RES5 Ch.2 Full Facts

🧾Product Disclosure

Section 34 duty to disclose material product information to clients and prospects.

Section 34(1) of the FAA, read with Sections 20(2) and 46, requires a licensed financial adviser to disclose to every client and prospective client all material information relating to any designated investment product that the adviser recommends to that person. — p.2-4
⚠ Disclosure is owed to prospective clients too, not only existing clients.
The material information to be disclosed under Section 34 includes the product's terms and conditions; its likely benefits and the risks that may arise; and the premiums, costs, expenses, fees or other charges that may be imposed, together with any other information the MAS may prescribe. — p.2-4
Where the designated investment product is a unit in a collective investment scheme, the adviser must additionally disclose the name of the scheme's manager and the relationship between the adviser and that manager. — p.2-4
⚠ CIS unit -> disclose the scheme MANAGER; life policy -> disclose the INSURER.
Where the designated investment product is a life policy, the adviser must additionally disclose the name of the licensed insurer under the life policy and the relationship between the adviser and the insurer. — p.2-4
⚠ Life policy -> disclose the INSURER; CIS unit -> disclose the scheme MANAGER.

🗣️Statements Recommendations

Sections 35-36: false/misleading statements and the reasonable-basis rule for recommendations.

Under Section 35 of the FAA (read with Sections 20(2) and 46), no licensed financial adviser shall, with intent to deceive, make a false or misleading statement as to any amount payable under a proposed contract for an investment product, the effect of any provision of such a contract or proposed contract, or the connection with the provision of any financial advisory service. — p.2-4, 2-5
⚠ Section 35 requires intent to deceive; an innocent misstatement is not caught here.
A licensed financial adviser who contravenes Section 35 is, notwithstanding that a contract does not come into being, guilty of an offence and liable on conviction to a fine not exceeding S$50,000, or imprisonment for a term not exceeding 12 months, or both.S$50,000 — p.2-5
⚠ s35 fine is S$50,000 (12 months); the s43 and s45 fines are S$25,000. Liability stands even if no contract results.
Under Section 36(1) of the FAA, no licensed financial adviser shall make a recommendation about any investment product to a person who may reasonably be expected to rely on it if the adviser does not have a reasonable basis for making that recommendation. — p.2-5
Under Section 36(2), an adviser has a reasonable basis for a recommendation only if, to ascertain that it is appropriate, it gave reasonable consideration to and conducted reasonable investigation of the subject matter having regard to the person's investment objectives, financial situation and particular needs, and the recommendation is based on that consideration and investigation. — p.2-5
⚠ Reasonable basis = consideration + investigation of the product, tied to the client's objectives, financial situation and particular needs (the 'know your client' triad).
For the purposes of Section 35, making a misleading statement includes omitting to disclose any matter that is material to the statement. — p.2-5
⚠ A material omission is itself a 'misleading statement' under s35.
Under Section 36(3), where an adviser makes a recommendation without a reasonable basis, the person reasonably relies on it by doing or refraining from an act, and suffers loss or damage as a result, the adviser is liable to pay damages to that person for that loss or damage, without prejudice to any other remedy. — p.2-5, 2-6
⚠ s36(3) is a civil liability to pay damages, distinct from the criminal fines elsewhere in this chapter.

💵Client Money

Section 37: receipt and treatment of a client's money or property; void liens/charges.

Under Section 37(4), 'client's money or property' means money received or retained by, or property deposited with, a licensed financial adviser in the course of his business, for which he is liable to account to another person. — p.2-6
Under Section 37(1), the MAS may by regulations determine the manner in which a licensed financial adviser may receive or deal with client's money or property, or prohibit the adviser from doing so in specified circumstances or in relation to specified activities. — p.2-6
Under Section 37(2), a lien or claim on client's money or property in any account is void, unless the moneys in the account are for fees due and owing to the licensed financial adviser. — p.2-6
⚠ A lien/claim is void EXCEPT for fees due and owing; a charge/mortgage (s37(3)) is void with no exception.
Under Section 37(3), a charge or mortgage on client's money or property in any account is void. — p.2-6
⚠ A charge/mortgage is void outright; only the lien/claim rule carries the 'fees due and owing' exception.
The law relating to the receipt of a client's money or property is contained in Section 37 of the FAA. — p.2-6

📤Furnish Info Mas

Section 38: MAS power to require information from a licensed adviser.

Under Section 38(1), the MAS may in writing require any licensed financial adviser to furnish information about any matter related to its business, whether carried on in Singapore or elsewhere, if in the MAS's opinion it requires the information to discharge its function under the FAA. — p.2-7
⚠ Covers business carried on in Singapore OR elsewhere; the request must be in writing.

🏦Insurance Broking Accounts

Section 41 / Reg 20: separate premium accounts, permitted withdrawals, refund of investment loss.

Under Section 41(1), every licensed financial adviser that receives insurance moneys must establish and maintain a separate account, with a bank licensed under the Banking Act 1970, for its life insurance broking premiums. — p.2-7
⚠ A SEPARATE account, at a Banking-Act-licensed bank, specifically for life insurance broking premiums.
Under Regulation 20(1), a financial adviser must pay into its Section 41(1) account all moneys received from or on behalf of an insured or intending insured for or on account of an insurer in connection with a contract or proposed contract of insurance, and all moneys received from an insurer for or on account of an insured or intending insured. — p.2-7
Under Regulation 20(3), no financial adviser may withdraw moneys from the premium account except for: a payment to or for a person entitled to receive them (including itself where so entitled); a payment to or for an insurer for amounts due under a contract of insurance; an investment by way of deposits placed with a bank licensed under section 7 or 79 of the Banking Act; or a repayment of moneys paid into the account in error. — p.2-7, 2-8
⚠ Withdrawals are limited to four permitted purposes; anything else is a breach.
Under Regulation 20(4)-(5), moneys received from realising a permitted investment must be paid back into the Section 41(1) account; and if the amount realised is less than the amount invested, the adviser must pay into the account from which the moneys were withdrawn an amount equal to the difference between the amount invested and the amount realised. — p.2-8
⚠ Any investment shortfall must be topped up by the adviser out of its own funds.

🌐Unlicensed Insurers

Section 42: prohibition on placing risk with unlicensed insurers, carve-outs and MAS permission.

Under Section 42(1), no licensed or exempt financial adviser may negotiate any contract of insurance with an insurer, directly or indirectly, except with a licensed insurer acting in the course of his business; this prohibits the negotiation and placement of risk with unlicensed insurers except where the MAS specifically permits it. — p.2-8
⚠ The prohibition binds both licensed and exempt advisers.
The Section 42 prohibition does not apply to reinsurance, to businesses relating to risk outside Singapore, or to such other risks as may be prescribed. — p.2-8
Where the MAS is satisfied that, by reason of the exceptional nature of the risk or other exceptional circumstances, it is not reasonably practicable to comply, it may permit a licensed or exempt adviser to negotiate the contract of insurance with such insurer as it sees fit and, if the MAS considers the case requires it, to effect the contract and receive the premium in Singapore on behalf of that insurer. — p.2-9
Under Section 6(2), a person is deemed to be acting as a financial adviser in Singapore if he engages in any activity or conduct intended or likely to induce the public in Singapore (or any section of it) to use any financial advisory service he provides, whether or not that activity is intended or likely to have an effect outside Singapore. — p.2-9
Section 4 of the Insurance Act 1966 generally prohibits any person from carrying on any class of insurance business in Singapore as an insurer unless licensed by the MAS for that class; a contravention is a criminal offence. — p.2-8
The requirement targets the increased use of the Internet for the sale and distribution of financial products (including insurance) by persons outside Singapore but directed at consumers in Singapore. — p.2-8

📑Representations Insurance

Section 43: deceptive representations on a proposed contract or a claim, and the penalty.

Under Section 43(1), no licensed financial adviser shall, with intent to deceive, in relation to a proposed contract of insurance: write on a form given or sent to an insurer any material matter that is false or misleading in a material particular; omit to disclose to the insurer any matter material to the proposed contract; or advise or induce the intending insured to do either of those things. — p.2-9, 2-10
⚠ s43(1) = the PROPOSED contract stage; s43(2) = a CLAIM under an existing contract.
Under Section 43(2), no licensed financial adviser shall, with intent to deceive, in relation to a claim under a contract of insurance: fill up a form given or sent to an insurer so that it is false or misleading in a material particular; omit to disclose any matter material to the claim; or induce or advise the insured to do either of those things. — p.2-10
⚠ s43(2) covers deception at the CLAIM stage, mirroring s43(1)'s proposal-stage rules.
A licensed financial adviser who contravenes Section 43 is, notwithstanding that a contract of insurance does not come into being, guilty of an offence and liable on conviction to a fine not exceeding S$25,000, or imprisonment for a term not exceeding 12 months, or both.S$25,000 — p.2-10
⚠ s43 fine is S$25,000 (same as s45); s35 is S$50,000. All three carry up to 12 months.
Section 43 of the FAA governs the conduct of a financial adviser in making representations in relation to a proposed contract of insurance with the insurer. — p.2-9

⚠️Conflict Of Interest

Section 45: disclosure of interests in specified products, the statutory defence and the penalty.

The purpose of Section 45 is to avoid conflict of interest situations: an adviser should act in the best interests of its clients, and where a conflict cannot be avoided, must ensure that its clients are treated fairly and equitably. — p.2-11
Under Section 45(1), where a licensed adviser sends a circular or written communication making a recommendation (express or implied) on any Specified Products, it must include in that communication, in type no less legible than the rest, a concise statement of the nature of any interest it (or a person associated with or connected to it) has in, or in the acquisition or disposal of, those Specified Products at the date the communication is sent. — p.2-11
⚠ The interest statement must be in type NOT LESS LEGIBLE than the rest of the communication.
Under Section 45(7), a licensed financial adviser that contravenes the conflict-of-interest section is guilty of an offence and liable on conviction to a fine not exceeding S$25,000, or imprisonment for a term not exceeding 12 months, or both.S$25,000 — p.2-12
⚠ s45 conflict-of-interest fine is S$25,000 (12 months) — same as s43, half of s35.
Before establishing a client relationship, an adviser should fully disclose all material information or facts that may compromise its objectivity or independence or impair its ability to make unbiased and objective recommendations, and disclose its relationship with the financial institutions whose products it advises on or recommends. — p.2-11
Under Section 45(2), it is a defence to a charge of failing to disclose a conflict of interest if the adviser proves that, at the time of the representation, it was not aware and could not reasonably be expected to have been aware that it (or a person associated with or connected to it) had an interest in, or in the acquisition or disposal of, the Specified Products. — p.2-12
⚠ The statutory defence needs both no actual awareness AND no reasonable expectation of awareness.

🗂️Register Of Interests

Reg 20A/20B: register of interests in listed specified products — deadlines, retention, location.

Under Regulation 20A(1), particulars of an interest in Listed Specified Products must be entered in the register within seven days after the date the person acquires the interest.7 days — p.2-12
⚠ Enter within 7 days of ACQUIRING the interest; retain the entry for 5 years.
A register entry must be retained in an easily accessible form for a period of not less than five years after the date on which the entry was first made.5 years — p.2-12
⚠ Retention runs 5 years from the date the ENTRY was first made — not from acquisition or disposal.
The MAS requires all licensed financial advisers and their representatives who provide financial advisory service in respect of Listed Specified Products to maintain a register of their interests in Listed Specified Products. — p.2-12
The person must ensure that a copy of the register of interests is kept in Singapore. — p.2-12
When there is any change in an interest in Listed Specified Products, the relevant person must enter particulars of the change in the register within seven days from the date of the change and retain the entry for five years.7 days — p.2-13
⚠ Both acquisition and change use the same 7-day entry window and 5-year retention.
Under Regulation 20B, the register must be kept, in the case of an individual, at his principal place of business, and, in the case of a corporation, at any of its places of business. — p.2-13
⚠ Individual -> PRINCIPAL place of business; corporation -> ANY of its places of business.
A licensed adviser must maintain records of the places at which its representatives keep their registers and where copies are kept in Singapore, and, on the Authority's request, must produce those records for inspection and allow the Authority to copy or take extracts from them. — p.2-13
The register may be kept in electronic form provided the relevant person ensures that the Authority may gain full access to it at the place where the register is required to be kept. — p.2-13
Any person who contravenes the register-of-interests requirements is guilty of an offence. — p.2-13

💳Unsecured Facilities

Reg 18: S$3,000 cap on unsecured facilities and the defined terms (director, market value, unsecured).

Under Regulation 18(1), a licensed financial adviser must not grant an unsecured advance, unsecured loan or unsecured credit facility to a non-employee director, or to any other officer, employee (including an employee-director) or representative, where the amount in the aggregate outstanding at any one time exceeds S$3,000.S$3,000 — p.2-14
⚠ Cap is S$3,000 measured on the aggregate amount outstanding at any one time.
For Regulation 18, 'director' includes the director's spouse, father, step-father, mother, step-mother, son, adopted son, step-son, daughter, adopted daughter, step-daughter, brother, step-brother, sister and step-sister. — p.2-14
⚠ 'Director' is extended to close family, so the S$3,000 cap cannot be sidestepped via relatives.
For Regulation 18, the 'market value' of specified products listed or quoted on an approved or overseas exchange is the last transacted price of those products on the immediately preceding business day. — p.2-14
⚠ Default market value = last transacted price on the immediately preceding business day.
If there was no trading on the immediately preceding business day, market value is the lower of the last transacted price and the last bid price of the specified products in the immediately preceding 30 days.30 days — p.2-14
⚠ This 30-day window is a market-value look-back; do not confuse it with the 30-day appeal window against a prohibition-order variation.
'Unsecured advance', 'unsecured loan' and 'unsecured credit facility' include any advance or loan made without security; any secured facility where the amount due exceeds the market value of the security (or an MAS-approved valuation where there is no established market value); any guarantee, performance bond or security provided by the adviser in connection with a facility made by another party to its officers, employees or representatives; and any credit facility without security, whether drawn down or not. — p.2-15
⚠ A partly-secured facility counts as 'unsecured' to the extent the amount due exceeds the security's market value; an undrawn credit line still counts.
If there was no trading in the specified products in the immediately preceding 30 days, market value is the value estimated by the exchange or, absent such a value, zero value or any other value approved by the Authority before the grant of the facility. — p.2-15

🧑‍💼Ceo Director Approval

Section 63 / Reg 13: prior approval and fit-and-proper criteria for CEO and directors.

Under Section 63(1), a licensed financial adviser must obtain the MAS's prior approval, via submission of Form 11, to appoint its chief executive officer or a director, or to change a director from non-executive to executive. — p.2-16
⚠ Approval is PRIOR and uses Form 11; it also covers a non-executive-to-executive change.
The Section 63 approval requirement does not apply to the appointment of a director of a foreign company, or to a change in the appointment of a director (not based in Singapore) of a foreign company who is not directly responsible for the adviser's business in Singapore. — p.2-16
Under Regulation 13(2), in deciding whether to approve an appointment the MAS has regard to criteria including: whether required information was provided; any subsisting prohibition order under Section 68; undischarged bankruptcy; an unsatisfied enforcement order for a judgment debt; a subsisting compromise or scheme of arrangement with creditors; any conviction for fraud, dishonesty or an FAA offence; the appointee's qualifications, experience and expertise; whether he is a fit and proper person; his financial standing; his past performance; and whether there is reason to believe he will not act with professionalism or ethically. — p.2-16, 2-17
⚠ 'Fit and proper' plus a broad list of integrity, competence and financial-standing factors.
The chief executive officer and a director may be re-appointed immediately upon expiry of the earlier term without the MAS's approval. — p.2-17
⚠ Initial appointment needs prior approval (Form 11); an immediate RE-appointment on the same term does not.
Under Section 63(11), the MAS may, by written notice to a licensed adviser, impose a condition requiring it to notify the MAS of a change to any specified attribute (such as residence and nature of appointment) of its chief executive officer or director, and may vary any such condition. — p.2-17

🚪Removal Of Officer

Section 64: fit-and-proper as a continuing requirement and MAS power to direct removal.

The fit and proper criterion is a continuing requirement that applies to an officer of a licensed financial adviser at all times, not only at appointment. — p.2-17
Under Section 64(1)(i), where the MAS is of the view that an officer of a licensed financial adviser does not measure up to the fit and proper benchmark, it may direct the company to remove that officer if it thinks this necessary in the public interest or for the protection of investors. — p.2-17

📜Written Directions

Section 67: MAS power to issue written directions to advisers, exempt persons and representatives.

Under Section 67(1), the MAS may, if it thinks it necessary or expedient in the interests of the public or a section of the public or for the protection of investors, issue written directions (general or specific) to a licensed adviser, a person exempt under Section 20 or 130, a representative, a supervisor of a financial adviser, or any class of such persons; written directions include a circular or notice. — p.2-18
⚠ Written directions bind a wide class (advisers, exempt persons, reps, supervisors) and include circulars and notices.

🚫Prohibition Orders

Sections 68-70: making, effect, variation/revocation of prohibition orders and the appeal route.

A prohibition order aims to keep unfit persons from engaging in any or all financial advisory services regulated under the FAA, or from taking part in the management of, or acting as a director or substantial shareholder of, a licensed or exempt financial adviser; it is issued only where very serious offences have been committed. — p.2-18
⚠ Prohibition orders are reserved for very serious offences.
Under Section 69(2), where a prohibition order is notified to a licensed or exempt adviser, that adviser must not employ or use the prohibited person to provide any financial advisory service to the extent prohibited; contravention is an offence liable on conviction to a fine not exceeding S$50,000.S$50,000 — p.2-19
⚠ Employing a prohibited person: fine up to S$50,000 (no imprisonment term stated in s69(2)).
Under Section 68(2), a prohibition order may prohibit a person, permanently or for a specified period, from providing any financial advisory service (or in specified circumstances or capacities) or from taking part directly or indirectly in the management of, acting as a director of, or becoming a substantial shareholder of a licensed or exempt adviser, and may include a provision allowing the person, subject to conditions, to do specified acts the order would otherwise prohibit. — p.2-18, 2-19
Under Section 70(1), the MAS may vary or revoke a prohibition order by written notice to the person if satisfied that it is appropriate to do so because of a change in any of the circumstances on which the order was based. — p.2-19
Under Section 70(2), the MAS may vary or revoke a prohibition order on its own initiative, or on an application by the person against whom the order was made accompanied by the prescribed documents or fee. — p.2-19
Under Section 70(3), the MAS shall not vary a prohibition order on its own initiative without first giving the person against whom it was made an opportunity to be heard. — p.2-19
Under Section 70(4), a person aggrieved by the MAS's decision to vary a prohibition order made against him on the MAS's own initiative may, within 30 days of the decision, appeal in writing to the Minister.30 days — p.2-19
⚠ Appeal is to the MINISTER within 30 days; don't confuse this 30-day window with the market-value look-back.

📢Publish Information

Section 77: MAS power to publish regulatory actions.

Under Section 77, the MAS may from time to time, and in such form or manner as it considers appropriate, publish information relating to specified regulatory actions. — p.2-19
The information the MAS may publish includes the lapsing, revocation or suspension of a licence (s15); the removal of an officer (s64); the making of a prohibition order (s68); the acceptance of an offer to compound an offence (s117); a reprimand (s125); the revocation or withdrawal of an exemption; a conviction for any offence under the FAA; a licensed adviser's conviction for any offence in Singapore or elsewhere; any other MAS action; and any other information it considers necessary or expedient to publish in the public interest. — p.2-20

🏢Corporate Offences

Section 111: liability of corporate/association officers and the meaning of 'officer'.

Under Section 111(1), where an offence committed by a body corporate is proven to have been committed with the consent or connivance of, or attributable to any neglect on the part of, an officer of the body corporate, that officer as well as the body corporate is guilty of the offence and liable to be proceeded against and punished accordingly. — p.2-21
⚠ Personal liability arises on consent, connivance OR neglect of the officer.
Under Section 111(6), 'officer' in relation to a body corporate means a director, member of the committee of management, chief executive, manager, secretary or other similar officer, and includes a person purporting to act in any such capacity. — p.2-21
⚠ Body-corporate officer list differs from the unincorporated-association list.
For an unincorporated association (other than a partnership), 'officer' means the president, secretary and members of the committee of the association, or a person holding an analogous position, and includes a person purporting to act in any such capacity. — p.2-21
⚠ Unincorporated association (not a partnership): president, secretary and committee members.
Various FAA provisions set penalties for a body corporate, for example the obligation to provide information to the Authority (s38(3)), negotiation and placement of risk with an unlicensed insurer (s42(5)), and representation by licensed financial advisers (s43(3)). — p.2-21

🧑‍⚖️Officer Offences

Sections 112-113: officer failure to secure compliance and falsification of records.

Under Section 112(1), any officer of a licensed financial adviser who fails to take all reasonable steps to secure compliance with any FAA provision, or the accuracy and correctness of any statement submitted to the MAS or other required person, is guilty of an offence and liable on conviction to a fine not exceeding S$100,000 or imprisonment for a term not exceeding two years, or both.S$100,000 — p.2-21
⚠ Officer offences: S$100,000 and up to 2 YEARS — higher than the conduct-of-business fines (S$25,000-S$50,000, 12 months).
Under Section 113(1), any officer, auditor, employee or agent of a licensed or exempt adviser who wilfully makes or causes a false entry, wilfully omits or causes the omission of an entry, or wilfully alters, extracts, conceals or destroys (or causes such) an entry in any book, report, slip, document or statement of the adviser's business, affairs, transactions, conditions or assets, is guilty of an offence and liable on conviction to a fine not exceeding S$100,000 or imprisonment for a term not exceeding two years, or both.S$100,000 — p.2-22
⚠ Falsification (s113) mirrors s112: S$100,000 and up to 2 years; applies to officers, auditors, employees and agents.

RES5 — Rules, Ethics and Skills for Financial Advisory Services — Full Facts