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

Chapter 3 · quick-revision digest · narrative, key figures & core facts

📖 Overview

🧭 Principles & frameworks

• Information to be collected under Know Your Client — Under Know Your Client, a financial adviser shall take reasonable steps to collect and document the client's financial objectives, risk tolerance, employment status, financial situation (assets, liabilities, cash flow and income), source and amount of regular income, financial commitments, current investment portfolio (including any life policy), and whether the amount to be invested is a substantial portion of the client's assets. — p. 3A-5
• Factors and deemed outcome for CKA — For a Customer Knowledge Assessment the financial adviser shall consider the client's educational qualifications, investment experience and work experience; where the client does not provide this information, the adviser shall deem the client not to possess knowledge or experience in the unlisted SIP. — p. 3A-6, 3A-7
• Factors and deemed outcome for CAR — For a Customer Account Review the financial adviser shall consider the client's educational qualifications, investment experience and work experience; where the client does not provide this information, the adviser shall deem the client not to possess knowledge or experience in derivatives. — p. 3A-11
• The three general disclosure standards — In all product-information disclosures a financial adviser is expected to meet three general standards: information must be Clear (plain language, jargon explained), Adequate (sufficient for an informed decision, with warnings prominent), and Not False or Misleading (unambiguous, objective and unbiased). — p. 3B-4
• Product-information categories to disclose for a DIP — When recommending a designated investment product, a financial adviser shall disclose, clearly, adequately and not misleadingly, the product's nature and objective, product-provider details, contractual rights, client profile, commitment required, benefits, risks, pricing, fees and charges, reports, free-look/cancellation rights, withdrawal/surrender/claim procedures, and any warnings, exclusions and disclaimers. — p. 3B-7

⏱️ Key figures, limits & deadlines

📅 Key dates

⚠️ Exam traps (commonly confused)

• CKA = unlisted SIPs (Annex 2) vs CAR = listed SIPs/derivatives (Annex 3): The Customer Knowledge Assessment covers UNLISTED SIPs against Annex 2 criteria; the Customer Account Review covers LISTED SIPs (derivatives) against Annex 3 criteria. Swapping the product type, annex, or the 'derivatives' deemed shortfall is the classic trap.
• CKA validity = 1 year vs CAR validity = 3 years: A Customer Knowledge Assessment is valid one year from its date; a Customer Account Review is valid three years (subject to an active-trading exception). Do not confuse the two periods.
• s25 disclosure of material info vs s26 false/misleading statements vs s27 reasonable basis: Section 25 = duty to disclose material product information (FAA-N03); Section 26 = prohibition on false/misleading statements with intent to deceive (FAA-N03); Section 27 = reasonable-basis/suitability duty (FAA-N16). Questions test which section does what.
• Free-look period = life policies vs Cancellation period = unit trusts: The free-look period attaches to life policies; the mirror-image cancellation period attaches to unit trusts. Both shift the risk of a fall in value onto the client during the window.
• Base currency = initial investment vs Alternate currency = other repayment currency vs Issuer holds the option: In a DCI the base currency is where the client invested and the alternate currency is the other currency the issuer may repay in — and it is the deposit-taking institution, not the client, that holds the currency option.
• FAA-N16 = 1 Jan 2012 vs FAA-N11 = 1 Mar 2006 vs Overseas-listed trigger = 8 Oct 2018: Three easily-confused dates: FAA-N16 commenced 1 Jan 2012, FAA-N11 commenced 1 Mar 2006, and the overseas-listed risk-warning obligation bites on first recommendations on/after 8 Oct 2018.

⭐ Core facts

The must-know propositions, distilled. See all 79 facts by topic →

• Section 27 of the Act requires a licensed financial adviser to have a reasonable basis for any recommendation on an investment product made to a person who may reasonably be expected to rely on it, giving due consideration to that person's investment objectives, financial situation and particular needs. — p. 3A-5
  ⚠ s27 (reasonable basis) is the FAA-N16 anchor — distinct from s25 (disclosure) and s26 (false statements) under FAA-N03.

• Under Know Your Client, a financial adviser shall take reasonable steps to collect and document the client's financial objectives, risk tolerance, employment status, financial situation (assets, liabilities, cash flow and income), source and amount of regular income, financial commitments, current investment portfolio (including any life policy), and whether the amount to be invested is a substantial portion of the client's assets. — p. 3A-5

• Where the investment product is an unlisted Specified Investment Product, a financial adviser shall conduct a Customer Knowledge Assessment (CKA) based on the criteria in Annex 2 before making a recommendation on that unlisted SIP to a client. — p. 3A-6
  ⚠ CKA is for UNLISTED SIPs (Annex 2); the Customer Account Review (CAR) is for LISTED SIPs/derivatives (Annex 3).
• Where the client does not wish to receive advice on the unlisted SIP, the financial adviser shall document the decision and warn the client in writing that it is the client's responsibility to ensure suitability and that the client will not be able to rely on section 27 of the Act to file a civil claim for any alleged loss. — p. 3A-7
  ⚠ Declining advice forfeits the client's ability to rely on s27 for a civil claim — a key consequence to warn about in writing.
• Where a client who failed the CKA insists on transacting in a non-recommended unlisted SIP, the adviser shall not allow the trade unless its senior management (not involved in the trade and not a connected person to the client) has confirmed the client was properly informed, is satisfied the adviser complied with paragraphs 22 and 24, and has approved the trade. — p. 3A-9, 3A-10
• Where a client is assessed to have the knowledge or experience, the financial adviser may allow the client to transact in the unlisted SIP for a period of one year from the date of the Customer Knowledge Assessment; after a year, a new CKA must be conducted.1 year — p. 3A-10
  ⚠ CKA is valid ONE year; the Customer Account Review (CAR) is valid THREE years — the classic near-miss.

• A financial adviser shall conduct a Customer Account Review (CAR) based on the criteria in Annex 3 before making a recommendation on any Listed Specified Investment Product. — p. 3A-11
  ⚠ CAR = LISTED SIPs (derivatives), Annex 3; CKA = UNLISTED SIPs, Annex 2. Swap them and you fail the question.
• No financial adviser shall recommend a Listed SIP more than 3 years after the date of the Customer Account Review, unless the client has transacted in a Listed SIP more than once during the preceding 3-year period (and in every subsequent 3-year period) or a new CAR has been conducted.3 years — p. 3A-15, 3A-16
  ⚠ CAR validity is THREE years (with an active-trading exception); CKA validity is ONE year.

• A financial adviser shall not recommend a client to switch from one designated investment product to another in a manner that would be detrimental to the client. — p. 3A-23
• Under section 58(5) of the Act, any person who contravenes a requirement in a written direction issued by the Authority (which includes these Notices) is guilty of an offence and liable on conviction to a fine not exceeding $25,000 and, for a continuing offence, a further fine not exceeding $2,500 for every day the offence continues after conviction.25000 SGD — p. 3A-24, 3B-13
  ⚠ Contravening a MAS Notice (s58(5)) = fine up to $25,000 + $2,500/day continuing. Same figure applies to FAA-N16 and FAA-N03.

• Section 25 of the Act imposes on licensed financial advisers an obligation to disclose to their clients and prospective clients all material information relating to any designated investment product they recommend, including the form and manner of disclosure. — p. 3B-3
  ⚠ s25 = duty to DISCLOSE material product information; s26 = prohibition on FALSE/MISLEADING statements; s27 = reasonable basis. Do not swap them.
• Section 26 of the Act provides that no licensed financial adviser shall, with intent to deceive, make a false or misleading statement as to any amount payable in respect of a proposed contract relating to an investment product or as to the effect of any provision of a contract or proposed contract. — p. 3B-3
  ⚠ s26 requires INTENT TO DECEIVE and targets false statements on amounts payable or contract effect; contrast with s25's disclosure duty.

• A financial adviser shall disclose in writing to a client all remuneration — including any commission, fee and other benefits — it has received or will receive that is directly related to making a recommendation on an investment product or executing a purchase or sale of a designated investment product for the client. — p. 3B-6

• A financial adviser shall disclose in writing to its clients any actual or potential conflict of interest arising from any connection to or association with a product provider, including any material information or facts that may compromise its objectivity or independence. — p. 3B-7

• For a dual currency investment, the 'base currency' is the currency in which the initial investment is made, while the 'alternate currency' is the currency (other than the base currency) in which the principal sum could be repaid. — p. 3C-2, 3C-3
  ⚠ Base currency = where you invested; alternate currency = the other currency the principal could be repaid in. Do not swap them.

• No financial adviser or representative shall use the term 'deposit' or 'structured deposit' (or any of their derivatives in any language) in the name, description or any representation of a dual currency investment in marketing material or product disclosure documents, because such labelling may mislead investors into thinking the product is principal-guaranteed in the base currency. — p. 3C-3
  ⚠ A DCI may never be marketed as a 'deposit' or 'structured deposit' — the ban covers derivatives of the words in any language.

• A dual currency investment involves a currency option that confers on the deposit-taking institution the right to repay the principal sum at maturity in either the base or the alternate currency, and part or all of the interest earned represents the premium on that option. — p. 3C-4
  ⚠ In a DCI the ISSUER (deposit-taking institution) holds the option to choose the repayment currency; the enhanced interest is the option premium.

Quick-revision digest · All 79 facts by topic → · source-linked; verify against the study text before exam use.