Origins & Rationale
The Financial Advisers Act was enacted with a view to reducing the disparity between investment products across the industry and various distribution channels, harmonizing the regulatory regime governing these products. In addition, having a common set of requirements and regulations that is applicable for all market intermediaries engaging in financial advisory services (effectively providing advice on the investment products aforementioned) will help maintain consistent professional standards across the industry. If a person intends on carrying out regulated activities governed by the Financial Advisers Act, they will need to obtain the Financial Advisers Licence prior to doing so.
What constitutes “Regulated Activities”?
Regulated activities such as issuing reports and providing advice on investment products (which may comprise of futures and leveraged foreign exchange products), life insurance products, marketing of units trusts and other collective investment schemes, would be governed by the Financial Advisers Act, effectively require a Financial Advisers Licence. Individuals who are employed by an entity which is a Licensed Financial Adviser to carry out such services are required to be representatives under the Financial Advisers Act.
There are certain exemptions to the Financial Advisers Licence, and this is usually for entities that are granted other licenses that enable them to carry out other regulated activities that also encompass financial advisory to a certain extent. Examples here would be Banks, merchant banks, finance companies, insurance companies, insurance brokers and holders of a Capital Markets Services Licence. These entities are already regulated by the Monetary Authority of Singapore (MAS) under separate legislation.
Certain activities aren’t captured by the FAA, such as bank deposits, general insurance and loans and mortgages. For the latter, these are not considered investment products. General insurance is also not considered an investment product as it is consumption-based, and bank deposits are excluded as such products as they are relatively straightforward and are low-risk. However, it is imperative to note that the Monetary Authority of Singapore has the power to regulate additional products as necessary, as a means to provide the flexibility to cater to new product development.
Requirements & Criteria
The entities that are exempted from holding a Financial Advisers Licence would still need to meet the minimum requirements set out by the FAA. For individuals to be appointed as Representatives by a Licensed Financial Adviser, they need to be at least 21 years old and meet the criteria that is set out by the Notice of Minimum Entry & Examination Requirements for Representatives of Licensed Financial Advisers and Exempt Financial Advisers (Notice FAA-N13).
Entities that intend on Obtaining the Financial Advisers Licence need to meet the following eligibility criteria:
- The entity has to be a company that is domiciled in Singapore
- The Board of the Company needs to have 2 Directors with at least one who is resident in Singapore.
- The Chief Executive Officer (“CEO”) & all Executive Directors have a minimum of 5 years relevant experience providing financial advisory, and 3 years of managerial experience alongside their acceptable academic qualification
- There need to be a minimum of 2 Appointed Representatives
- Paid up capital – $150k if normal advisory, $300k if including advise on leveraged foreign exchange trading
- Professional Indemnity Insurance applied for should be a minimum $500,000 with deductibles to be limited to 20% of the company’s Net Asset Value for the preceding financial year
- 3- year track record in the business
- If track record can’t be proven, CEO must own not less than 20%, or CEO & ED must aggregate own not less than 50% of the company
- If the entity wanting to be licensed is an affiliate or part of a group structure, need to show proof of regulation in the home jurisdiction
- Adequate systems and processes in place, compliance, corporate governance, etc.
- Fit and proper criteria are met
How we help:
We at Argus has more than 40 years of experience with the team of professionals who are attorneys, certified public accountants and bankers. Our ethos of “Compliance Simplified” is based on our simple, cost-effective and pragmatic approach to handling your matters. If you’re intrigued on obtaining the Financial Advisers Licence, read the above mentioned and talk to us.
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