches to indentify reps with unusual high volumes of switching
transactions.
 Put in place procedures to ensure switch recommended by rep is reviewed by a

Supervisor for appropriateness. When a FA detects a switch not declared by a client,
the FA should require the supervisor to review the switch and indicates in writing,
whether he agrees with the recommendation and if not, the actions that have been
taken to rectify the situation.
 Implementing other procedures and control to identify unusual trends in switching

transactions.
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4. Guidelines on Fair Dealing – Board and Senior Management Responsibilities for

delivering fair dealing outcomes to customers.
This Guideline focus on Board and Senior Management responsibilities for delivering fair
dealing outcomes to customers. It applies to the selection, marketing and distribution of
investment products and the responsibilities for after sales services and complaints handling. It
sets out five fair dealing outcomes:
1. Fair Dealing Outcome One

“Customers have confidence that they deal with financial institutions (FIs) where fair dealing
is central to the corporate culture”.
1. Rationale: FIs play an important role in influencing customers’ financial decisions as

customers rely on FIs for relevant information and advice.
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2. To develop a culture of fair dealing, Board and Senior Management (BSM) should address
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the following areas:
a. Devising a clear strategy to achieve the fair dealing outcomes
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These plans include:
 Allocation of executive responsibilities;
 Implementation of measurable targets
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 Develop a remuneration structure for senior executives to linked key performance
for achieving fair dealing outcomes.
BSM should assign responsibilities to specific executives for carrying out initiatives to
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promote fair dealing practices within the FI. The formation of a taskforce dedicated to
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achieve fair dealing outcomes is way to demonstrate the FI commitment to dealing with
customers fairly.
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b. Aligning organizational policies and practices to the fair dealing outcomes

These include having:
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 Due diligence procedures for selecting investment products and services that are
suitable for its customers;
 Formalized recruitment practices and training to ensure its staff are competent;
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 Effective systems and control to ensure proper supervision of its staff;

 Procedures for whistle blowers to report misconduct;
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 Effective performance evaluation and remuneration systems to encourage right

behavior to achieve fair dealing outcomes;
 Proper and clear assessment for partnerships with other FIs or introducers in its
distribution business.
c. Communicating the fair dealing outcomes as a priority for the FI

BSM should communicate the above to internal and external stakeholders that
delivering fair dealing outcomes to customers is an important priority.
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d. Monitor implementation of the fair dealing strategy

The framework to measure and monitor includes these:
 Monitor complaints trends;
 Conduct customer survey;
 Conduct mystery shopping exercise;
 Preparing compliance reports.
2. Fair Dealing Outcome Two

“FIs offer products and service that are suitable for their target customer segments”.
1. Rationale: Fls should carefully assess the suitability of every investment product
before marketing the product to customers. Making financial decisions
can be a complex process that has a significant impact on the livelihood
of customers.
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2a. Conducting Product Due Diligence
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1. In deciding whether to distribute a new investment product, FI should conduct proper due
diligence:
o Product
To assess the features and risk reward characteristics of the product;
o Client
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Determine if it is suitable for its target customer segments, rather than relying solely
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on the product provider. This will ensure FI offers products that suit the profile of its
target segments.
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2. The product due diligence process should include a thorough review by FI on the
prospectus, pricing statement, Product Highlights Sheet, factsheet, marketing materials
from the product provider.
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3. In deciding to distribute a new investment product, FI to consider whether:

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 FI ’s target customer segments are able to understand the product, given its risk
reward characteristics and complexity;
 The product’s objective, risk, reward characteristics, cost and fees are suitable for its
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target segments;
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 How to distribute product – rep, internet, direct marketing;
 Their reps are able to understand and be competent to market such products;
 Its systems and processes, including fact find forms, risk profiling questionnaires etc
are able to support the sale of the product.
4. FI who disagrees with the disclosures made or customer segments recommended by

product provider, should not market and sell these products.
5. FI should maintain proper documentation of the due diligence performed.
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2b. Marketing to target customer segments

 FI should clearly communicates to its staff the target customer segment and key
features and risk reward characteristics of each product it offers;
 For those with limited knowledge of investment product, FI should encourage such
customers to opt for a full fact find to ensure recommendation made suits their
circumstances;
 In marketing a complex investment product, FI should make it clear to customers that

the product cannot be sold to them without advice.
3. Fair Dealing Outcome Three

“Financial institutions have competent representative who provide customers with quality
advice and appropriate recommendations”.
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1. Rationale: Customers often rely on reps to explain and recommend products to them,
hence this requires fully trained and competent reps.
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2a. Ensuring Competency Of Reps
1. In order to provide quality advice to customers, FIs should ensure all reps:
 Undergo a structured training programme covering advisory sales process,
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regulatory requirements etc;
 Receive continuous professional training;

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 Trained on features and risk rewards characteristics before they are allowed to sell.
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2. Where training is conducted the product provider or any third party trainer, it is FI’s
responsibility to ensure training is adequate.
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2b . Ensuring Competency Of Supervisors

1. FI should ensure that supervisors are primarily focused on performing supervisory duties
and are not distracted by their own sales function.
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2. Supervisors should conduct quality coaching sessions for their representatives. They
should also review the sales conducted by reps, including:
 Verifying that rep’s recommendation meets the needs of customers;
 Ensure reps seeks higher level approval for sales of complex products to customers
with limited knowledge of investment products;
 Monitor and ensure reps conduct activities which they are qualified and authorized
to sell;
 Monitor and ensure reps follow FI’s prescribed advisory and sales process, including
proper documentation of basis of recommendation.
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2c. Providing quality advice and appropriate recommendations

1. FI should ensure that its fact find form and risk profiling questionnaire should adequately
and correctly capture all important information about the customer. In addition, any
scoring methodology used in the advisory and sales process is soundly designed and
correctly applied.
2. FI that provides “execution only” services must put in place appropriate systems and
procedures to ensure it does not provide advice to customers.
3. FI should ensure its reps:

 Make reasonable enquires and collect sufficient information to understand and analyse
the customer’s risks and financial needs;
 Present sufficient investment option to meet the customer’s financial objectives and risk
tolerance;
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 Encourage customers with limited knowledge of investment products to opt for a full fact
find to enable appropriate recommendations;
 Fully document the basis of recommendation, by stating the customer’s objective and
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needs and why the product is recommended and the possible risks of the product.
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4. FI should not unduly influence the customers by offering gifts or rebates, and ensure
its reps do not use aggressive sales tactics.
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2d. Aligning remuneration structures with customers’ interest

1. Examples of problematic remuneration structures include those with product quotas
and highly differentiated commissions for the sale of different products.
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FI can consider adopting a balanced scorecard approach incorporating indicators,

such as number of fact finds conducted, compliance record and competency
assessments in its remuneration structure for its reps.
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Alternatively FI can consider adopting a “fee for advice” model pegging the
remuneration of reps to other objective indicators such as the medium term performance
of assets under advice.
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4. Fair Dealing Outcome Four

“Customers receive clear, relevant and timely information to make informed financial
decisions”
1. Rationale: FI should provide customers with clear and relevant information before, during
and after sale process, in order for them to make informed financial decisions.
2a. Providing clear information

1. FI should ensure disclosures to customers are:
 In plain language and avoid the use of technical terms;
 Presented in a format that is simple to read and easy to understand.
2. Where information is provided verbally by representatives, FI should ensure that any

representations are consistent with the written information provided in the product
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disclosure documents. FI should train reps to avoid the use of terms of phrases which may
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convey a false sense of security, eg “capital protected” or similar to fixed deposits or bonds”
3. In dealing with customers with limited knowledge or understanding of investment products,
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FI should put in place safeguards during the advisory and sales process including:
 Providing appropriate translation of the product disclosure documents to non English
speaking customers and taking care not to change their meaning when translating
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technical terms;
 Requiring the rep’s supervisor or an English speaking relative to be present during the
advisory process;
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 Rep to clearly document the additional steps taken to ensure the customers fully
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understand the investment product and its basis for recommendation.
2b. Providing relevant information

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1. FI should provide product disclosure documents, prepared by product provider such as

prospectus, pricing statement, Product Highlights Sheet, factsheets and marketing materials
to a customer before he makes a financial decision.
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2. Information on the free look or cooling off period must be highlighted.

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3. FI should be mindful that advertising and marketing materials in particular those for unlisted
investment products give a balanced representation of the features and risk reward
characteristics of the product. FI should be mindful such advertising and marketing materials
 Do not misrepresent or omit key product features and risks;
 Do not contain words/ graphics that can convey an inaccurate nature or risks of the
product;
 Do not give the impression that a customer can make a profit without bearing any
risk , esp for unlisted investment products;
 Do not mislead about the possible performance of the products.
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4. FI should explain to customers the range of possible outcomes for the investment product,
including the worst case scenario.
5. FI should inform customers how they can provide feedback or lodge complaints about the FI
and its reps thro Financial Industry Disputes Resolution Centre Ltd (FIDReC)
2c. Providing Timely Information

1. FI should at the start of the relationship with its customers, set out the scope of its services
and what customers could expect.
2. FI should provide customers with information and updates during the advisory and sales
process, and after the sale has been concluded.
3. FI should provide ongoing disclosures on investment products, such as annual reports or
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updates on material development provided by product providers to its customers to keep
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them updated.
5. Fair Dealing Outcome 5
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“Financial institutions handle customer complaints in an independent, effective and prompt
manner”.
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1. Rationale: To assure customers that their concerns and feedback are dealt with fairly and
professionally.
2a. Handling complaints independently and effectively

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1. Every complainant must be afforded full opportunity to state his complaint. FI should work
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with the complainant to identify all facts required for a fair assessment of the compliant. The
complaint should be properly documented and a copy of the interview statements made by
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the complainant should be furnished to him.
2. To ensure that complaints are handled independently and effectively, FI should appoint
reviewers who are not involved in the provision of financial advisory services to oversee the
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investigation and resolution of complaints. There should be guidelines on and when to

escalate complaints to the Board and Senior Management.
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3. When FI receives a significant number of complaints about a specific issue (reps or product),
it should conduct investigations to identify the cause of the problem.
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2b. Resolving the complaints promptly

FI must devote sufficient resources to attend to and resolve customer’s complaint within the
stipulated turnaround time, without compromising the quality of review.
6. The Board ’s Responsibilities

The Board and Senior Management (BSM) are accountable for setting the culture and direction
of the FI to align business practices with fair dealing outcomes. This involves:
 Commitment by the BSM;
 Management framework to measure and monitor achievement of the fair dealing outcomes;
 Training of staff and reps;
 Performance evaluation and remuneration system to incentivize fair dealing conduct.
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7. Assessment by MAS
1. On FI’s failure to observe this Guideline, MAS will take supervisory enforcement action
through use of :
 Inspections and visits to FIs;
 Interviews with Board and Senior Management;
 Surveys of FIs;
 Customer surveys and mystery shopping exercises
2. Industry and consumer associations play a key role in promoting the fair dealing outcomes.
They can do so in these ways:
 Developing case studies and examples of best practices;
 Conducting mystery shopping exercises, customer surveys and other studies to
identify the area of market conduct practices for improvement.
 Aligning their codes of practice with the fair dealing outcomes.
 Conducting training for industry representatives.
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 Educate customers to help them understand fair dealing initiative and what they can
expect from financial institutions.
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3. Consumes should also equip themselves to make informed financial decisions. The MAS will
continue to issue consumer guides and support under the MoneySense financial education
ad
programme.
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Chapter 10 – Revised Code On Collective Investment

Schemes
1. The code sets out the best practices on management, operation and marketing of Collective
Investment Schemes that managers and approved trustees are expected to observe.
2. A breach of this code may result in MAS:

 to revoke or suspend the authorization or recognition of the scheme;
 to refuse to authorize or recognize new schemes proposed;
 to revoke approval granted under the SFA, or to prohibit the trustee from acting as trustee
for any new scheme.
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3. The code was first issued on 23 May 2002, revised on 8 April 2011. The revised code will be
effective 1 October 2011 and it will apply to all authorized schemes. The revised code aims to
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provide greater clarity and to increase the flexibility for fund managers in managing their
funds. The Code also aims to enhance safeguards for retail investors.
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4. The code is non statutory in nature. Failure to comply will not itself render the person liable to
criminal proceedings.
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1. The Manager
1. Functions and Responsibilities include:
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 maintain a record of the instructions to the trustee as to how votes in relation to the
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investments of a scheme should be exercised;

 maintain a record of all soft dollars received;
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 carries out the transactions for the scheme under specified guidelines and take reasonable
steps to ensure the best possible result for the scheme, taking in consideration all relevant
factors;
 ensure transactions are carried out consistently with the scheme’s objective, and at arm’s
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length and adhere to compliance requirements when involving related corporations.

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2. Use of Financial Derivatives

The scheme has to observe certain safeguards. These includes:
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 ensure derivatives’ underlying instruments are permitted investments, commodities, which

meet the conditions in the code;
 derivatives are liquid and subject to daily valuation;
 underlying instruments of the scheme must comply with diversification limits
 the global exposure of a scheme to financial derivatives or embedded financial derivatives
should not exceed 100% of the scheme’s NAV.
3. Use of Credit Ratings

The manager should where possible make its own credit assessments to verify ratings issued by
credit rating agencies. In the event of a difference between the ratings issued by credit rating
agencies and the manager’s internal credit assessment, the lower rating should be used.
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4. The manager should not carry out its investments activities in a manner which would enable it to
exercise significant influence over the management of an issuer or permissible investments.
5. Payment of Redemption Proceed

Cross reference Chapter 7, 3.3.3
6. Notification of significant changes

Manager should inform MAS and existing participants not later than one month before the
changes is to take effect.
Examples of significant changes – similar to Chapter 7, 3.2.1(b)
7. Modifications to the Trust Deed

Manager should obtain an extraordinary resolution of participants for any modification of the
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trust deed, unless the trustee certifies that the modification or change does not prejudice the
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interests of the participant, necessary in order to comply with official requirements, or to remove
obsolete provision.
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8. Cash Rebates and Soft Dollars
Similar to Chapter 7, 3.2.7
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9. Delegation – Similar to Chapter 7, 3.3.20
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10. No payments should be made by the scheme if it prejudices the interests of the participant. The
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manager should not pay from the scheme that has not been provided for in the trust deed.
Marketing or promotion expenses, (eg advertisement in the media, mailers fact sheet) cannot
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be paid from the scheme unless it is those for preparation, printing lodgment of prospectuses,
profile statements or product highlights sheets
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11. Performance fees payable by the scheme should meet the following:
 equitable to all participants;
 calculated and paid after consideration of all other payments;
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 cystallisation of performance fees should be no more frequent than once a year;

 It should be based on method either a fulcrum fee or a high water mark arrangement.
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12. The Fulcrum Fee, as a percentage of the NAV per unit of the scheme, should be applied in a
symmetric manner. The fulcrum fee should increase or decrease proportionately
with the investment performance of the scheme as compared to the specified benchmark.
Under the High Water Mark arrangement of a scheme, the high water mark should be reset
to the scheme’s NAV whenever a historical high is reached at the point of performance fee
calculation. Refer to examples in text.
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13. Performance fee should be contained in the Prospectus and it contains the following:
 to whom it is payable;
 can be levied, even if the return of the scheme is negative ;
 maximum amount of the scheme’s NAV the fee may represent in an annual accounting
period;
 numerical examples of how the fee is calculated;
 whether the scheme achieves equalization of the performance fees or otherwise and how it
will affect the amount of fees borne by the participant.
2. The Scheme
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1. The revised code requires the scheme’s name to be appropriate, not to be undesirable and
misleading. It takes into consideration whether the name:
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 is similar to another scheme
 implies that the scheme has merits which may not be justified. Eg cannot use “capital
protected” and “principal protected” when it does not comply with the guidelines
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concerning capital guaranteed schemes.
 implies that the manager has particular qualities which may not be justified;
 is inconsistent with the scheme’s objective;
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 implies the scheme is not a CIS eg using “plan”, “account”;
 mislead the participants into thinking that persons other than the manager are
responsible for the scheme.
 Acronyms in names is permissible provided they are appropriate.
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2. A scheme should not engaged in direct lending of monies, granting of guarantees, underwriting
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or short selling except where it arises from financial derivatives which are invested in accordance
with the code.
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3. The liability of the participants should be limited to their investments in the scheme as
reflected in the trust deed.
A
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3. Accounts and Reports

1. The manager should prepare half yearly financial statements and audited financial statements
for the semi annual report and annual report respectively.
The semi annual report or annual report need not be prepared if:
 The reports covers a period of less than 3 months from the start of the launch period of the
scheme;
 The termination or maturity date of the scheme is within 1 month prior to be sent to the
participants;
 Refer to text on what the semi annual report and annual report should contain.
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4. Dealing and Valuation

1. The manager should deal in units in a scheme in accordance with the trust deed and the
prospectus, and in any event at least one dealing day a month
2. The manger should notify MAS if the dealing in Units is suspended, stating the reasons for
suspension. The suspension should cease as soon as practicable and in any event, within 21
days of the commencement of the suspension. The trustee should notify MAS when the
manager has resumed the dealing in units
3. The units in the scheme should be issued, redeemed at a price arrived at by dividing the
scheme’s NAV by the number of units outstanding. The price of units may adjusted by adding or
subtracting the fees and charges.
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4a. In the Case Of Quoted Investments :
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The value of the assets of a scheme should be based on :
a. the official closing price or the last known transacted price on the organized market on
which the investment is quoted; or
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b. the transacted price on the organized market on which the investment is quoted at a
cut off time specified in the scheme’s prospectus.
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4b. In the case of assets that are unquoted investments :
 A fair value of an asset should be the price that the scheme would reasonably expect
to receive upon the sale of the asset.
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 Except of quoted securities, all investments of the scheme should be valued by a person
approved by the trustee as qualified to value such assets.
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 Where the fair value of an asset cannot be determined, manager should suspend valuation
and trading in the units in the Scheme.
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5. Frequency of Valuation
The manager value the units in the Scheme every business day, or every regular dealing
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day, but in any event at least once a month.

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6. Rounding differences arising from calculating price of units in a scheme, or arising from the
calculating the number of units to be issued should be credited to the scheme.
7a. When a manger becomes aware of an error in the calculation of a scheme’s NAV per unit, the
manager should notify both MAS and the trustee of the error as soon as practicable.
7b. When a valuation error represents 0.5% or more of the scheme’s NAV per unit after
adjustment for the error, the manager should compensate participants and notify them of the
compensation. A valuation error of less than 0.5% of the scheme’s NAV per unit, the manager
is not required to make compensation.
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5. Breaches
Any breach of the guideline, the manager should inform the authority within 3 business
days after it becomes aware of any breach.
6. Recognised schemes and authorized schemes which feed into an underlying

Scheme (Pg 299)
1.
Where an authorized scheme feeds into recognized scheme or underlying
scheme, certain disclosures must be made by the Recognised scheme
and reflected in the marketing materials of the Authorised Scheme.
Recognised Scheme (RS)
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Authorised
Feeds into or
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Scheme
Underlying Scheme
- Intends to invest in
financial derivatives
- High volatility due to
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investment polices
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Disclosures:
 Marketing materials should reflect the
intentions of the Recognised Scheme or
Underlying Scheme
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Notifications
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 Where the home financial supervisory authority of a recognized scheme /

underlying scheme imposes or varies any condition in relation to it authorization, the
Authority and the responsible person of the Authorised Scheme must be inform no
later than 14 days after the condition has been imposed.
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 Should the scheme revised its risk management process, documentation should be
submitted to the Authority and the responsible person of the Authorised Scheme no
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later than 1 month after it has been approved by the by the home financial
supervisory authority.
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7. Core Investment Requirements for All Authorised Schemes

For the purpose of this study guide the key core investment requirements relating to Capital
Guaranteed Funds and Hedge Funds covered in the CIS Code include:
1. Permissible Investments
Underlying investments consists of:
 Transferable securities ;
 Money market instruments;
 Eligible deposits;
 Units in other schemes;
 Financial derivatives ;
 Unlisted shares or similar securities
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2. Spread of investments and their limits

Spread of investments Limit (% of the
Schemes NAV)
Investments in transferable securities or money market instruments by =>10%
a single entity
Aggregate investments in transferable securities, money market =>20%

instruments, eligible deposits, counterparty risk exposures from the use
OTC financial derivatives to a group of entities
Short Term Deposit above group limit

do not apply
 Single entity limit investing in Government and other Public Debt 10% raise to 35%
Securities where the issuing entity is guaranteed by a government
or has a min long term rating of BBB by credit rating agency
 If there is a downgrade in rating, then the single entity limit will be
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reverted back to 10%
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 Single issue of transferable securities by the same entity or trust for =>20%
Schemes with a fixed maturity
The single entity limit for bonds and other unrated and non investment =>5%
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grade corporate debt securities which are not rated or has a long term
rating below BBB by credit rating agencies
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 Investment in other schemes which satisfies the code  100%
 Investment in other schemes which do not satisfies the code  =>10%
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Shares, debt securities that are not listed, not approve, undated Up to 10%
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Concentration limit for shares, debt securities, money market =>10%

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instrument to any single entity or trust

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3. The global exposure of a scheme to a financial derivatives or embedded financial derivatives

should not exceed 100% of the scheme’s NAV at all times. Netting Arrangements and
Hedging Arrangements may be taken into account to reduce a scheme’s exposure to
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financial derivatives.
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4. Recognition of Collateral – risk is lower if collateral is tendered to the scheme.

Collateral may consist of Cash, money market instruments or bonds. They should be
issued by or have the benefit of a guarantee from a government or supranational that has a
long term rating of AAA. Securities debt instruments, money market instruments or
bonds with embedded financial derivatives are not eligible as collateral.
Requirements of Collateral :
 It is liquid;
 Not issued by related corporations;
 Held by a custodian which is subject to proper supervision;
 Fully enforced by the trustee at any time;
 Free from all encumbrances ;
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5. Efficient Portfolio Management (EPM) Techniques

A scheme may carry out securities lending and repurchase transactions for the sole
purpose of EPM. The counterparty to a securities lending agreement or repurchase
transaction should be a financial institution with a minimum long term rating of A. If the
counter party is not rated, it is acceptable if the counter party could get an entity with A rating
to indemnifies the scheme against losses suffered as a result of the counterparty’s failure.
Schemes that intends to carry out the above, disclosures should be made in:
Prospectus Semi Annual Report and Annual Report

 All securities lending and repurchase  Total value of the transferable securities
agreement transactions; lent
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 Purpose, conditions & limits they are  Description & a nature of the collateral
Conducted holdings
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 Any conflict of interest (lent to related  Marked-to-market value of non-cash
corporations) collateral
 Inherent risks
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 Value & types of investments made with
cash collateral
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 Revenue sharing arrangement between
the scheme, manager  Identify of counterparty providing the
Collateral
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 Revenue earned by the scheme &

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Manager
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6. Aggregate borrowing by the scheme should not exceed 10% of the scheme’s NAV at the
time of the borrowing for purposes of meeting redemptions and bridging requirements. The
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borrowing should not exceed one month.
7. Where a scheme intends to use or invest in financial derivatives, the prospectus should
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include:
 whether it is used for the purpose of hedging, EPM, optimizing returns or a combination
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of all 3 objectives;
 the methods used to determine the scheme’s exposure to financial derivatives.
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8. Appendix 3 of the Code- Hedge Funds

1. A hedge funds refers to a scheme which aims to achieve a higher return through the use of
advanced investment strategies which may involve financial derivatives, leverage or short
selling. A hedge fund may carry out short selling provided the transaction is covered.
2 The prime broker should be subject to prudential supervision by the Authority in its home
jurisdiction. If the prime broker is related corporation of the manager, the manager should have
in place to manage potential conflict of interest.
3.
Single Hedge Funds Fund-of Hedge Funds (FOHF)
Min subscription requirements Minimum initial subscription of Minimum initial subscription of

S$100k per participant. S$20K per participant.
Min holding should be the Min holding should be the
lesser of S$100,000 or units lesser of S$20,000 or units
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purchased for S$100,000 purchased for S$20,000
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Manager  Expertise
 At least 2 executives who Same
have at least 5 years relevant
experience in the
Investment in other hedge ad

management of hedge funds
May invest in another single May invest in an underlying

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funds hedge fund which is not a FOHF only if the latter invests
feeder fund. No further layer of directly in another single
feeding is allowed hedge funds (not through
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another FOHF or a feeder

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scheme). No further layer of

feeding is allowed
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Borrowings and dealings May leveraged to the extent May borrow temporarily to meet
disclosed in the prospectus. redemptions and bridging
requirements for an aggregate
not exceeding 25% of the
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fund’s NAV.
There should be at least one There should be at least one

regular dealing day per month. regular dealing day per month.
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Redemption proceed should be The borrowing period should

paid to the participant within 90 not exceed 3 months.
days from the dealing day. Redemption proceed should be
paid to the participant within 90
days from the dealing day.
Marketing Materials for both funds must include:

 Fees and charges payable;
 Carry a different risks from other types of Collective Investment Schemes and may not be
suitable for risk averse persons;
 In the case where it is not capital guaranteed, participants may lose all of their investments;
 In the case where it is capital guaranteed, participants are subject to the credit risk of the
guarantor.
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9. Appendix 4 of the Code – Capital Guaranteed Funds

1. Capital guaranteed funds apply to a scheme which guarantee the return of capital invested by
the participants at a pre determined date in the future.
2. The Guarantor
The capital guaranteed fund should have an eligible guarantor who fulfills these criteria:
 In the case of a FI, have a minimum long term rating of AA by credit rating agencies, in all
other cases, a minimum of AAA. If the long term rating of the guarantor falls to A, no action
need to be taken.
 If action need to be taken the manager should within 6 months or sooner, enters into a new
agreement with a new guarantor, who satisfies the above criteria and provide the same
level of guarantee to the participants as the original guarantor.
 A eligible guarantor should not be the issuer of transferable securities and money market
instruments with constitute more than 10% of the scheme’s NAV.
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3. The Guarantee
 A written agreement should be entered into between the guarantor and the trustee of an
unconditional guarantee to be provided by the guarantor.

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It should be a first demand guarantee and should be legally enforceable in Singapore
against the guarantor by the trustee on behalf of the participants
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 Provision should be paid to ensure the accrued rights of the trustee, on behalf of the
participants are not prejudiced by the termination of the guarantee.
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 Where the agreement is governed by foreign law, trustee to ensure that it is legally
enforceable in Singapore.
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 The guarantee should be in respect of not less than 100% (less initial sales charges) of the
capital invested by participants.
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 Changes to the agreement for the guarantee should be subject to the approval of the
trustee.
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 Guarantee may be terminated if the guarantor goes into liquidation (excluding voluntary
liquidations),or if a new legal regulatory requirement renders the agreement for the
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guarantee illegal, or if the capital guaranteed fund is voluntarily terminated.
 Should the guarantee be terminated, or allow the scheme to continue without a guarantor, in
which case the word “guarantee”, “assured”, “insured” or “warranty” should not be use in its
name.
4. Notification to participants
Where the guarantee applies only on particular dates, the manager should notify participants at
least 30 days before such dates. Where the guarantee applies after a specified period of time,
the manger should notify participants at least 30 days before the first day that guarantee applies.
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Chapter 11 – Central Provident Fund

CPF Contributions and Uses
1. The CPF covers all employees who are Singapore citizens or permanent residents. Both
employer and employee are required by law to contribute to the CPF.
2. For self-employed Singapore Citizens and permanent residents, the law requires them to
contribute only to the Medisave account to provide for the healthcare needs of their families
and themselves.
3. In a nutshell:
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Ordinary Account
Employee At Retirement
 to buy residential
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age Account
property 55 Options:
 to pay for
 Leave in the
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insurance
CPF
 for investment account;
CPF
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for education
Employer  buy life
annuity;
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 CPF Life
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scheme
Special Account
Employers are  primarily for old
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exemption from
age
making contributions
for :
 for selected
 Foreigners on
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investments
Employment pass,
S Pass,
Miscellaneous Work
A
Pass, Work Permit

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 Persons registered Medisave Account

as partners, sole  for hospitalization
proprietors or self expenses
employed;
 pay for medical
 Employees working insurance
overseas
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1. CPF Minimum Sum Scheme (MSS)
Objective a. To provide members with a monthly income to support a

modest standard of living during retirement.
b. May invest in :
 Participate in CPF Life ;
 Buy an approved life annuity from approved insurer;
 Keep with CPF Board
Withdrawals of CPF Savings at CPF member upon reaching withdrawal age can withdraw only
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withdrawal age 20% of his cash balance and the remaining balance after having
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set aside the CPF Min Sum in his Retirement Account. The
percentage point of withdrawal will go down 10 percentage points
each year until 2013.
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From Jan 2013, member can withdraw at withdrawal age, only
the cash balance after setting aside the CPF Min Sum and the
Medisave Min Sum. However the first $5,000 from his CPF
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Account can still be withdrawn when he reached the withdrawal
age.
Draw Down Age Raised gradually from age 62 years in 2012 to age 65 years in
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year 2018.
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Exemptions from CPF Minimum CPF members

Sum Scheme  who are pensioners;
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 who have purchased cash annuity policies from approved

insurer;
A
Conditions are attached to these exemptions if granted.

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Minimum Sum Plus Scheme To allow CPF members to buy life annuities beyond their
Minimum Sum, with their withdrawal CPF savings at withdrawal
age. Income is tax exempted from these annuities.
a. CPF Life  It provides CPF member with a monthly payout starting from
the draw down age as far as he lives;
 CPF members can join CPF Life if they are Singapore

Citizens or Singapore PR between the ages of 55 and
80 with savings in Retirement Account.
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 It will be made mandatory from 1 Jan 2013 through automatic

inclusion in the scheme when member reaches withdrawal
age and has the stipulated amount in the Retirement Account
to ensure every CPF member will have an income for life in
his retirement years .
b. Types of CPF Life Plans There are 4 plans under CPF Life.
Refundable Plans Monthly Payout Bequest

(money left to
beneficiary upon
death)
Life Plus Plan High Low
Life Balanced Plan Medium Medium
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Life Basic Plan Low High
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Non Refundable
Plan
Life Income Plan Highest No bequest
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 Once a plan is chosen, CPF member is not allowed to switch
to another plan, or withdraw from the plan, except on medical
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grounds or if he is leaving Singapore permanently.
 CPF Life monthly payouts are protected from creditors.

Payouts are not fixed but adjustments are small so that it
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remains stable.
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After 1 Jan 2013

CPF member may choose only the new Standard Plan or the
Basic Plan.
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Standard Plan
 It will be the default CPF Life Plan which (combines the
current Balanced and Plus Plans), provides a higher monthly
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payouts while preserving the flexibility in the use of their

Retirement Account savings for housing prior to age of 65
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years. Members also leave a bequest for their beneficiaries

under the new Standard Plan.
Basic Plan
 Retained for members who prefer a higher bequest and lower
monthly payouts.
Existing CPF Life policyholders on any of the 4 current plans can

continue to remain on their existing plans or choose to switch to
the new Standard Plan before 31/12/13.
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2. Healthcare Financing
Healthcare Financing
Consists of
Private
Medisave Medifund Medishield
Medical
Eldershield
Insurance
Scheme
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To meet own and  Medishield is to help Singaporeans and PRs pay for
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dependents hospitalization at B2/C wards in restructured
hospitalisation , day hospitals. Can use to pay for A or B1 wards but
surgery and certain expenses will be pro-rated.
outpatient expenses.
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Dependants refer to  Private Medical Insurance Scheme allows purchase
spouse, children, of Medisave approved integrated shield plans for
parents & grandparents. themselves and dependents. Can use Medisave to
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Grandparents must be pay, subject to $800 (below age 81); $1150 (age
Singaporean or PRs. 81 and above) per insured person, per policy year.
Each insured person can have only one approved

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plan.
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Eldershield
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Medifund Eldershield is an affordable severe disability

insurance scheme which provides basic financial
An endowment fund to help protection to those who need long term care. It
the needy Singaporean who provides a monthly cash payout for a limited period of
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are unable to pay for their time to help pay out of pocket expenses for the care of
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medical expenses despite severely disabled persons. All Singaporeans and PRs
subsidies, Medisave and who are CPF member are automatically covered when
Medishield. they turn 40 years old, unless they opt out. Can use
Medisave to pay for own, spouse, children, parents,
and grandparents
Three insurers are appointed to offer Eldershield, they

are Aviva Ltd, Great Eastern Life, NTUC Income.
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3. Property Ownership
Property Ownership
CPF Ordinary Account Savings can be used
Residential Properties Scheme

Public Housing Scheme
 To purchase a private residential
Objective
properties in Singapore.
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To help CPF member buy a government
 Can use savings to pay the
built HDB flat, either new or resale. For
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purchase price after member has
CPF members using their CPF savings to
paid the first 5% of the purchase
service the housing loans, the loan
price with his own funds.
installment payments will not commence
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unless they are covered by CPF Board
 Can use CPF savings to pay for
Home Protection Scheme (HPS).
land, construction costs, legal and
stamp fees.
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 Can buy more than 1 property at
any one time.
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 CPF will have a ‘charge’ on the

Property to ensure CPF savings
HPS
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used in the purchased is recovered

 The HPS is a mortgage reducing when the property is sold.
term insurance which insures
members against losing their homes
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should they become

physically/mentally incapacitated or
pass away.
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 To qualify member must disclose

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fully his health condition.
 If member is not eligible for HPS

cover, he may still use his CPF
savings to pay his monthly housing
installments or make lump sum
payments.
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1a. CPF Usage for HDB Flat
Withdrawal Limit (loan from HDB)
New HDB Flat Resale HDB Flat
 Purchase of a flat directly from HDB(new),  For the purchase of a Resale HDB Flat in the
all of the OA can be used to pay for the open market, member can withdraw total
initial deposit and the balance of the purchase CPF savings subject to the Valuation
price. Limit (VL). The VL is the purchase price or
the market value of the flat, whichever is
lower.
 Under HDB loan, all future CPF contributions
may be used to pay the monthly installments.
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 Under HDB loan, member will be subjected to
credit assessment by HDB and it requires
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all his OA to be exhausted before the loan is
granted.
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CPF OA may be used to pay for stamp duty, survey, and legal fees incurred in the purchase of a
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HBD flat. However monthly conservancy and other charges cannot be paid with CPF savings.
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b. Bank Loans
1. CPF Charge
 For a bank loan taken from a bank, CPF member must obtained a Letter of Offer before he
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can exercise the Option to Purchase for the HDB flat.
 CPF charge is effected upon the release of the CPF moneys for the flat. The charge shall be
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in force until all the moneys secured by the charge and interest accrued are refunded into
the member’s account.
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2. Notification of changes to loan details like full redemption of housing loan, refinancing,
re-mortgage etc, CPF Board should be notified.
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3. A member using CPF savings is required to notify CPF Board if he intended sale, transfer,
assignment and otherwise disposal of the flat one month before the completion of the
transaction. CPF member or his financier are to furnish to CPF board the redemption
statement of the housing loan 4 weeks before the completion of the sale, transfer etc.
4. Penalty for false declaration and misuse of property

CPF Board shall be entitled to seize the property and sell it to recover the amount of CPF
Savings that has been withdrawn plus accrued interest.
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2. Lease Buyback Scheme(LBS)
1. This scheme involves HDB buying back the tail end of the 99 years lease of the HBD flat, leaving
the flat owner with a shorter 30 year lease. In addition to the value of the housing equity
unlocked from the shorter lease, the government will top up the amount up to $10,000.
Of the total value, $5000 will be given upfront as a lump sum while the remainder will be used to
purchase an immediate annuity under the CPF Life Scheme.
The shorter 30 year lease term is non transferable in the open market. If it is terminated
prematurely, his beneficiaries will receive a pro – rated refund on the residual lease.
2. Eligibility criteria of LBS:

 Citizen household living in a 3 room or smaller HDB flat;
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 All lessees are at least at the specified CPF draw down age;
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 Must not have enjoyed more than one housing subsidy in the past;
 Must have lived in their flat for at least 5 years;
 Monthly income must not exceed $3000;

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 Must not owned or currently own a private residential property;
 Must not have any outstanding loan on their flat that exceeds $5000 unless they have
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minimum proceeds of $60,000 for the purchase of an immediate annuity under the CPF Life
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Scheme.
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Pr
A
AI
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4. Asset Enhancement Scheme
CPFIS Scheme
1. Purpose of this scheme is to give CPF members more options to enhance their retirement
savings through investments in their Ordinary and Special Accounts.
Under the CPFIS Scheme, CPF members can invest their CPF savings in shares, loan stocks,
Unit trusts, government bonds, statutory board bonds, bank deposits, fund management
accounts, endowment insurance policies, investment linked insurance policies , exchange traded
fund and gold.
2. Eligibility Requirements: -
 At least 18 years old;
 Not an undischarged bankrupt;
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 Have savings of more than $20,000 in each of their OA and more than $40,000 in their SA
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Account .
 CPF member overseas are allowed to participate by way authorizing someone to act on his
behalf through a Power of Attorney.
3. Differences between OA and SA.
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CPFIS- OA CPFIS –SA
 Need to open an investment a/c with one of  No need to open account. Service provider
the agent banks- DBS, OCBC & UOB. Banks will liaise with CPF Board. CPF board
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will liase with CPF Board and other product settle member’s purchases and sales as
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providers to settle purchases and sales of well as keep track of their investment
investments. holdings and transactions.,
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 No top up except entitlement or conversion  Not allowed

of entitlements. Top up is not withdrawal if
the application is unsuccessful.
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 Profit cannot be withdrawn, but can be

used for other CPF Schemes  Profits cannot be withdrawn.
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 Can withdraw OA as well as cash balance in

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his investment account if he has set aside  Same

the CPF Minimum Sum and Medisave
required amount. CPF investment account
will be closed.
 Upon member’s death, any cash and

investments held in the account shall form  Same
part of the deceased estate distributed in
accordance of the applicable laws. These
investments are not protected from
deceased creditors . This applies whether
or not deceased is an undischarged bankrupt.
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5. Family Protection
Dependants’ Protection Scheme (DPS)
1. The DPS is an optional term insurance which covers the CPF member for a maximum sum
assured of S$46,000 up to the age of 60 years should the member dies or become permanently
incapacitated.
2. Premium varies according to age and will be deducted from his Ordinary Account, or Special
Account if OA does not have enough money. If member does not have sufficient money, he can
either do a top up or reduce sum assured (minimum is $5000).
3. Cover renewed every year automatically unless:

 Reached the age of 60 years; or died
 Does not have enough savings to pay for a minimum sum assured of $5000;
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 Do not want to renew;
 Has no contribution paid to his CPF Account for a continuous period of 3 years.
6. Other schemes
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1. Education Scheme
To enable CPF members to use CPF savings from their OA to pay for their children and their own
tuition fees. The Student has to repay the amount withdrawn plus interest in cash subsequently.
Courses that qualify under this scheme must be approved and on a full time basis:
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 Degree courses under the Polytechnic –Foreign Specialised Institution framework

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 ITE’s Technical Engineer Diploma

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2. Workfare Income Supplement (WIS) Scheme

Older low wage workers are paid twice a year to encourage them to work and improve their
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retirement adequacy. Employees received their workfare in the form of cash payments and
contributions to their CPF accounts. Self employed person have their workfare credited to their
Medisave.
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WIS Scheme is tied to the CPF system. As CPF contribution rates for older low wage workers are
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lower, WIS payments help to increase their take home pay.
3. Wokfare Training Support (WTS) Scheme

To complement WIS by encouraging older low wage workers to undergo training so that they can
be more productive.
Employers who sent their workers can claim a higher absentee payroll of up to 95% to cover the
salaries of their low wage workers when they are away for training.
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4. Supplementary Retirement Scheme (SRS)
1. It is a voluntary scheme where a participant may at his own discretion contributes (in cash
only) a varying amount to SRS, subject to the contribution cap. The cap is determine by
multiplying the appropriate SRS contribution rate by an absolute income base.
2. SRS offers tax benefits:

 Contributions to SRS are eligible for tax relief;
 Investments returns are tax free(with exception of dividend);
 50% of the withdrawals from SRS are taxable at retirement.
3.
Participant Opens account with : Investments
 Singaporean, SRS Operator: Can invest in anything
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 Singapore PR,  DBS except direct property
 Foreigner
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 OCBC investments.
 UOB
 at least 18 yrs For Life insurance
old, of sound Each participant one account products, conditions
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mind. at any point in time. apply:
 Single premium (SP)
 not an Employer can contribute on  Recurrent SP
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undischarged behalf of employees. (for both annuity and
bankrupt. Participants will be given a non annuity plans)
tax relief for such contributions  Life cover capped at
in the subsequent year of 3 times SP
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assessment.  Allow for contribution

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continuation benefit
Once all the money had been upon disability;
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withdrawn, at the statutory

retirement age, SRS account  Critical illness, health
is closed and participant and Long term care
cannot open a new account. are excluded;
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 Trust nomination is
not allowed for life
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insurance products
using SRS funds
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4. SRS Withdrawals must be made in cash only. Transfer of investments out of SRS account is
not allowed. Participants can withdraw any amount of his SRS savings at any time.
Types of Withdrawals Max period for Withdrawal 5%

withdrawal subject to tax Penalty
Withdrawal at or after statutory retirement age 10 years 50% No
Withdrawal before statutory retirement age NA 100 % Yes
Upon death NA 50% No
Upon permanent incapacity/medical grounds NA 50% No
Full withdrawal by foreigner who has NA 50% No
maintained his SRS account for at least 10
years from the date on the first contribution
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Chapter 12 – Needs Analysis

1. What are the benefits of conducting FNA?
 Help discover client’s needs and to advise the most suitable product ;
 No product pushing, but providing a service to identify and meet the client’s needs;
 Sell additional products based on his needs and objectives to fit his overall plan;
 Establish long term business relationship with client.
2. What is Financial Needs Analysis (FNA)?
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 A process designed to assist prospect identify his financial needs and goals so that a
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better informed decision can be made when deciding on investment products;
 FNA is developed based on information the client provides in the fact find form, specially
designed for this purpose;
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 FA is not a financial plan, although it can result in one. It is a guide for the representative to
use in deciding how best to attain the client’s financial goals.
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3. There are 6 stages of Needs Analysis. (Know the 6 stages).
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Stage 1: Establish and define client-representative relationship;

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Stage 2: Gather data, including goals;

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Stage 3: Analyse and evaluate financial status;

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Stage 4: Develop and present recommendations;
Stage 5: Implement recommendations; and

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Stage 6: Review with client periodically.

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3a. Qn: Which stage of Needs Analysis is analyzing and evaluating financial status?
Ans : Stage 3
3b. Qn : What is not included in the stages of Needs Analysis?

Ans : Both (A) and (B)
A. Explain the benefit of needs analysis
B. Explain recommendations
C. Implement recommendations
D. Review with client
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4. Details of the 6 Stages:
Stage 1 : Establish and define client-representative relationship
Meeting up with client and introduce your company, disclose your status and explain your role
and the types of financial advisory services and investment products you can provide.
The aim is to see a positive and dynamic mutual interaction that will enhance the quality of the
sales advisory to the client.
Stage 2: Gather data, including goals
1a. Accumulation Goals and Needs
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Setting aside a sum of money for :
 Children’s education
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 Starting business
 Buying a bigger house/car
 Retiring early
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 Giving to charity
1b. Retirement Goals and Needs

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Provision of fund to support himself and his spouse after retirement:
 When CPF payment begins, usually his earn income ceases.
 The expenses of working decrease, but the expense of leisure increases.
 Increased medical costs of healthcare due to ageing.
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1c. Protection Goals and Needs

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Untimely Death Serious Injury Serious Illness

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 Final expenses  Current income  Reduced level of debt

(funeral , tax costs)
 Current expenses  Future income
 Interim family income
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(cash reserve to last  Current  Peace of mind

through the first 3 commitments
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months) Plan : Critical Illness

Plan : Disability Income Insurance
 Long term family Income Insurance
 Estate settlement &

 education.
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2. Fact Finding
 Employment - determine hazard and affordability;
 How to determine “years of support” for dependants?

For children
o Boys – subtract the current age from age of 25.
o Girls – subtract the current age from age of 22.
Other older dependants

o Add eight years to the life expectancy for female (83.7 years) and male (79
years).
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 Financial information needed to determine.
o Net Cash Flow = Monthly income – expenditure
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o Net Worth = Assets - liabilities
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 Know the following expenses as Committed or Manageable
Committed / Fixed Expenditure Manageable/ Variable Expenditure

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 Housing;  Food;
 Education;  Clothing;
 Debt/loan repayments;  Utilities;
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 Insurance premiums; 
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Transportation;
 Income/property taxes.  Leisure and entertainment;
 Household furnishings;
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 Investments;
 Savings.
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 Clients’ existing insurance policies serves as a starting point for any further insurance
recommendations.
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 Client’s attitude towards risk is important to determine the right products. The higher the
return, the higher the risk and uncertainties. Risk is associated with the volatility of return.
Eg of low risk products are government bonds, bank deposits. Eg of high risk products are
equities. Beside the risk and return of investments, client’s investment time horizon, which
is the length of time between when the client invests and when he withdraws from the
investments is important.
 Retirement needs
Research has shown that most singles in Singapore need about 50% to 60% of their
re-retirement income to maintain the same living standard after retirement. For married
couples the percentages increase to 60% to 70% with one retiree.
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Stage 3: Analyse and evaluate financial status
 Analyze objectives and prioritize needs as resources are limited.
 Each need must be quantified. What are the methods to quantify these needs?
1. Retirement needs (2 methods)
 Replacement ratio method
Computes the amount of funds required based on a certain percentage of the
client’s last drawn pay.
 Expense method
Computes the amount of funds required based on the current level of the
household expenses projected into the future at the expected inflation rate.
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2. Protection needs (2 methods)
 Multiple approach
Computes the amount of funds required by multiplying the present value of the
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stream of the client’s current yearly gross income (assumed to be constant until
his retirement) by a constant future investment rate.
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 Needs approach
It is the difference between estimating the income needed by the dependants to
maintain their standard of living and the available funds
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the client has to meet his needs.

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3. Accumulation Needs
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The future value of the target amount taking into consideration the effects of inflation.
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Stage 4: Develop and present recommendations
 2 principles on product recommendations: -

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o Recommend products if your client needs them;

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o Recommend products which are most suitable given his situation and circumstances.
 Factors to consider before recommendation of products:

o Product suitability
o Client’s objectives and needs
o Financial situation- affordability
o Tax consideration
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Stage 5 : Implement recommendations
1. Main Types of Products to meet Accumulation and Retirement Needs and its
corresponding risk of capital loss.
Types of Product Risk of Capital Loss
Annuities Lower
Endowment Insurance Policies Lower
Money Market Securities Lower

Eg treasury bill , banker’s acceptance, certificate of
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deposits, commercial paper, repurchase agreement
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and bank deposits
Whole Life Insurance Policies Lower
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Fixed Income Securities, i.e bonds Medium
Derivative Instruments, e.g options and futures Higher

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Equity Investments, i.e ordinary and preferred Higher
shares
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Investment Link Life Insurance Policies (ILPs) Low to High depending on the
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underlying assets (i.e whether

fund consists of bonds or
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equities).
Structured Products (including Structured ILPs and Low to High depending on the
Structured Deposits) underlying mechanism (i.e
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financial instruments used to

protect capital or generate
returns) and the underlying assets
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(i.e whether the fund consists of

bonds or equities etc).
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Unit Trusts Low to High depending on the

underlying assets (i.e whether
fund consists of bonds or
equities).
Universal Life Insurance Low to high depending on sum

assured chosen and the insurer’s
performance.
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2. Different types of Insurance products to meet Protection Needs.
Types of Products Objectives
Term Insurance Policies Provide life cover for a fixed term.
Whole Life Insurance Policies Provide life cover for whole of life.
Endowment Insurance Policies Provide life cover for a fixed term and a lump sum at
the end of the term.
Investment Link Life Insurance Provides mainly for investing in units trusts or similar
Policies (ILPs) investments with some insurance protection.
Universal Life Insurance Provides life cover with flexibility in changing mix
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between cover and investment.
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Annuities Protects against insufficient income arising out of
excessive longevity.
Critical Illness Insurance

illnesses.
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Protect against contracting one of the covered critical
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Medical Expense Insurance Protects against risk of ill health and hospitalization
Disability Income Insurance Protects against risk of loss of income if a person is

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disabled.
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3. Presenting Your Recommendations

Ensure client understands product recommended and the reasons for the
recommendations. Your basis of recommendations should be clearly documented in the fact
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find form.
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Stage 6: Review with client periodically
Review is important because: -
 Client’s circumstances may change;
 External developments e.g. changes in CPF Rules;
 Continue to receive good quality service which reinforces relationship.
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Useful Table For A Quick Review Of Forms.
Forms Purpose
Form 1 Application for the grant of a FA’s license with a non refundable application fee to
(Pg 20) MAS.
Form 3D Principal informing MAS (within the 3 months grace period) of the provisional
(Pg 36) rep’s fulfillment of relevant exams requirements.
Form 3A & 3B Principals who wish to appoint appointed or provisional reps shall lodge these
(Pg 36) with MAS.
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- Notice of intent by principal to appoint these individuals as reps
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- Certificate that rep is fit and proper
Form 18
(Pg 37)
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Any change in particulars of reps, appointed or provisional;principal shall furnish
document to MAS.
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Form 12 Register of their interest in securities of licensed FAs and its reps.
(Pg 50)
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Form 13 The place at which the register of its interest in securities is kept.
(Pg 50)
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Form 11 For licensed FAs to seek approval from MAS for the appointment of its CEO.
(Pg 52)
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AI
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CMFAS Module 5 Strictly for Internal Use Only

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Chapter 1 – The Regulatory Bodies and Associations

1. Monetary Authority of Singapore

 To act as a central bank of Singapore, including the conduct of monetary policy,

 To manage the official foreign reserves of Singapore;

Have the force of law, contravention

Not having the force of law.

consequences if fail to abide.

Subsidiary Legislations Practice Notes

that financial institutions or specified persons as licensing, reporting and compliance

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4. 6 Tenets of Effective Regulation

Tenet 2 “ Shared Responsibility” Regulatory outcomes can be more effective with

Tenet 3 “Risk Appropriate” Regulation should set standard requirements of broad

Tenet 4 Regulation should be updated as market practice

2. Singapore Exchange Limited (SCX)

3. SGX- ST operates the fully electronic and floorless exchange in Asia.

4. Regulatory functions includes:

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c. Market Surveillance - Maintain surveillance of all trading activities.

3. Investment Management Association of Singapore (IMAS)

1. It is a representative body of investment managers spearheading the development and growth

 To provide a forum for members to discuss issues relating to the industry;

 Educate investing public on investments and investment management industry;

 Promote professionalism and standards of research and management expertise in

 Promote the investment and fund management industry.

3. IMAS code of Ethics

dealings with public, customers, regulators and fellow members;

 Act with competence and strive to maintain and improve competency;

4. IMAS Standards of Professional Conducts cover the following areas:

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4. Life Insurance Association of Singapore (LIA)

2. Vision and Mission of LIA

3. Values Underpinning LIA and its Members

 Ethical – ensure policyholders’ interests are managed with integrity.

 Proactive – skills and knowledge to provide sound solutions.

5. Associations of Banks in Singapore (ABS)

6. Association of Financial Advisers (Singapore) – AFA(S)

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Chapter 2 – Financial Advisers Act (FAA) and Financial

3. 4 Key Principles of FAA and FAR:

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a. Advising others either directly or through publications or writings, whether in electronic

o advising others by issuing or promulgating research analyses or research

b. Marketing of any collective investment scheme;

c. Arranging any life policy other than a contract of reinsurance.

 Any other as may prescribed.

 General insurance polices Consumption based.

 Bank deposits Low end of risk spectrum product

 Loans and mortgages Liability management

7. Who is a Financial Adviser?

a. Exempt Financial Advisers and their Representatives.

 Companies registered under the Insurance Act;

 Holder of Capital Markets Service License;

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 Any other as may prescribed;

 Securities Exchange, Future Exchange or an approved holding company in respect of

(Cross Ref Pg 24)

1. Exempt fund managers, and FAs can serve up to a total of 30 accredited or

Definition of “Accredited Investor” (Pg 25)

 A partnership or corporation in which owner of the business is an accredited

Definitions of a “Qualified Investor” – is an accredited investor other than the details