Chapter-4

Question 1

What is Notice No: FAA-N02?

Answer 1

Notice On Appointment And Use Of Introducers By Financial Advisers

Question 2

What is FAA-N10?

Answer 2

Notice On Prohibited Representations Made By Persons Exempted Under Regulation 27(1)(d) Of The Financial Advisers Regulations (RG 2)

Question 3

What is Notice No: FAA-N12?

Answer 3

Notice On Entry Requirements Of A Provisional Representative

Question 4

What is Notice No: FAA-N14?

Answer 4

Notice On Reporting Of Misconduct Of Representatives By Financial
Advisers

Question 5

What is FAA-N20?

Answer 5

Notice On Requirements For The Remuneration Framework For
Representatives And Supervisors (“Balanced Scorecard Framework”) And Independent Sales Audit Unit

Question 6

What is Notice No: FAA-N26?

Answer 6

Notice on Competency Requirements for Representatives of Financial
Advisers

Question 7

Where does FAA-N02 not apply?

Answer 7

FAA-N02 does not apply to (a) persons specified in Regulation 4 of the Financial Advisers (Structured Deposits - Prescribed Investment Products and Exemption) Regulations 2005 in relation to the provision of any financial advisory service relating to any structured deposit as defined in those Regulations; and
(b) persons specified in Regulation 3 of the Financial Advisers
(Exemption from Sections 25 to 29 and 36 of the FAA) Regulations
2004 in respect of the provision of any financial advisory service
relating to the investment products referred to in Regulation 3 of
those Regulations.

Question 8

What does introducing activity mean?

Answer 8

Introducing activity means (a) introducing any client to an introducee in relation to the provision of any type or types of financial advisory service by the introducee; or
(b) the activity as referred to in (a) above and either or both of the
following: (i) recording the particulars of any client and forwarding such particulars to an introducee with the client’s consent;
(ii) providing factual information to any client on investment
products, including (where applicable) information on the name
of the investment product, the product provider, the date on
which the product is launched, the minimum subscription
amount, and any fee or charge which may be imposed.

Question 9

What are the requirements of Financial Advisors appointing introducers?

Answer 9

1) Where a financial adviser appoints a person as an introducer, it should take reasonable steps NOT to appoint an introducer whose carrying out of introducing activities is its sole business OR full-time profession,
2) A financial adviser shall ensure that none of its employees or
representatives enters into any arrangement with an introducer to carry out introducing activities, other than on behalf of the financial adviser.
3) Institute adequate control systems and procedures to ensure the proper conduct of the introducer such as written agreement, disclosure by introducer, provision of script, prohibition of handling client’s money and maintenance of registrar of introducers

Question 10

What is the written agreement between financial advisor and introducer?

Answer 10

The written agreement spells out clearly the scope of introducing activities to be carried out by the introducer. Also monitor the conduct of the introducer to satisfy itself that the introducer operates within the specified terms and conditions of the agreement.

Question 11

What are the disclosures required for the introducer?

Answer 11

The financial adviser shall require the introducer to disclose to all clients the following information that the introducer is required to disclose under Regulation 31 of the FAR:
(i) that the introducer, when carrying out introducing activities, is not
permitted to give advice or provide recommendations on any
investment product to the client, market any collective investment
scheme, or arrange any contract of insurance in respect of life
policies, other than to the extent of carrying out introducing activities;
(ii) whether or not the introducer is or will be remunerated by the
financial adviser for carrying out introducing activities; and
(iii) where the introducer is or will be remunerated by the financial
adviser, the amount of remuneration, if so requested by the client.
In addition, the financial adviser shall require the introducer to disclose to all clients that the introducer is carrying out introducing activities for the financial adviser.

Question 12

What is the Provision Of Script For Use By Introducers?

Answer 12

The financial adviser shall provide a script to the introducer to provide guidance to the introducer in its or his introducing activities. The financial adviser shall ensure that the script specifies:
(i) The information that the introducer is required to disclose to clients in accordance with Regulation 31 of the FAR;
(ii) The factual information that the introducer is to provide to clients on the financial adviser; and
(iii) The factual information on the investment products to which its or his introducing activities relate.

Question 13

What is the info required in the register for introducers?

Answer 13

The register of introducers should contain (i) names; (ii) places of business; (iii) contact numbers; (iv) business registration numbers or, in the case of individuals, identity card numbers; and (v) dates of appointment and, where applicable, their dates of termination.

Question 14

What is the meaning of exempt person?

Answer 14

“Exempt person” means a person exempted from holding a
financial adviser’s [“FA”] licence under section 23(1)(f) of the Act
read with regulation 27(1)(d) of the Financial Advisers Regulations
(Rg 2) [the “FAR”];

Question 15

What is the limit of accredited investors where exempt persons can provide financial advice?

Answer 15

30

Question 16

What are the prohibitions for exempt persons?

Answer 16

Prohibitions are 1) Serve maximum 30 accredited investors 2) Shall not represent itself as being regulated by MAS.

Question 17

What is a provisional representative scheme?

Answer 17

Provisional representative scheme is meant to facilitate the
relocation of experienced individuals who wish to provide financial
advisory service.

Question 18

How much time is allowed before the provisional rep passes entry level exam requirements?

Answer 18

3 months

Question 19

What are the minimum entry requirements to be a provisional representative?

Answer 19

The minimum entry requirements are:
(a) he is at least 21 years old;
(b) he is in the process of relocating or has already relocated to
Singapore;
(c) he possesses at least three years of working experience relevant to the type of financial advisory service that he will provide as a
provisional representative; and
(d) he possesses at least a Bachelor’s degree or equivalent, or a
professional qualification.

Question 20

What are the reporting requirements for Misconduct Of Representative?

Answer 20

A financial adviser shall report to the MAS. 1) Acts Involving Fraud, Dishonesty or Other Offences of a Similar Nature 2) Acts Involving Inappropriate Advice, Misrepresentation or Inadequate Disclosure of Information 3) Failure to satisfy the Guidelines On Fit And Proper Criteria 4) Any other misconduct, This should be in a form as per Appendix 1 of the MAS Notice FAAN14 [“Misconduct Report”] not later than 14 days after the discovery of the misconduct by the financial adviser.

Question 21

What are the requirements for the financial advisor to notify MAS in case of fraud, cheating etc?

Answer 21

For such cases, the financial adviser is expected to
lodge a police report and submit to the MAS a copy of the police
report, together with information (where available) relating to:
(i) the name of the police officer investigating the case; and
(ii) an update on the progress of the police investigation and result
of the criminal proceeding (if any).

Question 22

In which circumstance is the financial adviser is not required to lodge a Misconduct Report?

Answer 22

Financial adviser shall ensure continuing education requirements as part of the fit and proper requirements. However, the financial adviser is not required to lodge a Misconduct Report against its representatives for failing to meet the continuing education requirements.

Question 23

How to Update On Report Of Misconduct Of Representative?

Answer 23

FA should use Appendix 2 of the MAS Notice FAA-N14 [“Update Report”], to provide an update of the case as and when there is any significant development. The Update Report shall be lodged by the financial adviser through MASNET.

Question 24

What and when is the annual declaration?

Answer 24

If there is no Misconduct Report for which a financial adviser is required to report under Paragraph 1.6 above for any calendar year, the financial adviser shall submit to the MAS a declaration in the form as set out at Appendix 3 of the MAS Notice FAA-N14 not later than 14 days after 31 December of that calendar year. Appendix 3 of the MAS Notice FAA-N14 shall be lodged by the financial adviser through MASNET.

Question 25

What are the record keeping requirements of the FA when it comes to investigations on misconduct?

Answer 25

FA is expected to keep proper records of the following: (a) a summary of the facts of the case; (b) interviews with relevant parties, such as the representative, his supervisor and the client; (c) documentary evidence of the alleged misconduct; (d) the investigator’s assessment and recommendation; and (e) disciplinary action taken against the representative, if any.

Question 26

What are the types of disciplinary actions that FA must take on misconduct?

Answer 26

The type of disciplinary action that a financial adviser may take against its representatives in respect of any misconduct committed depends on the severity of the case and includes, but is not limited to, any one or more of the following: (a) suspension from providing any financial advisory service; (b) restitution of misappropriated moneys; (c) fine; (d) formal warning; (e) demotion; and (f) termination of the representative’s employment or arrangement (agreement) with the financial adviser.

Question 27

What are the requirements for persons in the ISA unit?

Answer 27

A financial adviser shall have an ISA Unit comprising persons who – (a) are independent of the financial advisory services unit of the financial adviser; (b) do not directly or indirectly supervise or manage the conduct and performance of any representative or class of representatives of the financial adviser; and (c) are competent in reviewing and assessing the quality of the financial advisory services provided by the representatives of the financial adviser, against the non-sales KPIs, and determining if infractions have been committed by the representatives.

Question 28

What are the reporting requirements for the ISA unit?

Answer 28

A financial adviser shall require the ISA Unit to submit reports on its audit of the quality of financial advisory services provided in every calendar quarter by the representatives of the financial adviser, to either – (a) the board and chief executive officer of the financial adviser; or (b) a business function or unit of the financial adviser, which is independent from the financial advisory services unit of the financial adviser, by the end of two calendar quarters immediately subsequent to the measurement quarter, or such longer period as the Authority may approve.

Question 29

What is the requirement for balanced scorecard for representatives of FA?

Answer 29

FA shall satisfy all of the following requirements by the end of every calendar quarter immediately subsequent to a measurement quarter: (i) require the ISA Unit to review and assess the quality of financial advisory services provided by the representative in respect of his sampled transactions (ii) review and assess findings of mystery shopping exercises, if any, and substantiated complaints, if any, in relation to the performance of representatives, against the non-sales KPIs; (iii) ensure that the ISA Unit classifies any infraction committed by the representative (iv) determine the percentage or number of cases with one or more infractions, set out in the Representatives’ Grading Table; (v) assign the balanced scorecard grade to the representative under the Representatives’ Grading Table, which corresponds with the percentage or number of cases with one or more infractions referred to in sub-paragraph (iv); (vi) if applicable, determine the percentage of specified variable income which the representative is entitled to under the Representatives’ Grading Table, which corresponds with the percentage or number of cases with one or more infractions referred to in sub-paragraph (iv); and (vii) if applicable, determine the effective percentage of specified variable income which the representative is entitled to in accordance with paragraph 4.6.3.

Question 30

What is specified variable income?

Answer 30

In a calendar quarter, where a financial adviser remunerates a representative for his provision of financial advisory services by way of – (a) variable income only, the financial adviser shall measure only 60% of the variable income provided or to be provided to the representative in the calendar quarter against the non-sales KPIs; or (b) a fixed salary and a variable income component, the financial adviser shall measure all of the variable income provided or to be provided to the representative in the calendar quarter against the non-sales KPIs.

Question 31

What are the Post-transaction checks by the ISA Unit?

Answer 31

The ISA Unit has to carry out and complete the following post-transaction checks on the sampled transactions by the end of the calendar quarter immediately subsequent to the measurement quarter: 1) Review all call-logs of conversations of every sampled transaction for dual currency investments that roll over. 2) Documentation review 3) Client survey for the sampled transactions

Question 32

What is the sampling methodology of the ISA Unit?

Answer 32

The ISA Unit is to carry out up to three rounds of post-transaction checks for each representative for every calendar quarter. 1) First round of post-transaction checks are determined by the population of sampling by a) Historical average b) Actual transaction count method(for new reps or existing inactive reps for the last 12 months). The sampling would be 10% for selected reps, 2% for reps who has only currency/equity/commodity on exception basis and 5% for all others. 2) Second round of post transaction checks where any rep has committed one or more infractions. In this case, additional 5% for the selected reps and those who have only currency/equity/commodity and additional 10% for others. 3) Third round of post transaction checks for additional 10% for currency/equity/commodity and additional 20% for the rest.

Question 33

What is category 1 infraction?

Answer 33

Category 1 infraction relates to the quality of the financial advisory services provided by a representative to the client, the infraction – (a) has a material impact on the interests of the client; or (b) impinges on the fitness and propriety of the representative.

Question 34

What is a category 2 infraction?

Answer 34

Any infraction which is not a Category 1 infraction, is a Category 2 infraction.

Question 35

How long should the records of balanced score card be maintained?

Answer 35

5 years

Question 36

What are the 4 non-sales KPIs measured in the balance score card?

Answer 36

1) Understanding a client’s needs 2) Suitability of product recommendations 3) Adequacy of information disclosures 4) Standards of professionalism and ethical conduct in financial advisory services

Question 37

What are the minimum entry requirements of FA?

Answer 37

For the purposes of section 23(1)(a) of the FAA, an individual must satisfy all of the following entry requirements; (a) Be at least 21 years old; and (b) subject to paragraph 3.2, hold any of the following minimum academic qualification: (i) a GCE ‘A’ Level certificate with passes in at least three subjects at “Higher 2” level and two subjects at “Higher 1” level; (ii) an International Baccalaureate Diploma; (iii) a diploma awarded by a polytechnic in Singapore; or (iv) an academic qualification equivalent2 to those set out in subparagraphs above.

Question 38

What are the Circumstances Under Which the Minimum Academic Requirement Does Not Apply?

Answer 38

1) He was providing financial advice before 1 Feb 2014 or notice of intent was put up before that date. 2) He was advising others concerning over-the-counter derivatives contracts for up to 1 year before 8 Oct 2018 or advising others concerning over-the-counter derivatives contracts/forex/spot forex on or after 8 October 2018; and ceased to carry out that activity prior to those dates. 3) an individual who on or before 28 September 2023, was appointed to provide any type of financial advisory service on behalf of a specialised unit which was, before 8 January 2021, serving high net worth individuals pursuant to an exemption under section 100(2) of the FAA as in force at that time.

Question 39

What are the minimum exam requirements for FA?

Answer 39

The minimum examination requirements are: (a) a valid pass in RES5; and (b) a valid pass in the relevant product knowledge CMFAS Exam modules, depending on the type of financial advisory service which the individual intends to provide and the type of products concerning which he or she intends to provide such financial advisory service, as set out in Table 1.

Question 40

What are the Circumstances Under Which the CMFAS Exam Requirements Do Not Apply?

Answer 40

An individual is not required to meet the CMFAS Exam requirements stipulated if he possesses any of the following qualifications: (a) Degree in finance, financial engineering or computational finance; or (b) Chartered Financial Analyst (“CFA”) by the CFA Institute, USA.