Securities and Futures Act and Financial Advisers Act
Under the single licensing regime, an intermediary needs to hold only a single license, either a Capital Markets Services License or Financial Advisers License, to conduct one or more financial services regulated activities, unless specifically exempted. These regulated activities include asset/portfolio management, investment advisory services, property fund management and other activities like securities dealing and futures trading, leveraged foreign exchange trading, advising on corporate finance etc.
Deciding on which kind of License is required
Before familiarising yourself with the procedures of applying for a license it is important to ascertain which license is applicable to you. For this purpose we have defined the activities that are covered by the Financial Advisers Act and consequently require a Financial Advisers license. Likewise a person engaged in the activities covered by the Securities and Futures Act, requires a Capital Markets Services license. Certain individuals/institutions are exempt from holding these licenses, the details of which are provided below.
Who should opt for a Capital Markets License?
The Securities and Futures Act (SFA) regulates the following activities and issues a Capital Markets license to persons engaged in:
Except for those who are specifically exempted, any person who wishes to carry on business in any of the above mentioned regulated activities will need to obtain the requisite Capital Markets Services (CMS) license under the Securities and Futures Act (SFA). A CMS license is granted only to a corporation. Any individual who wishes to act as a representative to conduct any of the above mentioned regulated activities for a CMS license holder will need to obtain the requisite Representative’s license, unless otherwise exempted.
Who should opt for a Financial Advisers License?
The Financial Advisers Act (FAA) regulates the following activities and issues a Financial Advises License to persons engaged in:
The FAA does not regulate the following:
Except for those who are specifically exempted, any corporation which carries on the business of providing any of the financial advisory services under the Financial Advisers Act (FAA) is required to obtain a Financial Adviser FA License. Any individual who provides financial advisory services on behalf of a licensed FA must obtain a Representative’s license, unless otherwise exempted.
Who should opt for a Capital Markets License?
The Securities and Futures Act (SFA) regulates the following activities and issues a Capital Markets license to persons engaged in:
- dealing in securities
- trading in futures contracts
- leveraged foreign exchange trading
- advising on corporate finance
- fund management
- real estate investment trust management
- securities financing
- providing custodial services for securities
Except for those who are specifically exempted, any person who wishes to carry on business in any of the above mentioned regulated activities will need to obtain the requisite Capital Markets Services (CMS) license under the Securities and Futures Act (SFA). A CMS license is granted only to a corporation. Any individual who wishes to act as a representative to conduct any of the above mentioned regulated activities for a CMS license holder will need to obtain the requisite Representative’s license, unless otherwise exempted.
Who should opt for a Financial Advisers License?
The Financial Advisers Act (FAA) regulates the following activities and issues a Financial Advises License to persons engaged in:
- Providing advice on investment products including securities (which includes unit trusts), futures contracts, foreign exchange and leveraged foreign exchange contracts, and life insurance policies (which includes investment-linked life insurance products) and structured products
- Issuing reports on investment products
- Marketing collective investment schemes, i.e. unit trusts and
- Arranging life insurance products
The FAA does not regulate the following:
- General insurance – These are arranged by insurance intermediaries under the Insurance Act. They are consumption-based and are therefore not considered investment products.
- Bank deposits – These are offered by banks regulated under the Banking Act. They have lower risks and are generally well-understood by the public.
- Loans and mortgages – These do not have any investment element.
Except for those who are specifically exempted, any corporation which carries on the business of providing any of the financial advisory services under the Financial Advisers Act (FAA) is required to obtain a Financial Adviser FA License. Any individual who provides financial advisory services on behalf of a licensed FA must obtain a Representative’s license, unless otherwise exempted.
Exemptions from holding a license
Exemption from CMS license and CMS Representative’s license
Exemption from Financial Advisors License and FA Representative’s License
- Banks, merchant banks, finance companies and insurance companies are exempt from holding a CMS License because MAS already regulates them under separate legislation.
- The following individuals are exempted from holding a CMS Representative’s License:
- Those acting on behalf of exempt persons, i.e. persons exempted from the requirement to hold a CMS License
- Those acting on behalf of CMS license holders, which provide securities financing or custodial services for securities.
- An employee of a bank or merchant bank who is registered as an associated person of the Singapore Exchange Derivatives Trading Ltd.
- Satisfying the minimum academic qualification and examination requirements as prescribed in the Notice on Minimum Entry and Examination Requirements for Representatives of Licensed Financial Advisers and Exempt Financial Advisers.
- Satisfying the fit and proper criteria set out in the Guidelines on Fit and Proper Criteria.
- Complying with requirements on market conduct and practices and other requirements as specified in theGuidelines on Standards of Conduct for Financial Advisers and Representatives.
Exemption from Financial Advisors License and FA Representative’s License
- Exempt FAs are exempt from holding a FA License because MAS already regulates them under separate legislation.
- Exempted bodies include banks, merchant banks, finance companies, insurance companies, insurance brokers and holders of a capital markets services license.
- Individuals who provide financial advisory services on behalf of institutions that are exempt from holding a FA License are exempt from holding a Representative’s License. Additionally, a person resident in Singapore who acts, whether directly or indirectly, as a financial adviser in giving advice, or in issuing or promulgating analyses or reports, concerning any investment product (other than life policies), to not more than 30 accredited investors on any occasion is exempt from holding a Financial Adviser’s License. An “accredited investor” is defined as:
- an individual whose a) net personal assets exceed SGD 2 million or its equivalent value in any foreign currency; or b) whose income in the preceding 12 months is not less than S$300,000;
- a corporation with net assets exceeding SGD 10 million or its equivalent value in any foreign currency
- the trustee of a trust or such other person as the authorities may prescribe
- Satisfying the minimum academic qualification and examination requirements as prescribed in the Notice on Minimum Entry and Examination Requirements for Representatives of Licensed Financial Advisers and Exempt Financial Advisers.
- Satisfying the fit and proper criteria set out in the Guidelines on Fit and Proper Criteria.
- Complying with requirements on market conduct and practices as specified in the Guidelines on Standards of Conduct for Financial Advisers and Representatives.
- Complying with the reporting requirements of exempt FAs.
Applying for a Capital Markets Services License
Before filling in the application form for Capital Markets Service (CMS) License or CMS Representative’s License, you must be aware of the key criteria that is taken into consideration by MAS, amongst several other factors.
Eligibility Criteria taken into account for Capital Markets Services License
Eligibility Criteria for Capital Markets Services Representative’s License:
Upon approval of the license application (can take up to 6 months), MAS will send out licenses to the applicants along with a ‘Annual license Fee Advise’ specifying the amount of license fees payable. Each license issued will be valid for up to 3 years. However, license fees will be paid on an annual basis. Licensees must renew their licenses if they wish to continue with their regulated activities and must submit renewal applications at least one month before the expiry dates of the license.
Eligibility Criteria taken into account for Capital Markets Services License
- The applicant is a corporation and is primarily engaged in the business of conducting any one of the regulated activities specified in the Second Schedule to the SFA.
- The track record, management expertise and financial soundness of the applicant and its parent company or major shareholders for at least the past 5 years.
- Ability to meet the minimum financial requirements prescribed under the Securities and Futures Act.
- Strength of internal compliance systems.
- Business plans and projections.
- Fitness and propriety of the applicant, its officers, employees and substantial shareholders.
- The applicant employs at least 2 full time individuals
- in respect of each regulated activity for which the corporation is seeking to be licensed and
- who each hold a representative’s license for the relevant regulated activity as required under the SFA
- The applicant should obtain the approval of MAS prior to appointing a person as its Chief Executive Officer or its director, who should both be resident in Singapore.
- An applicant which is applying to carry out the regulated activity of dealing in securities or trading in futures contracts should have minimum group shareholders’ funds of SGD 200 million and SGD 100 million, respectively.
- An applicant which is applying to carry out the regulated activity of fund management should have global funds under management of at least SGD 1 billion.
- Where an applicant applies to carry out the regulated activities of fund management or advising on corporate finance or both, MAS may impose a license condition requiring the applicant to purchase a Professional Indemnity Insurance policy that complies with the basic requirements set out by MAS.
Eligibility Criteria for Capital Markets Services Representative’s License:
- The applicant must be an individual and at least 21 years old.
- The applicant must satisfy the minimum academic qualification [at least 4 credits in the GCE 'O' level Examination (or its equivalent)], and satisfy the examination requirements as prescribed by MAS.
- The applicant has to satisfy MAS that he is a fit and proper person to be licensed, in accordance with MAS criteria.
Upon approval of the license application (can take up to 6 months), MAS will send out licenses to the applicants along with a ‘Annual license Fee Advise’ specifying the amount of license fees payable. Each license issued will be valid for up to 3 years. However, license fees will be paid on an annual basis. Licensees must renew their licenses if they wish to continue with their regulated activities and must submit renewal applications at least one month before the expiry dates of the license.
Applying for a Financial Advisers License
The following pre-requisites apply before you can proceed with the Financial Advisers License or Financial Advisers Representative’s License application filing in Singapore.
Admission Criteria for Financial Advisers License:
Admission Criteria for Financial Advisers Representative’s License:
Upon approval of the license application (can take up to 6 months), MAS will send out licenses to the applicants along with a ‘Annual license Fee Advise’ specifying the amount of license fees payable. Each license issued will be valid for up to 3 years. However, license fees will be paid on an annual basis. Licensees must renew their licenses if they wish to continue with their regulated activities and must submit renewal applications at least one month before the expiry dates of the license.
Admission Criteria for Financial Advisers License:
- A Financial Adviser’s License will only be granted to a corporation that has established a physical presence in Singapore.
- Ability to meet the minimum financial requirements prescribed in Regulation 15 of the Financial Advisers Regulations.
- An applicant must have in force a professional indemnity insurance policy under which the limit of indemnity covered should not be less than SGD 500,000, under which the deductible allowed must not exceed 20% of the applicant’s net asset value at the end of its immediately preceding financial year.
- All Executive Directors, including the Chief Executive Officer, must have a minimum of 5 years of relevant working experience and acceptable academic/professional qualifications.
- An applicant must have a minimum 3-year proven track record in the financial advisory business.
- Strength of internal compliance systems.
- Fitness and propriety of the applicant, its officers, employees and substantial shareholders.
Admission Criteria for Financial Advisers Representative’s License:
- The applicant must be an individual and at least 21 years old.
- The applicant must satisfy the minimum academic qualification and examination requirements as prescribed by MAS.
- The applicant has to satisfy MAS that he is a fit and proper person to be licensed, in accordance with MAS criteria.
Upon approval of the license application (can take up to 6 months), MAS will send out licenses to the applicants along with a ‘Annual license Fee Advise’ specifying the amount of license fees payable. Each license issued will be valid for up to 3 years. However, license fees will be paid on an annual basis. Licensees must renew their licenses if they wish to continue with their regulated activities and must submit renewal applications at least one month before the expiry dates of the license.
