RES5 — Rules, Ethics and Skills for Financial Advisory Services — Cheat Sheet

Chapter 1 · quick-revision digest · narrative, key figures & core facts

📖 Overview

🧭 Principles & frameworks

• The four principles — The principles underpinning the FAA and the FAR are customers' interest, consistency, accountability and independence. — Ch. 1, p. 5
• Reasonable basis for recommendations — Financial advisers must give due regard to the interests of customers and are required to have a reasonable basis for their recommendations, ensuring due consideration of the person's investment objectives, financial situation and particular needs. — Ch. 1, p. 5
• Know Your Client — The 'Know Your Client' requirement covers the client's financial objectives, risk tolerance, employment status, financial situation, current investment portfolio and number of dependants, after which a Needs Analysis is conducted to identify appropriate products. — Ch. 1, p. 5
• Principle of consistency — Consistency applies in two ways: the same investment product (e.g. life insurance) sold through different distribution channels is subject to the same rules and standards; and functionally similar products (e.g. single premium investment-linked policies and unit trusts) are subject to similar rules and standards. — Ch. 1, p. 6
• Accountability and the one-principal rule — The principle of accountability is captured in the 'Representative To Act For Only One Principal' rule: each financial adviser representative can represent only one principal, and the principal is responsible for developing, supervising and monitoring the conduct of its representatives at all times. — Ch. 1, p. 6
• Determination of 'independent' — The principles and guidelines on the determination of 'independent' are laid down in Regulation 21 of the FAR and the Guidelines On The Use Of The Term 'Independent' By Financial Advisers (Guideline No: FAA-G05). — Ch. 1, p. 6
• Independence is not a prerequisite — Although independence has been considered by many to be an important condition for customer interests, experience from other established markets has not borne this out; it is considered more important that representatives put customers' interests at the forefront by giving good objective advice guided by the concept of reasonable basis. — Ch. 1, p. 6
• Types of financial advisory service — The types of financial advisory service regulated under the FAA are: advising others concerning any investment product (other than advising on corporate finance within the meaning of the SFA 2001); advising others by issuing or promulgating research analyses or research reports concerning any investment product; and arranging any contract of insurance in respect of life policies, other than a contract of reinsurance. — Ch. 1, p. 10
• Conditions to use 'independent' — No licensed or exempt financial adviser shall use the word 'independent' (or any derivative or like expression) in its name, to promote or advertise its services, or in respect of its provision of any financial advisory service, unless it meets all three conditions: it receives no commission or benefit from a product provider (and pays none to its representatives) that may create product bias; it operates free from any direct or indirect restriction relating to any investment product recommended; and it operates without any conflict of interest created by connection or association with any product provider. — Ch. 1, p. 19, 20
• Two classes of representative — The FAA provides for two classes of representatives — appointed and provisional. — Ch. 1, p. 24

⏱️ Key figures, limits & deadlines

📅 Key dates

⚠️ Exam traps (commonly confused)

• Exempt financial adviser (s.20) vs Excluded financial adviser (First Schedule): Exempt FAs ARE financial advisers but exempted from holding a licence. Excluded FAs do NOT fall within the definition of 'financial adviser' at all.
• Exempt status vs Licensed status: An exempt person must NOT represent itself as licensed, regulated, supervised or registered by the MAS.
• Appointed representative vs Provisional representative: Appointed reps have passed the exams; provisional reps have not yet passed and get a 3-month grace period (for relocating experienced overseas advisers).
• 5 years from date of lodgement: Document retention runs 5 years from the date of LODGEMENT — not from resignation/cessation, and not 7 years.
• 14 days to notify a change in particulars vs Next business day to notify cessation: Change in particulars = within 14 days (Form 18). Cessation of a rep = no later than the next business day.
• Misuse of protected term $12,500 vs Rep offence S$25,000 vs Principal offence S$50,000 vs False statement S$50,000: Different offences carry different maximum fines. The principal's penalty (S$50,000) is higher than the representative's (S$25,000).
• Life policy (regulated investment product) vs General insurance (excluded): Life policies are regulated investment products; general insurance, deposits, loans and mortgages are excluded.
• 12 months comparable overseas experience vs 3 months provisional grace period: A provisional rep needs ~12 months comparable overseas regulation to qualify, and gets a 3-month grace period to pass exams. Don't swap the two numbers.
• Accredited investor vs Qualified investor: A qualified investor is defined by reference to an accredited investor plus additional categories; the thresholds and lists differ.

⭐ Core facts

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• The Financial Advisers Act 2001 came into operation on 1 October 2002 to regulate the sale of investment products in Singapore.1 October 2002 — Ch. 1, p. 4
  ⚠ FAA 2001 in the name; commenced 1 Oct 2002.
• Under Section 6(1) of the FAA, no person shall act as a financial adviser in respect of any financial advisory service unless authorised to do so by a financial adviser's licence, or is an exempt financial adviser. — Ch. 1, p. 7
  ⚠ To act as an FA a person must be licensed OR exempt — nothing else suffices.
• Under Section 2(1) of the FAA, a 'financial adviser' means a person who carries on a business of providing any financial advisory service, but does not include any person specified in the First Schedule. — Ch. 1, p. 7
• For the purposes of the definition of a financial adviser, 'person' refers to a corporation and not an individual. — Ch. 1, p. 7
  ⚠ A licensed FA is a corporation; individuals are representatives, not FAs.
• Section 20(1) of the FAA exempts certain persons from holding a financial adviser's licence to act as a financial adviser in respect of any financial advisory service. — Ch. 1, p. 7, 8
• An exempt financial adviser carries on a business of providing financial advisory services but is exempted from the requirement to hold a financial adviser's licence; it is therefore distinct from an excluded financial adviser, which does not fall within the definition of a financial adviser at all. — Ch. 1, p. 7
  ⚠ Exempt = an FA that need not hold a licence. Excluded = not an FA at all.
• Under the First Schedule of the FAA, certain persons are defined as 'excluded financial advisers' and do not fall within the definition of 'financial adviser' under the FAA. — Ch. 1, p. 8
  ⚠ Excluded ≠ exempt. Excluded persons are not FAs under the FAA.

• The types of financial advisory service regulated under the FAA are: advising others concerning any investment product (other than advising on corporate finance within the meaning of the SFA 2001); advising others by issuing or promulgating research analyses or research reports concerning any investment product; and arranging any contract of insurance in respect of life policies, other than a contract of reinsurance. — Ch. 1, p. 10
  ⚠ Corporate finance advice and reinsurance arranging are NOT regulated FA services.

• Under Section 2(1) of the FAA, an 'investment product' means any capital markets products, spot foreign exchange contracts other than for the purposes of leveraged foreign exchange trading, any life policy, or any other products as may be prescribed. — Ch. 1, p. 10
  ⚠ A life policy IS a regulated investment product.
• General insurance policies, deposit-taking products, and loans and mortgages are excluded from the definition of investment products. — Ch. 1, p. 11
  ⚠ Excluded: general insurance, deposits, loans/mortgages. NOT life policies or unit trusts.

• An 'accredited investor' includes an individual whose net personal assets exceed S$2 million, or whose financial assets (net of related liabilities) exceed S$1 million, or whose income in the preceding 12 months is not less than S$300,000; and a corporation with net assets exceeding S$10 million.individual net personal assets: S$2 million; individual financial assets: S$1 million; individual income 12m: S$300,000; corporation net assets: S$10 million — Ch. 1, p. 15, 16
  ⚠ Individual AI: >S$2m net personal assets OR >S$1m financial assets OR ≥S$300k income. Corporation: >S$10m net assets.

• An exempt person, including its representatives, cannot represent itself, nor cause itself to be represented, to any person as being licensed, regulated, supervised or registered by the MAS, whether verbally or in writing. — Ch. 1, p. 14
  ⚠ Exempt ≠ licensed. An exempt person must not present itself as MAS-licensed.

• Under Section 17(1) of the FAA, no person other than a licensed financial adviser, an exempt financial adviser, or a person (or class of persons) approved by the Authority shall use the words 'financial adviser' (or any word indicating that it carries on business as a financial adviser) in its business name, description or title, or make any such representation in any bill head, letter, notice, advertisement, publication or writing. — Ch. 1, p. 18
• No licensed or exempt financial adviser shall use the word 'independent' (or any derivative or like expression) in its name, to promote or advertise its services, or in respect of its provision of any financial advisory service, unless it meets all three conditions: it receives no commission or benefit from a product provider (and pays none to its representatives) that may create product bias; it operates free from any direct or indirect restriction relating to any investment product recommended; and it operates without any conflict of interest created by connection or association with any product provider. — Ch. 1, p. 19, 20
  ⚠ All three conditions must be met to use 'independent'.

• The MAS launched the Representative Notification Framework (RNF) on 26 November 2010; under the RNF, a financial institution intending to appoint a financial adviser representative must lodge a notice of intent with the MAS and provide a 'fit and proper' certification in respect of that representative.26 November 2010 — Ch. 1, p. 21
  ⚠ RNF launched 26 Nov 2010.

• The principle of accountability is captured in the 'Representative To Act For Only One Principal' rule: each financial adviser representative can represent only one principal, and the principal is responsible for developing, supervising and monitoring the conduct of its representatives at all times. — Ch. 1, p. 6
  ⚠ A tied agent cannot be a licensed FA representative at the same time.
• Representatives are individuals who actually perform the activities that their principals are engaged in and for which they are regulated by the MAS under the FAA. — Ch. 1, p. 22
  ⚠ Representatives are individuals; the financial adviser (principal) is a corporation.

• Under Section 27(1) of the FAA, unless otherwise approved by the MAS in writing, no appointed representative or provisional representative shall at any one time be a representative of more than one principal. — Ch. 1, p. 23
  ⚠ One principal only, unless the MAS approves otherwise in writing.

• The FAA provides for two classes of representatives — appointed and provisional. — Ch. 1, p. 24
• Appointed representatives are persons who meet in full the entry and examination requirements prescribed by the MAS in the Notice on Minimum Entry and Examination Requirements for Representatives of Licensed Financial Advisers and Exempt Financial Advisers (Notice No: FAA-N13). — Ch. 1, p. 24
  ⚠ Appointed rep = has met entry AND examination requirements in full.
• Provisional representatives are persons who meet the entry requirements but have not yet passed the relevant examinations; as a policy they are given a grace period of three months to pass the requisite examinations, and this category was introduced to accommodate the relocation of experienced individuals currently licensed in an overseas jurisdiction.3 months (grace period) — Ch. 1, p. 24
  ⚠ Provisional rep = entry met, exams NOT yet passed; 3-month grace period.
• No individual will be allowed to act as, or hold himself out as, a representative of a financial adviser unless he meets the entry and examination requirements specified by the MAS for the relevant type of financial advisory service and his name is entered in the Public Register for the FAA. — Ch. 1, p. 25

• Under Section 30(1)(a) to (f) of the FAA, the MAS may refuse to enter, or may revoke or suspend, an individual's status as an appointed or provisional representative if: the individual fails or ceases to act as a representative for all notified services; the individual or principal has not provided required information; the individual is an undischarged bankrupt (in Singapore or elsewhere); an enforcement order for a judgement debt has been returned unsatisfied; the individual has entered a compromise or scheme of arrangement with creditors still in operation; or the individual has been convicted of a fraud or dishonesty offence, or of an offence under the FAA. — Ch. 1, p. 33
  ⚠ A conviction for dishonesty overseas is a valid ground for MAS to revoke/refuse — not limited to Singapore offences.

• Under Section 33 of the FAA, any person aggrieved by the MAS's refusal under Section 30(1) to enter their particulars (or an additional service type) in the public register, or by the revocation or suspension of their status as an appointed or provisional representative under Section 30(1) or (2)(a), may appeal to the Minister within 30 days after being notified of the MAS's decision, and the Minister's decision shall be final.30 days — Ch. 1, p. 35
  ⚠ Appeal to the MINISTER within 30 days; the Minister's decision is final.

• The Financial Advisers Regulations (FAR) came into effect on 1 October 2002 as subsidiary legislation prescribed by the MAS to give effect to the provisions of the FAA and set out the rules on the application of the FAA.1 October 2002 — Ch. 1, p. 5
  ⚠ FAR is subsidiary legislation giving effect to the FAA.
• Financial advisers must give due regard to the interests of customers and are required to have a reasonable basis for their recommendations, ensuring due consideration of the person's investment objectives, financial situation and particular needs. — Ch. 1, p. 5

• In the case of an exempt fund manager who is also an exempt financial adviser, the total number of qualified investors and accredited investors served should not exceed 30 in total.30 investors (qualified + accredited combined) — Ch. 1, p. 13
  ⚠ Cap is 30 qualified + accredited investors in total.
• To be an appointed representative, an individual must be at least 21 years old, satisfy the minimum academic qualification and examination requirements (Notice FAA-N13), satisfy the fit and proper criteria (Guideline FSG-G01), and meet any other criteria stipulated by the MAS.21 years old (minimum age) — Ch. 1, p. 24
  ⚠ Minimum age to be an appointed rep is 21.
• Under Section 23(8) of the FAA read with Regulation 12A of the FAR, a principal shall, no later than the next business day after an individual ceases to be its representative or ceases to provide the relevant type of financial advisory service, provide particulars of such cessation to the MAS in the prescribed form and manner.next business day deadline — Ch. 1, p. 28
  ⚠ Cessation of a rep = notify by NEXT BUSINESS DAY (not 14 days).
• Under Section 24(2) of the FAA read with Regulation 4B(1) of the FAR, an individual shall only be a provisional representative for a period not exceeding three months from the date his name is entered in the public register of representatives.3 months (maximum) — Ch. 1, p. 29
  ⚠ Provisional rep: max 3 months. Don't confuse with the 12-month overseas experience requirement.
• A provisional representative must be currently or previously licensed, authorised or otherwise regulated for at least 12 months (and not more than 12 months ago) in relation to a comparable type of financial advisory service in an overseas jurisdiction with a regulatory regime comparable to that of Singapore; during the three-month grace period they may provide financial advisory services, and the principal must undertake to properly supervise them.12 months (comparable overseas regulation) — Ch. 1, p. 30
  ⚠ Provisional rep generally needs ~12 months comparable overseas regulation (and it must be recent, within 12 months).
• Under Regulation 4A(3) of the FAR, a principal who submits a certificate must keep copies of all information and documents which the principal relied on in giving the certificate for a period of five years from the date of lodgement.5 years — Ch. 1, p. 32
  ⚠ Retention = 5 years from LODGEMENT (not from resignation; not 7 years).
• Where a change occurs in any particulars of an appointed or provisional representative in any document required to be furnished to the MAS, the principal shall, no later than 14 days after the occurrence of the change, furnish particulars of the change to the MAS in the prescribed form (Form 18).14 days — Ch. 1, p. 32
  ⚠ Change in particulars = within 14 days (Form 18). Cessation = next business day.

• Under Section 32(1) of the FAA, if a principal or an individual lodges any document to the MAS and makes a statement that is false or misleading, or omits to state any material matter without which the document is misleading, that person is guilty of an offence and liable on conviction to a fine not exceeding S$50,000.S$50,000 maximum fine — Ch. 1, p. 35
  ⚠ False-statement fine = up to S$50,000.

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