CMFAS Module 5 Strictly for Internal Use Only

Key Learning Points for Module 5

5th Edition – April 2020

Chapters 1 to 14

th
Note: This document must be read in conjunction with the 5 Edition Textbook (refer to as text).

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Chapter 1 – The Regulatory Bodies and Associations

1. Monetary Authority of Singapore
Know:
 Mission and Objectives of MAS
 Classification of 8 Instruments issued by MAS
 Of the 8 instruments, know these instruments; Acts, Subsidiary Legislation and Directions –
have the force of law and may specify that a contravention is a criminal offence.
 Tenets of Effective Regulations – There are 6 of them.

2. Singapore Exchange Limited (SCX)

 SGX is the first demutualized, integrated securities and derivatives exchange in Asia
Pacific.
 SGX owns and operates the only integrated securities exchange (SGX – ST) and
derivatives exchange (SGX- DT) in Singapore and their clearing houses.
 SGX- ST operates the fully electronic and floorless exchange in Asia.
 Know: SGX Regulatory Functions:
o (a) to (g) of text.

3. Investment Management Association of Singapore (IMAS)

 IMAS is a representative body of investment managers spearheading the development and
growth of the industry in Singapore.
 Objectives OF IMAS - know: (a) to (f) of text.
 MAS Code of Ethics - know: (a) to (c) of text.
 IMAS Standards of Professional Conducts cover the following 4 areas:
 An investment manager;
 Business conduct;
 Client relations;
 Investment conduct.

4. Life Insurance Association of Singapore (LIA)

 LIA is a not for profit trade body of life insurance product providers and life reinsurance
providers based in Singapore, licensed by MAS.
 Vision And Mission of LIA.
 Values Underpinning LIA And Its Members – Know: (a) to (f).

5. Associations of Banks in Singapore (ABS)

ABS promotes and represents the interests of the banking community in Singapore. It works
closely with MAS and other governmental bodies in supporting their role, in developing and
maintaining a sound financial system in Singapore.

6. Association of Financial Advisers (Singapore) – AFA(S)

AFA(S) is formed primarily to represent licensed Financial Advisers (Firms) who provide and
advice on the sale of financial products; to provide a forum for members to develop opinions,
recommendations all of which contribute to the further development of the financial services
industry. Exempt Financial Advisers are associated members.

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Chapter 2 – Financial Advisers Act (FAA) and Financial Advisers

Regulation (FAR) – Financial Advisers and Representatives
1. Financial Advisers Act (FAA)
 On 1 Oct 2002, FAA (Cap 110) came into regulation to regulate the sale of investments
products in Singapore.

 Consolidates the Securities Industry Act, Futures Trading Act and the Insurance
Intermediaries Act into a Single Legislation. This will provides a consistent set of regulations
for engaging in similar activities across investment products.

 FAA governs financial advisory activities in respect of namely life insurance policies, and
collective investment schemes, including unit trusts. It also governs the conduct of person
providing such services.

2. Financial Advisers Regulation (FAR)

It is a subsidiary legislation to effect the provisions of FAA. It includes licensing approval or
registrations requirements, exemptions as well as provides revocation or variation of any
condition under the FAA.

3. Principles of FAA and FAR

1. Customers’ Interest
2. Consistency
3. Accountability
4. Independence

4. Financial Advisers Act (FAA) and Financial Advisers Regulation (FAR)

Know the following:
 Exempt Financial Advisers and Their Representatives – (a) to (g) of text.
 Excluded Financial Advisers (First Schedule of the FAA) – (a) to (k) of text.
 Types of Financial Advisory Services under the Second Schedule of the FAA – (a) to (d) of
text.
 Products Regulated Under The FAA - (a) to (d) of text.
 Excluded Products - (a) to (c) of text.

5. Application For The Grant of Financial Adviser’s Licence – Know: (a) to (e).
 With effect from 26 November 2010, all existing financial adviser’s licences would no longer
have to be renewed. Instead, once issued the licence would continue to be valid, subject to
the payment of an annual licence fee, unless the licence holder ceases to carry on
business.

 Grounds For Refusal To Grant FA’s Licence (read through)

Grounds For Refusal To Grant FA’s Licence Without Opportunity To Be Heard. Why?
(a) the applicant is in the course of being wound up or otherwise dissolved,
(b) a receiver, a receiver and manager or an equivalent person has been appointed, in
respect of any property of the applicant;
(c) a prohibition order has been made by the MAS against the applicant;
(d) the applicant has been convicted of an offence involving fraud or dishonesty.

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6. Minimum Financial Requirements

Differentiate between when the paid up capital of the applicant:
1) to be not less than S$300,000
2) to be not less than S$150,000

7. Exempt Persons (Third Schedule Of The FAA)

1. The FAA also provides for a category of persons to be exempted from holding a financial
adviser’s licence. This group of persons called “exempt persons” are persons who are
referred to in Section 4.7(f) of this chapter.

2. Prerequisites To Be Met By Exempt Persons

 Fit and proper;
 Compliance to commensurate with the size and scale of its business activities in
Singapore;
 To demonstrate minimum financial viability.

3. Definitions of Accredited and Qualified Investors

Know: (a) Individual and (b) corporation of text.

8. Use of the term “Financial Adviser” or “Life Insurance Broker”.

No person, other than:
(a) licensed financial adviser;
(b) an exempt financial adviser; or
(c) a person, or a person belonging to a class of persons, approved by the Authority,
Can use term “Financial Adviser” or “Life Insurance Broker”.

8. Launch of Representative Notification Framework (RNF regime)

1. Onus is now on the principals to accept only fit and proper individuals as reps.

2. Under the new RNF, representatives providing financial advice will have their names
recorded on a public register.

3. Public Register Of Representatives – know the information in this register - (a) to (f) of text.

4. The public register is accessible to the public through the MAS website.

9. Who Are Representatives?

1. Representative To Act For Only One Principal
However, an appointed representative may be a representative of more than one principal
if the principals are related corporations. Know the fine in the text.

2. Types of Reps
(a) Appointed Reps
(b) Provisional Reps Rep

3. Criteria To Be A Rep – (a) to (d) of text.

4. Acting As A Rep
 No individual will be allowed to act as a representative or to hold himself out as a
representative of a financial adviser unless:
(a) he meets the entry and examination requirements specified by the MAS for
the relevant type of financial advisory service; and
(b) his name is entered in the Public Register for the FAA.

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 Contravention : a fine not exceeding S$25,000 or to imprisonment for a term not

exceeding 12 months or to both and, in the case of a continuing offence, to a further
fine not exceeding S$2,500 for every day or part thereof during which the offence
continues after conviction.

10. Criteria To Be An Appointed Rep and Provisional Rep

Quite similar in the text (Pt 11 and Pt 12)

11. Cessation Of Status Of Provisional Rep – Know: (a) to (d) of text.

12. Differences Between Appointed Rep and Provisional Rep

1. Provisional representatives are given a grace period of three months to pass the
requisite examinations applicable to appointed representatives.

2. The appointment of a provisional representative is valid for a period of up to three

months after his name is entered into the Public Register as a provisional representative.

13. Notification Procedure

1. Documents To Be Lodged With The MAS
Know: (a) to (c) of text.

2. Retention Period

3. Undertaking Of Responsibilities For Provisional Representatives - (a) to (e) of text.

14. Conditionals for Refusal To Enter Details In The Public Register

(a) to (d) of text.

15. False Statement in Relation to Notification of Appointed or Provisional Representative.

FAA provides that if a principal or an individual lodges any document to the MAS and:
(a) makes a statement which is false or misleading; or
(b) omits to state any material matter without which the document is misleading, shall be
guilty of an offence and shall be liable on conviction to a fine not exceeding S$50,000.

16. Appeals
Any person who is aggrieved by the refusal of the MAS to enter his name in the public register
may, within 30 days after he is notified of the decision of the MAS, appeal to the Minister whose
decision shall be final.

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Chapter 3 – FAA & FAR - Conduct of Business, Powers of Authority and

Offences
Part III of the FAA : Conduct Of Business - Division 1 – General
Know the following:
1. Obligation To Disclose Product Information To Clients – (a) to (f) of text.
2. Statements By Licensed Financial Advisers – (a) to (c). Note the fine.
3. Recommendations By Licensed Financial Advisers
4. Receipt Of Client’s Money or Property
5. Obligation To Furnish Information To The MAS. (Note the fine and imprisonment).

Part III of the FAA : Conduct of Business - Division 2 – Life Insurance

1. Insurance Broking Premium Accounts
 Separate Bank Accounts
Every licensed financial adviser which receives any insurance moneys shall:
 establish and maintain a separate account with a bank licensed under the Banking
Act (Cap. 19) for its life insurance broking premiums.

 Conditions for Withdrawal

Know: 2 situations monies are forwarded to the account and 4 situations monies are
withdrawn from the account.

 Refund Of Loss On Investment

 Retention Of Interest And Income

2. Negotiation and Placement of Risk with Unlicensed Insurers

 Financial advisers are required to seek the approval of the MAS, should they wish to place
their clients’ life insurance risks with unlicensed overseas insurers;
 Ensure that no financial adviser is being used by unlicensed overseas insurers to assist
them to write domestic Singapore risks, since unlicensed overseas insurers are not allowed
to carry on insurance business in Singapore as an insurer.

Part III of the FAA : Conduct Of Business - Division 3 – Specified Products

Licensed FA To Disclose Certain Interests in Specified Products
1. A financial adviser should act in the best interests of its clients in providing services to them.
Where such conflict of interest situations cannot be avoided, the financial adviser should ensure
that its clients are treated fairly and equitably.

2. A licensed financial adviser who contravenes this “conflict of interests” section shall be guilty of
an offence and be liable on conviction to a fine not exceeding S$25,000, or to imprisonment for
a term not exceeding 12 months or to both.

3. Register Of Interest In Listed Specified Products –Know (a) to (d)

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Part IV of the FAA- Conduct Of Business

1. Conditions for Granting Unsecured Advances, Loans and Credit Facilities
Know (a) to (b) of text.

2. Know the definition of “Unsecured Advance”, “Unsecured Loan” or “Unsecured Credit Facility”.
Pg 51 (c) for details.

Part V of the FAA- Powers Of Authority

1. Approval Of Chief Executive Officer and Director of Licensed Financial Adviser
 Criteria To Be Appointed As the Chief Executive Officer (CEO) or Director
o Read through (a) to (j) of text.

2. Removal Of Officer and Licensed Financial Advisers

The fit and proper criterion is a continuing requirement. Where the MAS is of the view that any
officer of a licensed financial adviser does not measure up to this benchmark, it may direct the
company to remove such an officer from his office, if the MAS thinks it necessary in the
public interest or for the protection of the investors to do so.

3. Prohibition Orders (PO)

Objective of PO is to keep unfit persons from engaging in any or all of the financial advisory
services regulated under the FAA. It is only issued for very serious offences that have been
committed. Know the following:
 Power Of Authority To Make Prohibition Orders – (a) & (b)
 Effect Of Prohibition Orders - Any licensed financial adviser or exempt financial adviser
which contravenes this shall be guilty of an offence to a fine not exceeding S$50,000.
 Variation Or Revocation of PO – Know all.

Part VIII of the FAA- Offences

1. Corporate Offenders and Unincorporated Associations

2. Offences By Officers
An officer of a licensed financial adviser who fails to take all reasonable steps to secure:
(a) compliance with any provision of the FAA; or

(b) the accuracy and correctness of any statement submitted to the MAS, or such other
person as may be required under the FAA, shall be guilty of an offence and shall be liable
on conviction to a fine not exceeding S$100,000 or an imprisonment for a term not
exceeding two years or both.

3. Defence On Reasonable Grounds – know all.

4. Falsification Of Records By Officers, ETC. – same fine and jail term as (2) of above.

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Chapter 4 – MAS Notices Part I (Notice Nos: FAA-N16, FAA-N03 & FAA-
N11)
1. Notice On Recommendations On Investment Product (Notice No: FAA-N16)
Concentrate on these areas:
1. Introduction
 These new requirements will apply to the sale of Specified Investment Products. These
include listed SIPs such as futures and exchange traded funds, and unlisted SIPs such
as investment-linked life insurance policies.
 The intermediary must conduct a Customer Knowledge Assessment to assess whether
a customer has the relevant knowledge or experience to understand the risks and
features of an unlisted SIP. In the case of listed SIPs, the intermediary must conduct a
Customer Account Review to ascertain whether the customer has the relevant
knowledge or experience to understand the risks and features of derivatives, before
approving the customer’s account to trade such products.

2. Applicability Of Notice NO: FAA-N16

Know: (a) to (e) of text.

3. Circumstances where Notice NO: FAA-N16 Does Not Apply

Know: (a) and (b)(i), (ii) - all of text.

4. Recommendations On Investment Products

1. Know Your Client – Pg 63.
 A financial adviser to make a recommendation that takes into account a client’s
investment objectives, financial situation and particular needs.

 Customer Knowledge Assessment (CKA) (Pg 65) and Customer Account Review
(CAR)(Pg 69) - know all of Text.
 Explore from the following which are similar for both:
o Requirements where the client are assessed not to possess knowledge or
experience
o Validity of outcome of CKA and CAR;
o Reliance on a third party;

2. Needs Analysis – (Pg 73) read all.

 Where a client does not want to :
(a) to provide any information requested by the financial adviser;
(b) to accept the recommendation of the financial adviser and chooses to
proceed with the transaction in another investment product which is not
recommended by the financial adviser,
the financial adviser may proceed with the client's request, but it shall document the
decision of the client and highlight to the client in writing that it is the client’s
responsibility to ensure the suitability of the product selected.

3. Documentation and Record Keeping (Pg 74)

Know what documents to be given when advising on CIS vs Life Insurance Policy

5. Requirements On Financial Advisers Providing Financial Advisory Services In Relation To

Overseas-Listed Investment Products

6. Switching of Designated Investment Products - Know the example of detrimental switches:

(i) to (iv) of text.

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2. Notice on Information to Clients and Product Information Disclosure (Notice No: FAA-
N03)
1. Applicability Of Notice NO: FAA-N03 – know: (a) to (e) of text.

2. General Disclosure Principles

a) Clear
b) Adequate
c) Not False and Misleading

3. General Information About FA And The Status Of A Rep

Know: What the FA and the Rep shall disclose.

4. Remuneration Of The Financial Adviser – Read all.

 A financial adviser shall disclose, in writing, to a client all remuneration, including
any commission, fee and other benefits, that it has received or will receive that is
directly related to the recommendation in respect of an investment product.

 In the case of a life policy, a financial adviser shall disclose to its client the “distribution
cost” item in the policy illustration (where a policy illustration is available in respect of
the life policy) and shall not be required to disclose the amount and type of
remuneration stated of this Notice.

5. Designated Investment Products

 Nature and Objective Of the Product
 Contractual Rights
 Client Profile
 Benefits Of The Product
 Risks Of The Product
 Pricing Of The Product
 Fees And Charges To Be Borne By The Client
 Free-Look Period For Life Policies and Cancellation Period For Unit Trusts
 Warnings, Exclusions And Disclaimers
 Illustration Of Past and Future Performance Of Designated Investment Products

3. Notice on Dual Currency Investment (Notice No: FAA-N11)

1. This Notice applies to any licensed or exempt FA or its representatives, who advises on
any dual currency investment, except, where advice is given to:
Know: (a) to (c) of text.

2. Use Of The Term “Deposit” And “Structured Deposit” – Pg 93

No financial adviser or its representative shall, when describing or referring to a dual
currency investment in any marketing material or product disclosure document, use the
term “deposit”, or any of its derivatives in any language, or “structured deposit”, or any of its
derivatives in any language, in the name or description or any representation of that dual
currency investment.

3. Additional Product Information Disclosure

Know: (a) to (k) of text.

4. Warnings – Important : (a) to (c) of text.

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Chapter 5 – MAS Notices Part II (NOTICE NOS: FAA-N02; FAA-N10; FAA-N12;

FAAN13; FAA-N14; FAA-N15 & FAA-N20)

1. Notice on Appointment and Use of Introducers by FAs (Notice No: FAA-N02)

1. Definitions Of “Introducing Activity”
(a) introducing any client to an introducee in relation to the provision of any type
or types of financial advisory service by the introducee; or

(b) the activity as referred to in (a) above and either or both of the following:
(i) recording the particulars of any client and forwarding such particulars to
an introducee with the client’s consent;
(ii) providing factual information to any client on investment products, including
information on the name of the investment product, any fee or charge which
may be imposed.

2. Requirements For Financial Advisers Appointing Introducers

1. Introducer, if it is a corporation, introducing cannot be its sole business activity, if it is
a person, introducing should not be his full time occupation.

2. A FA which engages the services of an introducer shall comply with:

(Know all of the following)
(a) Written Agreement
(b) Disclosure By Introducer
(c) Provision Of Script For Use By Introducers
(d) Prohibition On handling Of Client’s Money Or Property By Introducers
(e) Maintenance Of Register Of Introducers

2. Notice on Prohibited Representations made by persons exempted under Regulation 27

(1)(D) of the FAR(RG 2). (Notice No: FAA-N10)
Prohibited Representations – know: all of text.

3. Notice on Entry Requirements of a Provisional Representative (Notice No: FAA-N12)

Entry Requirements:
The principal shall ensure Provisional Representative satisfy the following minimum
requirements, failing which MAS may refuse entry of them:
a. He is at least 21 years old;
b. He is in the process of relocating or relocated to Singapore;
c. He possesses at least 3 years of relevant working experience as a provisional rep;
d. He possesses at least a Bachelor’s degree or equivalent, or has a professional
qualification.

4. Notice on Minimum Entry and Exam Requirements (Notice No: FAA-N13)

1. Application of CMFAS Exam Requirements – Pg 119

2. Know the 2 Tables in the text at page 119 and 121:

 The CMFAS Exam, which commenced on 1 December 2002, comprises 14
modules, of which Modules 5 to 9A are applicable under the Act.
 The applicable modules under the CMFAS Exam for each of the FA services.

3. Minimum Entry Requirements For an Appointed Representative:

a. be at least 21 years old;
b. minimum academic qualification requirements

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a. a full certificate in GCE 'A' Level; or

b. an International Baccalaureate Diploma qualification; or
c. a diploma awarded by a polytechnic in Singapore; or
d. any other academic qualification which is equivalent to the qualifications of the
above.

4. Circumstances under which CMFAS Exam do not apply (pg 123):

1. Specified Qualifications or Work Experience
Know: 18A – Rep who are exempted from M6, 8 or 9 if they fulfil the 3 points.

2. A representative who possesses any of the following qualifications is not required to

pass Module 6A, 8A or 9A (as may be applicable) :
(a) a degree or higher qualification in finance, financial engineering or
computational finance; or
(b) Chartered Financial Analyst (CFA) by the CFA Institute, USA

5. Specified Types OF Financial Advisory Services. (pg 127)

CMFAS Exam requirements shall not apply to any reps who confines performance of the
FA services in respect of: Know- (a) to (c) of text.

6. Retake Module 5 (pg 131, Pt 25) – Know (a) & (c) of text.

7. Administration of CMFAS Exam - Know: which modules are administered by SCI Vs IBF.

8. Continuing Professional Development Requirements For Appointed Representatives

1. Every appointed Rep and Principals to observe with regard to CPD training:

Every appointed rep to observe: Every principal must:

a. Undergo structured CPD training a. Review and follow up on each of its

which is relevant to the type of appointed reps' structured CPD training
financial advisory services that he needs on an annual basis;
provides;
b. Obtain & retain relevant supporting b. Obtain & retain relevant supporting
evidence of completed minimum hrs evidence that each of its reps has
of structured CPD training. completed minimum hrs of structured CPD
training.

2. In this section, “structured CPD training” includes –

(a) lectures;
(b) conferences;
(c) workshops;
(d) courses;
(e) product seminars prior to the launch of new products; and
(f) e-learning courses

3. Minimum hours of structured CPD training required and calculation of structured

CPD training hours.
1. With effect from 1 Jan 2016, an individual who acts or hold himself out to be an
appointed rep and provides:

(A) only one type of financial advisory service, must complete by the end of
every calendar year:
(i) the minimum number of training hrs in Ethics and Rules and
Regulations respectively set out in the second column of Table A

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(Refer to Table A of Text)

- 6 training hrs in respect of Ethics or Rules and Regulations) or both,
as the case maybe

(ii) the minimum number of training hrs set out in the third column of
Table A (10 hrs) for that type of financial advisory service; and

(B) two or more types of financial advisory service, must complete by the end of
every calendar year:
(i) same as (i) of above

(ii) the higher of the minimum number of training hrs set out in the third
column of Table A (10 hrs - 18 hrs) for those type of financial advisory
services.

2. Circumstances Under Which CPD Requirements Do Not Apply (pg 139)

Know: Pt 33A - (a)(i) to (iii) and (b) of text.

9. Transitional arrangements for implementation for of the securities and Futures

(amendment) Act 2017 - Read

5. Notice on Reporting of Misconduct of Representatives by FAs (Notice No: FAA-N14)

The following are important:
1. Report of Misconduct Of Representative –Know all of (a) to (d) of text.

2. Update On Report Of Misconduct of Representatives

3. Annual Declaration

4. Disciplinary Action
 It should take appropriate disciplinary action against its representatives for any
misconduct committed by them in relation to the provision of any financial advisory
service and ensure consistency in its application of disciplinary action.

 Know the disciplinary action - (a) to (f) of text.

6. Notice on Cancellation Period For Unlisted Debentures (Notice No: FAA-N15)

1. This notice shall apply to:
(a) holders of a financial adviser’s licence;
(b) exempt financial advisers;
(c) representatives of financial advisers;
(d) persons who are exempted under Regulation 29 of the FAR; and
(e) representatives of persons who are exempted under Regulation 29 of the FAR.

2. This Notice does not apply :

Know (a) to (c) of the text.

3. Sale of Unlisted Debenture

4. Disclosure of Cancellation Period for Unlisted Debenture

Know well - (a) to (c) of Text.

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7. Notice On Requirements For The Remuneration Framework For Representatives and

Supervisors ("Balanced Scorecard Framework") And Independent Sales Audit Unit
(Notice [Link]-N20)
Refer to Pg 150
1. Introduction
 This Notice sets out the requirements for the independent sales audit unit ("ISA Unit")
and the design and operation of the balanced scorecard framework, which FAs shall put
in place in their remuneration structures for their representatives and supervisors.
 Read through the definitions.

2. The ISA Unit – Pg 153

1. The Independent Sales Audit Unit (ISA Unit)
 Persons Comprising The ISA Unit.
 (a) to (c) of text.

2. Requirements of ISA Unit in relation to the Balanced Scorecard Framework

A financial adviser shall require the ISA Unit to submit reports on its audit of the quality
of financial advisory services provided in every calendar quarter by the representatives
of the financial adviser, to either :
(a) the board and chief executive officer of the financial adviser; or

(b) a business function or unit of the financial adviser, which is independent from the
financial advisory services unit of the financial adviser

3. Requirements of the balanced scorecard framework for representatives of a FA.

Know:
 Non-sales key performance indicators (Pg 155)

4. Process and methods for reviewing and assessing representative’s performance in his
provision of financial advisory services against non-sales KPIs.
 Post-transaction checks by ISA Unit (Pg 156)

 Sampling methodology of the ISA Unit and sampled transactions (Pg 157)
(a) Historical average transaction count method
(b) Actual Transaction count method

5. Classification Of Infractions: Category 1 infraction or Category 2 infraction (Pg 161)

Know:
 Definition of Category 1 and Category 2 infraction.
 What is disregarded as infraction

6. Know: Representatives Grading Table and Supervisor Grading Table in the Text.
(Pg 163, 172)

7. Avenue For Appeal By Reps And Supervisors (Pg 173)

8. Record Keeping (Pg 174) - 5 years

9. Maintenance Of Register – 5 years

10. Read - Responsibilities of Board and Senior Management

11. Read - Submission of reports to the Authority

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Chapter 6 – MAS Notice No: FAA – N06 – Prevention of Money

Laundering & Countering the Financing of Terrorism – Financial
Advisers
1. Definitions
Know: all the points mentioned in text at page 232.

2. Underlying Principles – Know: Pg 234 (a) to (c)

3. Assessing Risks and Applying A Risk-Based Approach

 Risk Assessment – (a) to (d)

 Risk Mitigation – (a) to (d)

4. New Products, Practices and Technologies – (a) and (b) of text.

5 Customer Due Diligence (“CDD”) (Pg 236)

1. Anonymous or Fictitious Account
No financial adviser shall open or maintain an anonymous account or an account in a
fictitious name.

2. Where there are reasonable grounds for suspicion prior to the establishment of business
relations or undertakings of any transaction. FA shall:
(a) not establish business relations with, or undertake a transaction for, the
customer; and

(b) file an STR2, and extend a copy to the Authority for information.

3. When CCD is to be performed - Know (a) to (c)

1. Identification of Customers
A FA shall identify each customer. How? - (a) to (e) of text

2. Verification of Identity of customers

A FA should verify the identity of the customers, using reliable, independent source
data, documents or information.

3. Identification and Verification of Identity of Natural Person Appointed to Act on

a Customer’s Behalf
Where a customer appoints one or more natural persons to act on his behalf in
establishing business relations with a financial adviser or the customer is not a
natural person, the financial adviser shall observe (a) & (b) of text.

4. Identification and Verification of Beneficial Owner

A FA shall not be required to inquire if there exists any beneficial owner in relation to a
customer that is:
a. Deleted with effect 30 Nov 2015; (Sup notes V1.4)
b. Deleted with effect 30 Nov 2015; (Sup notes V1.4)
c. An entity listed on the Singapore Exchange;
d. An entity listed on a stock exchange outside of Singapore that is subject to
regulatory requirements;
e. A financial institution set out in Appendix 6A of this chapter;
f. A financial institution incorporated or established outside of Singapore that is
subject to and supervised for compliance with AML/CFT requirements consistent
with standards set by the FATF.

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5. Notice - Ongoing Monitoring – Pg 240

6. CDD Measures for Non-Face-to-Face Business Relations

When there is no face-to-face contact, the FA shall perform CDD measures that are
at least as stringent as those that would be required to be performed if there was
face to-face contact.

7. Reliance by Acquiring Financial Adviser on Measures Already Performed

Know (a) and (b).

8. Timing for Verification

A financial adviser may establish business relations with a customer before
completing the verification of the identity of the customer if :
Know: (a) & (b) of text.

9. Where Measures Are Not Completed

Where the financial adviser is unable to complete the measures, it shall not commence
or continue business relations with any customer, or undertake any transaction for any
customer. The financial adviser shall consider if the circumstances are suspicious so
as to warrant the filing of an STR.

10. Screening – Know (a) to (c).

6. Simplified Customer Due Diligence (SCDD) Pg 243

FA may perform SCDD if it is satisfied that the risks of money laundering and terrorism
financing (ML/TF) are low. The assessment of low risks shall be supported by an adequate
analysis of risks by the FA. Examples of SCDD – (a) to (c) of text.

7. Enhanced Customer Due Diligence (ECDD) Pg 244

 Know these definitions:
Close associates, politically exposed persons (PEPs), prominent public functions.

 A financial adviser shall, in addition to performing CDD measures perform at least the
following enhanced CDD measures where a customer or any beneficial owner of the
customer is determined by the financial adviser to be a politically exposed person:
(a) obtain approval from the financial adviser’s senior management to establish or
continue business relations with the customer;
(b) establish, by reasonable means, the source of wealth and source of funds of the
customer and any beneficial owner of the customer; and
(c) conduct, during the course of business relations with the customer, enhanced
monitoring of business relations with the customer.

 Other Higher-Risk categories – Pg 246, 8.6 (a) to (b) of text.

8. Reliance on Third Parties – Pg 247,9.2

A financial adviser may rely on a third party to perform CDD if the following requirements
are met : Know (a) to (d) of text.

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9. Record Keeping - (a) to (d) of text

Know:
 Retention period - 5 years
 In what form the documents can be kept. - A financial adviser may retain data, documents
and information as originals or copies, in paper or electronic form or on microfilm, provided
that they are admissible as evidence in a Singapore court of law.

10. Personal Data

For the purpose of complying with this Notice, a FA may, whether directly or through a third
party, collect use and disclose personal data of an individual customer, without the respective
individual's consent. (Pg 249, 11.4)

11. Suspicious Transactions Reporting (STR)

Know all in text.

12. Group Policy – (Pg 251)

A financial adviser shall develop a group policy on AML/CFT to meet all requirements of this
Notice and extend this to all of its branches and subsidiaries.
Where the AML/CFT requirements in the host country or jurisdiction differ from those in
Singapore, the financial adviser shall require that the overseas branch or subsidiary apply the
higher of the two standards of the host country or jurisdiction so permits.

13. Compliance

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Guideline to MAS Notice No: FAA – N06 on Prevention of Money Laundering & Countering
the Financing of Terrorism – Pg 253 of text
Key Concepts
Know the following:
1. Definition of Money Laundering

2. 3 Stages of Money Laundering - (a) to (c) of text.

3. Terrorism financing – all four paragraph.

4. The 3 Lines of Defence

1. First Line of Defence
Business units (eg front office, customer-facing functions)constitutes the first line of
defence in charge of identifying, assessing and controlling the ML/TF risks of their
business.

2. Second Line of Defence

AML/CFT compliance function, as well as other support functions, such as
operations, human resource, technology, which work together with the AML/CFT
compliance function to identify ML/TF risks when they process transactions or
applications or deploy systems or technology.

3. Third Line of Defence

The Financial Adviser's audit function.

5. Notice Paragraph 6 - Customer Due Diligence – (Pg 261)

Focus on:
1. Where they are reasonable grounds for suspicion prior to the establishment of business
relations or undertaking any transaction.

2. When CDD is to be performed

3. Identification of Customers
Know the situations where PO Box can be used.

4. Identification of a Customer that is a Legal Person or Legal Arrangement

5. Verification of Identity of Customers

 (a) Natural Persons Vs (b) Legal Arrangements

6. Identification and Verification of Beneficial Owner

7. Ongoing Monitoring
1. Know the (a) and (b) in text when the FA can identify changes to the customer's risk –
6.10.3 of text

2. Examples of trigger events – 6.10.4 of text.

3. What constitute suspicious, complex, unusually large or unusual pattern of

transactions, FA should pay attention to: (a) to (d) of 6.10.6 text

8. CDD Measures for Non-Face-to-Face Business Relations - Pg 267, 6.11of text.

1. Know: (a) to (d) of text where internet may pose greater risks than other non-face-to
face business.

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2. Where verification of identity is performed without face-to-face contact (e.g

electronically), a FA may apply additional checks to manage the risk of impersonation.
It may consists of robust anti-fraud checks, which may include the (a) to (f) at page 268
of text.

9. Timing for Verification

1. An example of deferral of completion of verification is essential in order not to interrupt
the normal conduct of business operations is securities trades, where timely execution
of trades is critical given changing market conditions.

2. With reference to this Notice:

a. the completion of verification should not exceed 30 business days after the
establishment of business relations;

b. FA should suspend business relations with the customer and refrain from
carrying out further transactions(except to return funds to their sources ) if
such verification remains uncompleted 30 business days after establishment
of business relations; and

c. FA should terminate business relations with the customer if such verification

remains uncompleted 120 business days after the establishment of business
relations .

3. Screening – read all

6. Notice Paragraph 7 - Simplified Customer Due Diligence (SCDD) (Pg 271)

1. Know examples of possible SCDD measures – (a) to (c) of text.

2. Examples of lower ML/TF risk situations include:

a. Customer Risk

b. Product, service, transaction or delivery channel risk

7. Notice Paragraph 8 - Enhanced Customer Due Diligence (ECDD)

1. Know:
(a) Customer Risk - (i) to (vi) – all of it.

(b) Country or Geographic risk

(c) Product, Service, transaction or delivery channel risk

2. Politically Exposed Persons (PEPs)

 Know the definitions of PEPs and close associates of PEPs (mentioned 8.4.2, 8.4.3 of
text).
 Source of Wealth (8.5.5)
 Source of funds (8.5.6)
 Besides measures mentioned in Notice, other ECDD measures given at (a) to (c) of
8.5.8 of text.

3. Other Higher Risk Categories – Pg 276

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8. Notice Paragraph 9 - Reliance on Third Parties Pg - 277

1. Third party reliance under this Notice is different from an outsourcing arrangement
or agreement.
In a third party reliance scenario, the third party will typically have an existing relationship
with the customer that is independent of the relationship to be formed by the customer with
the relying FA. The third party will therefore perform CDD measures on the customer
according to its own AML/CFT policies, procedures, and controls.

In contrast to a third party reliance scenario, the outsourced service provider performs the
CDD measures (e.g performs centralised transaction monitoring functions) on behalf of the
FA, in accordance to the FA's AML/CFT policies and procedures.

2. All documents to be retained for a period of at least 5 years.

9. Notice Paragraph 12 - Suspicious Transactions Reporting (STR) - Pg 278

1. A FA shall ensure that the internal process for evaluating whether a matter should be
referred to the STRO via STR is competed and not exceed 15 business days of the
case being referred to the relevant employee unless the circumstances are exceptional.

2. STR reporting templates are available at CAD's website. However, FA are strongly
encouraged to use the online system provided by STRO to lodge STRs. In the event
that FA is of the view that STRO should be informed on an urgent basis, particularly where a
transaction is known to be part of an ongoing investigation by the authorities, the FA should
give initial notification to STRO by telephone or email and follow up with such other means of
reporting as STRO may direct.

10. Training – Pg 282

1. Know - FA should also provide refresher training at least once every 2 year.

2. A FA should monitor the effectiveness of the training provided to its employees and reps.
This may be achieved by (a) to (c) of text.

11. Other Key Topics - Guide to Financial Advisers on Proliferation Financing

1. CDD and Internal Controls – (a) to (b)
2. Obligation of Financial Adviser to Freeze without delay

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Chapter 7 – MAS Notices III (Nos: FAA-N17;FAA-N18;FAA-N19 & FAA-

N21)
1. Notice On Reporting Suspicious Activities & Incidents of Fraud (Notice No: FAA-N17)
1. It sets out the requirements for financial advisers to lodge Form F1 with MAS within 5
working days after the discovery of any suspicious activity or incident of fraud that will affect
their safety, soundness or reputation.

2. Details can be found in Appendix 7A at page 296 which was extracted from MAS website.

2. Notice On Technology Risk Management [Notice NO: FAA-N18]

1. It sets out requirements for a high level of reliability, availability and recoverability of critical
IT systems and for financial advisers to implement IT controls to protect customer
information from unauthorised access or disclosure.

2. Details can be found in Appendix 7B at page 298.

Know: Details of Technology Risk Management.

3. Notice On The Distribution of Direct Purchase Insurance Products (“DPI”) (Notice

NO: FAA-N19)
1. This notice applies to licensed financial advisers, exempt financial advisers and
their representatives.
It covers the following requirements in respect of the distribution of direct purchase
insurance products.

2. Details can be found in Appendix 7C at page 300.

Know:
 Definitions
 Requirements on Distribution of DPI
 A financial adviser must comply with the following requirements in respect of
the financial adviser’s distribution of DPI through its representatives or customer
service officers, or by way of an online direct channel:
(a) Implementation of safeguards;
(b) Provision of product information;
(c) Provision of avenues to address general queries, complaints and claims;
(d) Implementation of internal policies and processes;
(e) Roles and responsibilities of a representative or customer service officer.

 Contravention of this Notice is guilty of an offence – know the details.

4. Notice On Cyber Hygiene (Notice NO: FAA-N21)

1. It sets out cyber security requirements on securing administrative accounts, applying
security patching, establishing baseline security standards, deploying network security
devices, implementing anti-malware measures and strengthening user authentication.

2. Details can be found in Appendix 7D at page 307.

Know:
 Cyber Hygiene Practices
 4.1 to 4.7 of text.

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Chapter 8 – MAS Notice Nos: MAS 302 & MAS 307

1. Both Notice Nos: MAS 302 and MAS 307 are issued pursuant to Section 64(2) of the Insurance
Act (Cap 142). Notice No: MAS 302 applies to all direct insurers licensed under the Act to carry
on life business.

2. MAS 302 Product Development and Pricing

1. Part 1 Mandatory Requirements

1. Prudent Management Oversight

1. An insurer shall ensure that the Board of Directors approves policies and procedures in
respect of the development and pricing of insurance products and ILP sub-funds.

2. Prohibited Payout Features

After 1 October 2013, an insurer shall not include, in any insurance product a term or
condition which:
Know (a) and (b) of text.

3. Disclosure to Policyholders and Entitled Persons who have exercised a Settlement

Option and the Settlement Option has not come into effect:
Know: the 2 scenarios in (a) and (b), and that moneys payable in accordance with
the settlement option:
(i) is not covered under the PPF Scheme; and

(ii) in the event of insolvency of the insurer, rank after policy liabilities and equally with
the unsecured liabilities of the insurer.

2. Approval of New Products

 Insurer shall submit to MAS together with relevant documents no later than 1 month before
the proposed official launch date.

 The above do not apply to :

a. Short term accident or health policy;
b. Term policy with a duration of 5 years or less;
c. A Direct Purchase Insurance Product under Notice on Direct Purchase Insurance
Products

3. Contravention shall be an offence and shall attract penalty under the Insurance Act.

2. Part 2 Guidelines

1. Notifications for Product Launched that does not require MAS approval
 Shall be made in writing and submitted to MAS no later than 7 working days after the
official launch date of the product.

 The above do not apply to :

a. Short term accident or health policy;
b. Term policy with a duration of 5 years or less;
c. A Direct Purchase Insurance Product under Notice on Direct Purchase Insurance
Products.

 Know (a) to (d) on the circumstances to notify insurer.

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2. Compliance With Guidelines

Failure to comply, MAS may consider whether to:
a. approval on a new product;
b. revoke the approval for a product;or
c. issue directions for withdrawal of a product.

Notice No: MAS 307 - Investment Linked Policies (“ILPs”)

Part 1 - Mandatory Requirements (Pg 317)

Focus on the following:
1. Notification to The MAS
Know:
(a) Time frame to notify MAS.
(b) All the significant changes mentioned at (b) from (i) to (xi).
(c) The documents to be submitted at Pt 9 (a) to (e).

2. Audit Of ILP Sub-Funds

1. Know the 2 ways to carry out Annual Audit.

2. Audit is to be completed by time frame (3 months) and the period under review shall be a
period of not less than 12 months.

3. Know what Audit Certificate’s objectives at Pt 22– (a) to (e).

3. Audit Certificates Relating to ILP Sub-Funds that are Terminated or Matured

Know the time frame Audit Certificate is to be completed and retention period of such audit
certificates.

4. Disclosure – Pg 322
Focus on:
1. Statements to Policyholders

2. Semi- Annual Report and Relevant Audit Report

3. Payments from The ILP Sub-Fund

4. Cash Rebates and Soft Dollars

5. ILP Sub-Funds Admitted Under The CPF Investment Scheme

Part 2 – Non-Mandatory Standards Pg 327

Know the following:
1. Payment of Redemption Proceeds. – Pg 327, Pt 53.
(a) to (e) of Text

2. Use of Financial Derivatives

3. Use of Credit Ratings

4. Dealing in Units

5. Suspension Of Dealings

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6. Valuation of Assets Of An ILP Sub- Fund

Know - how to value quoted investments vs unquoted investments in an ILP sub-fund.

7. Frequency of Valuation
(a) and (b) of text.

8. Rounding Differences

9. Valuation Errors and Compensation

Know: when the insurer must compensate policyholder for valuation errors.

10. Delegation – all of it.

11. Calculation of Performance Fees using Fulcrum Fee Arrangement and High Water Mark
Arrangement (2 examples from the text) – Pg 337, 338.

12. Prohibited Activities – all of it. – Pg 338

13. Notification Of Breaches – Pg 339

14. Guidance On Naming Of ILP Sub-Funds – all of it.

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Chapter 9 – MAS GUIDELINES – PART I (GUIDELINE NOS: FAA-G01;

FSG-G01; FAA-G04; FAA-G05; FAA-G06 & FAA-G07) AND CIRCULAR
NO: CMI 01/2011
1. Guideline On Criteria For The Grant Of A Financial Adviser’s License

1. Criteria For Grant Of A Financial Adviser’s Licence

A financial adviser’s licence will only be granted to a corporation.

2. Chief Executive Officer, Directors and Reps of the applicant

1. Know: (i) to (v) of text.

2. Minimum Financial Requirements – know the following:

a. Paid up capital of S$150,000
FA services under (a) to (c)

b. Paid up capital of S$300,000

FA services under (a) to (c)

c. Paid up capital of S$300,000

Combination of (a) and (b)

3. Professional Indemnity Insurance

An amount of not less than $500,000 and under which deductible allowed must not be
more than 20% of the applicant’s NAV.

4. Track Record

5. Shareholding

6. System and Process

7. Fit and Proper

2. Guideline On Fit and Proper Criteria

1. Honest, Integrity and Reputation

2. Competency and Capability

3. Financial Soundness

3. Circulars On Due Diligence Checks And Documentation For Appointment Of Reps

1. Fit and Proper Declaration- Annex 1- Pg 376
Know 1 to 6 and the contravention of a fine not exceeding S$50,000.

2. Due Diligence Checks To Be Conducted by Financial Institution – Pg 379

1. Probity Checks On Rep’s Identity

2. Probity Checks On Rep’s Past Records

FI is expected to – (a) to (c) of text.

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3. Probity Checks On Rep’s Financial Status

4. False Or Misleading Document Or Information

For false or misleading information, MAS may: (a) to (c) of text.

5. Periodic Declarations And Checks

FIs should obtain on a periodic basis (eg annually) written self-declarations from its reps
and FIs to conduct the same due diligence checks on existing reps.

4. Guideline On Standards Of Conduct For Financial Advisers And Representatives

1. Focus on:
1. Purpose of the Guidelines on Standards Of Conduct For Financial Advisers.
 Cessation of Business – Pg 384, 5.2.2

2. General Information about the Financial Adviser

 Remuneration – Pg 385, 5.29

3. Complaints Handling – Pg 387- Know all.

5. Guideline On Use Of The Term “Independent” By Financial Advisers

1. Only financial advisers which can clearly demonstrate that they do not have financial or
commercial links with product providers that are capable of influencing their recommendations
should use the term “independent”; and before using the term “independent”, financial advisers
should be satisfied in light of their own particular circumstances that they are in compliances
with Regulation 21 of the FAR.

2. Conditions To Be Met – Pg 389. 6.8

Know: (a) to (c)(i) – (iii) of text.

3. Basic Test of Independence

All of (a) to (c) of text.

4. Commissions and Other Benefits

The mere fact that a financial adviser (FA) receives commissions or benefits from a product
provider does not preclude it from calling itself “independent”. Key issue is whether such
commission or benefit is likely to create a bias in favour of a particular investment product or
product provider. The following are guidelines to asset the FA in making this assessment:
(C1) Insignificant Commissions or Other Benefits
(C2) Same Level Of Commission
(C3) Commission Sharing Arrangement
(C4) Significant Commissions or Benefits

5. Product Restriction
Direct Restriction
A contractual agreement between FA and product provider; whereby FA is limited to sell only
a range of products selected by the product provider.

Indirect Restriction
FA is required to meet sales target agreed with product provider. This is likely to create product
bias in favor of product provider.

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MAS will not normally regard a financial adviser as being independent, if it represents less
than 4 product providers for each class of investment product.

6. Relationship With a Product Provider

Know - (a) to (c) of text.

6. Guidelines On Applications for Approval Of Arrangement Under Paragraph 11 of

the 1st Schedule to the FAA.
1. Applications Of Paragraph 11
Paragraph 11 allows a foreign company whose provision of any FA services is effected under an
arrangement between the foreign company and its related corporation which is licensed under
the FAA or is an exempted FA. Individuals providing any FA services for the foreign related
corporation are not representatives as defined in the FAA, hence they are not required to be an
appointed or provisional rep under FAA.

2. Assessment Criteria
1. In making an approval for approval under of the arrangement under Paragraph 11, the
Singapore entity should ensure that its foreign related corporations meet (a) to (c) of text.

2. In assessing an application, the MAS will take into consideration (a) to (e) of text.

3. Target Clientele

5. Application
In granting the approval under Paragraph 11 the MAS will consider:
 where there is a material change in the circumstances of the arrangement. A material
change refers to a change in the substance of the arrangement rather than one of
form. Such change may be in relation to the type of financial advisory service provided,
the target clientele or the role of the Singapore entity.

 changes in organisational structure or names of entities, and similar organisational

changes which do not affect the substance of the arrangement, would not normally be
considered material.

7. Guidelines On Exemption For Specialised Units Servicing High Net Worth Individuals
Under Section 100(2) of the FAA.
1. Definition of “High Net Worth Individual” – Pg 397
Know: (a) (i) to (iv) to (d) of Text.

2. Extent Of The Unit Being Separate And Distinct

3. Criteria Used By MAS In Assessing The Applications

Know: (a) to (e) of Text

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Chapter 10 – MAS Guidelines - Part II (GUIDELINE NOS: FAA-G08; FAA-

G09; FAA-G10; FAA-G11 & FAA-G14)
1. Guidelines On Conduct Of Business For Execution-Related Advice.
1. Definition Of “Executive-Related Advice”
 The definition of “Executed-Related Advice” – Pg 414

 “Executed Activities” means:

Know: (a) to (b) of text.

2. Recommendations On Capital Market Products.

 A financial adviser to have a reasonable basis for any recommendation made with respect
to any investment product to a person.

 On an ongoing basis a dealer should update the client profile and conduct a needs analysis
at a reasonable interval, at least once a year.

3. Documentation and Record Keeping

As a practice, such records should be kept for at least 6 years.

4. Disclosure Of Conflict Of Interest

2. Guidelines On Structured Deposits.

1. These guidelines apply to any licensed or exempt FA or its representatives, who advises on any
structured deposits, except, where advice is given to:
(a) to (c)(i) to (ii) of text.

2. Product Information Disclosure – read all.

3. Warnings – (a) and (b) of text.

4. Screening

5. Training and Competency

Need to pass Module 5 and Module 8.

6. Segregation of Duties
Financial adviser that is a deposit taking institution should ensure that the marketing and
advisory process for structured deposit is distinct from the process through which a client’s
funds are accepted. Employees in the deposit taking area who are not qualified to provide
advice on investment products, such as bank tellers, should not be involved in the marketing or
recommendation of structure deposit.

7. Requirements under the Banking Act (Cap 19) - (a) and (b) of Text

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3. Guidelines on Switching of Designated Investment Products.

Monitoring of switching of Designated Investment Products
1. Front End Monitoring Procedures
Know: All of text.

2. Back End Monitoring Procedures

FA should institute control, process and procedures to monitor and track switching of
designated investment products. It includes: (a) to (d) of text.

4. Guidelines on Fair Dealing – Board and Senior Management Responsibilities for

delivering fair dealing outcomes to customers.
1. The Board’s Responsibilities Pg 426 (5.6)
The Board is responsible for charting the corporate policy and strategy to deliver
the fair dealing outcomes to [Link] Board and Senior Management (BSM) are
accountable for setting the culture and direction of the FI to align business practices with fair
dealing outcomes.
This involves: (a) to (d) of text.

2. Assessment by MAS (5.10 of text)

1. On Financial Institution’s failure to observe this Guideline, MAS will take supervisory
enforcement action. The MAS will use inspections and visits to Financial Institutions
(FIs), Interviews with Board and Senior Management, Surveys of FIs, Customer
surveys and mystery shopping exercises.

2. Industry and consumer associations play a key role in promoting the fair dealing
outcomes. They can do so in these ways: (a) to (e) of text.

3. Consumes should also equip themselves to make informed financial decisions. The
MAS will continue to issue consumer guides and support under the MoneySense
financial education programme.

3. The details of each Fair Dealing Outcomes are as follows:

1. Fair Dealing Outcome One

“Customers have confidence that they deal with financial institutions (FIs) where fair dealing
is central to the corporate culture”.
1. Rationale:
FIs play an important role in influencing customers’ financial decisions as customers rely
on FIs for relevant information and advice.

2. To develop a culture of fair dealing, Board and Senior Management (BSM) should
address the following areas:
a. Devising a clear strategy to achieve the fair dealing outcomes
b. Aligning organizational policies and practices to the fair dealing outcomes
c. Communicating the fair dealing outcomes as a priority for the FI
d. Monitor implementation of the fair dealing strategy

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2. Fair Dealing Outcome Two

“FIs offer products and service that are suitable for their target customer segments”.
1. Rationale:
Fls should carefully assess the suitability of every investment product before marketing
the product to customers. Making financial decisions can be a complex process that has
a significant impact on the livelihood of customers.

2. Conducting Product Due Diligence

 Know: (a) and (b) of text.
 In deciding to distribute a new investment product, FI to consider: (a) to (e) of text.

3. Marketing To Target Customer Segments

Read all of text.

3. Fair Dealing Outcome Three

“Financial institutions have competent representative who provide customers with quality
advice and appropriate recommendations”.
1. Rationale:
Customers often rely on reps to explain and recommend products to them, hence this
requires fully trained and competent reps.

2. Ensuring Competency Of Reps

1. Know all of ensuring competency of Reps. (a) to (c) of text.

2. Ensuring Competency Of Supervisors

Know: (a) to (d) of text.

3. Providing Quality Advice And Appropriate Recommendations

FI should ensure its representatives – (a) to (d) of text.

4. Aligning remuneration structures with customers’ interest

Examples of problematic remuneration structures include those with product quotas
and highly differentiated commissions for the sale of different products. FI can consider
adopting a balanced scorecard approach incorporating indicators, such as number of
fact finds conducted, compliance record and competency assessments in its
remuneration structure for its reps. Alternatively FI can consider adopting a “fee for
advice” model or pegging the remuneration of reps to other objective indicators such as
the medium-term performance of assets under advice.

4. Fair Dealing Outcome Four

“Customers receive clear, relevant and timely information to make informed financial
decisions”.
1. Rationale:
FI should provide customers with clear and relevant information before, during and after
sale process, in order for them to make informed financial decisions.

2. Providing Clear Information

 Know: (a) and (b) of text.

 In dealing with customers with limited knowledge or understanding of investment

products, FI should put in place safeguards during the advisory and sales process
including: (a) to (c) of text.

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3. Providing Relevant Information

Know: (a) to (d) of text.

4. Providing Timely Information

5. Fair Dealing Outcome 5

“Financial institutions handle customer complaints in an independent, effective and prompt
manner”.
1. Rationale:
To assure customers that their concerns and feedback are dealt with fairly and
professionally. Financial institutions should regard complaints as potential indicators of
areas for improvement.

2. Handling Complaints Independently And Effectively

3. Resolving the Complaints Promptly

5. Guidelines on Remuneration Framework For Reps and Supervisors (Balanced Scorecard

Framework)(FAA -G14)
1. Know: Definition of “Selected Client” – (a) to (c) of text –Pg 448

2. Guidance on Post-Transaction Checks Carried Out By The ISA Unit (Pg 449)
 The ISA Unit should conduct both documentation and client review as conducting client
review would serve as an additional tool to: (a) and (b) of text.
 The ISA Unit should conduct Client Surveys via the few methods in the text (eg via
phone call, face to face etc).

3. Reps Assigned A Balanced Scorecard Grade of "E" and Supervisors Assigned A Balanced
Scorecard Grade of "Unsatisfactory under the Balanced Scorecard Framework.
 Know all of it- pg 450

4. Reference Checks On Reps and Supervisors

 Know the 2 points mentioned at page 452, 6.7.

5. Recruitment of Reps assigned a balanced scorecard grade of "E" and supervisors assigned
a balanced scorecard grade of "Unsatisfactory under the Balanced Scorecard Framework.
 Know all of it – pg 452,6.8

6. Pre-transaction Checks by Supervisors

1. Pre-transaction checks would help to minimize the impact of balanced scorecard
framework and will not affect the remuneration of the reps, as well as that of their
supervisors.

2. Pre-transaction checks should include:

a. Documentation review
b. Client call-back – know (i) and (ii)

3. A FA may:
a. engage a staff who does not make recommendations or effect transactions for
the client ("non-sales staff"), or a third party provider to conduct pre-transaction
checks; or

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b. implement systems to check whether the recommended product is suitable for

the client ("system-based method")

FA should complete the pre-transaction checks within the free-look or cancellation

period of the investment product.

Where a recommendation is a made by a rep which is time-sensitive, and does not

have a free-look or cancellation period, FA who implements the above method,
should complete the pre-transaction checks within 5 business days from effective
date of transaction.

FA should keep records of its processes and methods undertaken and every
assessment and determination made for pre-transaction checks under the balanced
scorecard framework for not less than 5 years.

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Chapter 11 – MAS Guidelines - Part III (GUIDELINE NOS: FAA-G13; FAA-

G15; FAA-G16; CMG-G02 & FSG-G02)
1. Guidelines On Addressing Conflicts of Interest Arising From Issuing or Promulgating
Research Analyses or Research Reports
1. They set out examples of potential conflicts of interest that may arise from issuing or
promulgating research reports that contain opinions or recommendations about clearly
identifiable investment products.

2. Refer to Appendix 11A at page 471 for details.

2. Guidelines On The Online Distribution of Life Policies with No Advice

1. They set out the safeguards that financial advisers should put in place when distributing life
policies online without advice which include:
 Offer of equivalent Direct Purchase Insurance products (DPI).
 Provision of key information.
 Provision of tools and calculators.
 Handling of queries, complaints and claims.

2. Refer to Appendix 11B at page 477 for details.

3. Guidelines On Application For Approval Of Arrangements Under Regulation 32CB of the

Financial Advisers Regulations.
1. These Guidelines set out the MAS assessment criteria and application procedures for
approval of arrangements under Regulation 32CB and the Authority’s supervisory
expectation in relation to approved arrangements.

2. Refer to Appendix 11C at page 482 for details.

4. Guidelines On Provision Of Digital Advisory Services

1. They set out the licensing and other pertinent requirements applicable to digital advisers
under the Financial Advisers Act and the Securities and Futures Act. These include:
 Governance and supervision of algorithms.
 Technology risk management.
 Prevention of money laundering and countering the financing of terrorism.
 Disclosure of pertinent information.
 Suitability of advice.

2. Refer to Appendix 11D at page 490 for details.

5. Guideline On Standards Of Conduct for Marketing and Distribution Activities By Financial

Institutions
1. They set out the roles and responsibilities of Board and Senior Management, and
safeguards that FIs should put in place to address market conduct risks when marketing
financial products and services to retail customers at retailers and public places.

2. Refer to Appendix 11E at page 504 for details.

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Chapter 12 – Revised Code On Collective Investment Schemes

1. Introduction
1. The code sets out the best practices on management, operation and marketing of
Collective Investment Schemes that managers and approved trustees are expected to
observe.

2. A breach of this code may result in MAS:

 to revoke or suspend the authorization or recognition of the scheme;
 to refuse to authorize or recognize new schemes proposed;
 to revoke approval granted under the SFA, or to prohibit the trustee from acting as
trustee for any new scheme.

2. Key Changes Introduced

Know what the Code aims to do.

3. The Manager (Pg 522)– know the following from text:

A. Functions and Responsibilities

B. Operational Obligations

C. Delegation

D. Investments in Other Schemes

E. Payments

F Performance Fees – Know the eg at page 529 and 530

4. The Scheme (Pg 531) – Know the following:

A. Name Of Scheme
The revised code requires the scheme’s name to be appropriate, not to be undesirable and
misleading. It takes into consideration: (i) to (vi) of text.

B. Prohibited Activities
Know: all of text.

5. Accounts and Reports

6. Dealing and Valuation - (know these areas in the text)

 Dealing In Units
 Suspension of Dealings
 Valuations (know: Valuations of assets of a scheme)
 Valuation Errors and Compensation

7. Breaches
 Notification

8. Recognized Schemes and Authorized Schemes Which Feed Into An Underlying Scheme
A. Disclosure in Marketing Material
B. Ongoing Notification

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9. Core Investment Requirements For All Authorized Schemes

 Permissible Investments (a) to (f) of text.
 Global exposure (3.1 of text – pg 547)
 Counterparty of financial derivatives
Know: The qualities of good collateral (Pg 554, 5.6 to 5.11)
 Efficient Portfolio Management (EPM) Techniques
 Securities lending and repurchase transactions
 Counterparty
 Recognition of collateral

10. Appendix 3 of the Code- Hedge Funds – Pg 568

1. A hedge funds refers to a scheme which aims to achieve a higher return through the use of
advanced investment strategies which may involve financial derivatives, leverage or short
selling. A hedge fund may carry out short selling provided the transaction is covered.

2. Know: Single hedge Funds Vs Funds-Of-Hedge-Funds

11. Appendix 4 of the Code – Capital Guaranteed Funds – Pg 575

1. Capital guaranteed funds apply to a scheme which guarantee the return of capital invested
by the participants at a pre-determined date in the future.

2. The Guarantor
The capital guaranteed fund should have an eligible guarantor which in the case of a FI,
have a minimum long term rating of AA by credit rating agencies, in all other cases, a
minimum of AAA. If the long term rating of the guarantor falls to A, no action need to be
taken.

3. The Guarantee
Read all of it.

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Chapter 13 – Central Provident Fund

1. Background and CPF Contributions
The CPF covers all employees who are Singapore citizens or permanent residents. Both
employer and employee are required by law to contribute to the CPF. For self-employed
Singapore Citizens and permanent residents, the law requires them to contribute only to the
Medisave account to provide for the healthcare needs of their families and themselves.

 In a nutshell:

Ordinary Account
 to buy residential
property;
Employee  to pay for insurance;
Retirement
Account
 for investment
Options:
 for education.
 Can choose to
Contributions to OA
be left in the
CPF earn a lower interest
account;
rate than other account.
 To purchase
Monthly deferred life
Contributions annuity from a
participating
Special Account
insurer;
 primarily for old
age;
 To participate
 for selected in the CPF Life
investments. scheme.

Employer Medisave Account

 for hospitalization
expenses;

 pay for medical

insurance as
specified.

2. Five Pillars of Financial Security under CPF

1. Retirement Adequacy
2. Healthcare Financing
3. Property Ownership
4. Asset Enhancement
5. Family Protection

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1. Retirement Adequacy
1. Retirement Sum Scheme (RSS)
Know all of text.

2. CPF Life
Know all of text and the following well:
a. Who qualifies and all the criteria to qualify.
b. Types of CPF Life Plans
c. Allocation & Description of CPF Life Plans before 1 Jan 2013.

2. Healthcare Financing
 Medisave – a national medical saving scheme
 Medifund – endowment fund set up by the Government
 Private Insurance Scheme
 ElderShield – a severe disability insurance scheme for CPF members who turn 40 years
old.
 CareShield (applicable from 2020 onwards)
An enhancement of ElderShield in 4 ways (know the 4 ways).

3. Property Ownership
1. Public Housing Scheme
1. To help CPF member buy a government built HDB flat, either new or resale. For
CPF members using their CPF savings to service the housing loans, the loan
installment payments will not commence unless they are covered by CPF Board
Home Protection Scheme (HPS).

2. Know: CPF Usage For HDB Flat Vs Resale Flat in the open market

3. Bank Loans
(i) CPF Charge
(ii) Notification Of Changes to Loan Details
(iii) Notification of Sale and Refund of CPF Moneys
(iv) Penalty For False Declaration and Misuse Of Property

2. Lease Buyback Scheme(LBS)

1. This scheme involves HDB buying back the tail end of the 99 years lease of
the HBD flat, leaving the flat owner with a shorter lease. Enhancement had
been made to allow the option to choose the length of the lease to be retained.
In addition to the value of the housing equity unlocked from the shorter lease,
the government will top up the amount up to $20,000. Only Singapore Citizens can
receive the bonus. After you have topped up the Retirement Account up to the
requirements stated, any excess proceeds can be withdrawn in cash, up to the
maximum of S$100,000. The full Retirement Account will be used to purchase an
immediate annuity under the CPF Life Scheme from CPF Board to provide a monthly
stream of income for life.

2. Eligibility criteria of LBS:

Know: (a) to (g) of Text

4. Asset Enhancement Scheme

CPFIS Scheme
1. Purpose of this scheme is to give CPF members more options to enhance their retirement
savings through investments in their Ordinary and Special Accounts. Under the CPFIS
Scheme, CPF members can invest their CPF savings in shares, loan stocks, Unit trusts,

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government bonds, statutory board bonds, bank deposits, fund management accounts,
endowment insurance policies, investment linked insurance policies, exchange traded fund
and gold.

2. CPFIS Eligibility Requirements:

Know: (i) to (iii) of text

3. Different Application Procedures for use of Ordinary Account (OA) and Special Account
(SA).
Know the procedures for applying for the use of one’s OA and SA savings for investment
under the 2 investment schemes.

5. Family Protection
1. Dependants’ Protection Scheme (DPS)
 The DPS is an optional term insurance which covers the CPF member for a maximum
sum assured of S$46,000 up to the age of 60 years should the member dies or become
permanently incapacitated.

 DPS is administered by 2 insurers, Great Eastern Life and NTUC Income. This scheme
is extended to Singaporeans or PRs between the ages of 21 and 60 years, when they
make their first CPF contributions.

 Cover renewed every year automatically unless – know (a) to (d) of text.

2. Home Protection Scheme (HPS)

 The HPS is a mortgage reducing term insurance which insures members against losing
their homes should they become physically/mentally incapacitated or pass away.

 HPS is applicable only to public housing. It does not cover private residential properties,
such as executive condominiums (ECs) or HUDC flats.

6. Other Schemes
1. Education Scheme
2. Workfare Income Supplement (WIS) Scheme
3. Workfare Training Support (WTS) Scheme
4. Supplementary Retirement Scheme (SRS)
 It is a voluntary scheme where a participant may at his own discretion contributes (in
cash only) a varying amount to SRS, subject to the contribution cap.

 SRS Participation
Know: eligible criteria to take part in the scheme.

 SRS Contributions

 SRS Withdrawals
Know: if the withdrawal is made before the statutory retirement age prevailing at the
time of the first contribution, 100% of the sum withdrawn will be subject to tax. A 5%
penalty for premature withdrawal will also be imposed, unless it is made under the 4
situations; (i) to (iv) of text.

 SRS investments -(i) to (v) of text.

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Chapter 14 – Needs Analysis

1. Benefits Of Conducting Needs Analysis
Know: (a) to (d) of text.

2. Stages of Need Analysis - Know the 6 stages of needs analysis; (a) to (f)

Stage 1: Establish And Define Client-Representative Relationship

Meeting up with client and introduce your company, disclose your status and explain your role and
the types of financial advisory services and investment products you can provide.

Stage 2: Gather Data, Including Goals

1. Accumulation Needs
Know: examples in the text.

2. Retirement Needs
Provision of fund to support himself and his spouse after retirement.

3. Protection Needs
(a) In the event of untimely death, financial needs will be:
- (i) to (v) of text.

(b) In the event of serious injury and not being able to work, financial needs will be:
- (i) to (iii) of text.

(c) In the event of a permanent disability, financial needs will be:

- an amount to repay debts, provide income/or create a cash reserve for his family.

(d) In the event of serious illness, financial needs will be:

- (i) to (iii) of text.

4. Fact Finding
 Employment - determines hazard and affordability.

 Number of Dependents
How to determine “years of support” for dependants?
For children
o Boys – subtract the current age from age of 25.
o Girls – subtract the current age from age of 22.

Other Older Dependants

Add eight years to the life expectancy for female (85.4 years) and male (81 years).

5. Financial Information
 Fixed vs Variable Expenditure
Eg of fixed and variable expenditure from the table in text.
 Net Cash Flow = Monthly Income – Expenditure
 Net Worth = Assets – Liabilities

6. Existing Insurance Policies

Clients’ existing insurance policies serves as a starting point for any further insurance
recommendations.

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7. Client’s Objective And Investment Preference

(a) Client’s Investment Preferences
(b) Areas of Concern - Know: (i) (v) of text.
(c) Personal Priorities
(d) Retirement needs
Research has shown that most singles in Singapore need about 50% to 60% of their re-
retirement income to maintain the same living standard after retirement. For married
couples the percentages increase to 60% to 70% with one retiree.

Stage 3: Analyse And Evaluate Financial Status

1. Analysis Of Goals And Objectives
Three factors to consider:
1. It must be established whether the objective is short term or long term.
2. You should establish whether the objective is for the benefit of the client or for others, such
as his children.
3. You must take the importance of your client’s objectives into account, as this will help you
to assess the priority of the identified needs.

2. Quantifying Needs
a. Retirement needs (2 methods)
(i) Replacement ratio method
(ii) Expense method

b. Protection needs (2 methods)

(i) Multiple approach
(ii) Needs approach

c. Accumulation Needs
The future value of the target amount taking into consideration the effects of inflation.

Stage 4: Develop And Present Recommendations

 2 principles on product recommendations: -
o Recommend products if your client needs them;
o Recommend products which are most suitable given his situation and circumstances.

 Factors to consider before recommendation of products:

a. Product suitability
b. Client’s objectives and needs
c. Financial situation- affordability
d. Tax consideration

Stage 5: Implement Recommendations

Know the following tables from the text:
1. Table 14.1 - Main Types of Products to meet Accumulation and Retirement Needs.

2. Table 14.2 - Main Types Of Products To Meet Protection Needs.

Stage 6: Review With Client Periodically

Benefits Of Periodic Client Review:
 Client’s circumstances may change;
 External developments e.g. changes in CPF Rules;
 Continue to receive good quality service which reinforces relationship.

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