Financial Adviser’s Licence Guide for Singapore Businesses
While most of us might associate “financial advisers” with the individuals advising us on financial products, what is less commonly known is that in Singapore, the term “financial adviser” actually refers to the entity licensed to provide financial advisory services, whereas the agents that we interact with are referred to as the “appointed representatives” of such entities.
As a result, this article will not be covering how one can become a representative of a financial adviser, but instead how you, as a business owner, can apply for a financial adviser’s licence in Singapore, if you wish to provide financial advisory services as part of your business. It will explain:
What is a Financial Adviser’s Licence?
A financial adviser’s licence is a licence that a company needs if it wishes to conduct financial advisory services regulated under the Financial Advisers Act in Singapore. Such financial advisory services comprise:
- Advising others concerning any investment product, other than advising on corporate finance.
- Advising others by issuing or promulgating research analyses or research reports concerning any investment product.
- Arranging of life policies.
Investment products include all capital market products such as securities, collective investment schemes and leveraged foreign exchange contracts, as well as life policies and structured deposits. As the name suggests, investment products must have an investment element and as such, it does not include general insurance policies, deposit-taking products offered by banks, and loans or mortgages.
A business can be exempted from the requirement to hold a financial adviser’s licence if it is one of the following:
- A bank or merchant bank licensed under the Banking Act;
- A company or co-operative society licensed under the Insurance Act;
- A holder of a capital markets services licence under the Securities and Futures Act;
- A finance company that has been granted an exemption from section 25(2) of the Finance Companies Act to carry on a business of providing any financial advisory service; and
- An approved exchange, a recognised market operator, or an approved holding company, in respect of the provision of any financial advisory service that is solely incidental to its operations.
Additionally, even if a business does not come under one of the institutional exemptions stated above, it might still be able to be exempted from holding a financial adviser’s licence in respect of certain activities. These specific exemptions are:
- An approved headquarters company or Finance and Treasury Centre that carries on business involving the provision of approved financial advisory services;
- Financial advisers that provide financial advisory services to any of its related corporations or connected persons;
- Financial advisers that only gives advice or provides research analysis:
- To not more than 30 accredited investors on any occasion;
- To an institutional investor;
- In respect of their business of fund management; or
- Concerning Over-the-Counter (OTC) derivatives contracts to an accredited or expert investor; and
- An approved global trading company that only gives advice or provides research analysis concerning OTC derivatives contracts.
However, do note that even if you come under one of the institutional or specific exemptions above, and are hence exempted from the requirement to obtain a financial adviser’s licence, you would still need to abide by the compliance obligations for being a financial adviser in Singapore (more on these below).
It is an offence to conduct activities regulated by the financial adviser’s licence without having such a licence, or without being exempted from having it. On conviction, you can be liable for a maximum fine of $75,000 or to imprisonment for a maximum of 3 years or to both. An additional fine amount of up to $7,500 will apply for each day the offence continues.
What is the Eligibility Criteria For Obtaining a Financial Adviser’s Licence?
First, only a corporation, and not businesses registered with any other form of legal structure, can obtain a financial adviser’s licence in Singapore. This includes foreign companies formed, incorporated or existing outside of Singapore. However, if you are running a foreign company, your corporation will need to establish a physical presence in Singapore in order to apply for a financial adviser’s licence.
A business applying for a financial adviser’s licence must meet the following requirements:
- Have a minimum paid-up capital of either $150,000 or $300,000;
- $150,000 if the business only gives advice or provides research analysis on investment products or if the business arranges contracts of insurance in respect of life policies; or
- $300,000 if the business gives advice or provides research analysis on only futures contracts, spot foreign exchange contracts, or OTC derivatives contracts, or in combination with other investment products;
- Have in force a professional indemnity insurance policy;
- Have a minimum 3-year proven track record in the financial advisory business. If the business does not have such a track record, then the CEO should own not less than 20% shareholding of the business, and the CEO and Executive Directors (EDs) should collectively own not less than 50% shareholding;
- Have adequate internal compliance systems and processes, to ensure compliance with the law, good practices and professional standards;
- The business, together with its officers, employees, representatives and shareholders, must satisfy the fit and proper criteria issued by the Monetary Authority of Singapore (MAS);
- If applicable, to have technology risk management tools; and
- If the business is a foreign company, it should be subject to proper supervision by recognised home regulatory authorities and possess the requisite track record.
Even if the business meets all of the requirements above, the MAS still retains the discretion to grant or refuse to grant the licence to the business. In assessing an application for a licence, the MAS takes into consideration the following factors:
- Wether the business employs or appoints at least 2 full-time individuals as appointed representatives;
- Whether the CEO and all EDs of the business have a minimum of 5 years of relevant working experience in the field of providing financial advisory services (3 years of which in a managerial capacity), and possess acceptable academic or professional qualifications;
- Whether the business’ board of directors consist of at least 2 directors, at least one of which is resident in Singapore;
- Whether the CEO of the business is resident in Singapore; and
- Whether the CEO or EDs are placed in a position of conflict of interest.
How Do You Apply For a Financial Adviser’s Licence in Singapore?
As mentioned previously, only a corporation can obtain a financial adviser’s licence in Singapore. Therefore, the first step would be to incorporate a company if you don’t already have one. If you would like to incorporate a company in Singapore, the procedure consists of a few main steps:
- Choosing a company name and address;
- Having a company constitution ready for submission; and
- Completing your registration on BizFile+.
You can refer to this article for more information on how to incorporate a company in Singapore.
If you already have a company, and wish to apply for a financial adviser’s licence, you will have to submit the application form, which can be found on the MAS website. After that, you will receive instructions on how the non-refundable application fee of $500 should be paid to MAS.
When payment of the application fee has been made, MAS will assess your application and decide whether to grant you a licence. This process typically takes no more than 4 months, but might take longer if the information provided in the application is assessed to be incomplete or inaccurate.
If MAS decides to grant the licence, you will be issued an electronic licence. Thereafter, your company will be listed on the Financial Institutions Directory, which is searchable by any member of the public.
How Long is the Financial Adviser’s Licence Valid For?
Once granted, the licence does not expire, and is valid until certain situations occur, such as:
- The licensed financial adviser is wound up or otherwise dissolved, in which case the licence lapses;
- The licence is revoked or suspended by MAS;
- The licensed financial adviser stops paying the licence fee for the financial adviser’s licence;
- The licensed financial adviser stops conducting all the regulated activities on the licence, in which case MAS will cancel the licence.
How Much is the Licence Fee For a Financial Adviser’s Licence?
In the period that your licence is valid, you will have to pay licence fees on a yearly basis. This is important because one of the grounds of revocation of the licence is where the licensed financial adviser fails to pay the licence fee above.
The licence fee consists of two components – a fixed fee and a variable fee. For the fixed fee, you will need to pay $2,000 yearly, regardless of the number of financial advisory services provided. The variable fee is computed at $5 per representative from the 101st representative onwards as at 1 January of the calendar year.
To illustrate, if you have 150 appointed representatives in a particular year, you would have to pay a total of $2,000 + ($5 x 50) = $2,250 that year.
How Do You Appoint Representatives?
You will have to appoint at least 2 full-time individuals as appointed representatives, but there is no upper limit on the number of representatives that you can appoint. This has to be done through lodging your notification of intent to appoint a representative via the Corporations and Representatives (“CoRe”) System.
The individual that you wish to appoint as a representative must meet the following criteria:
- Be at least 21 years old;
- Satisfy the minimum academic qualification requirements (i.e. have a GCE “A” Level certificate with passes in at least three H2 subjects and two H1 subjects, an International Baccalaureate Diploma qualification, a diploma awarded by a polytechnic in Singapore, or the equivalent of any of the above);
- Satisfy the fit and proper criteria (i.e. possess honesty, integrity and reputation; competence and capability; and financial soundness);
If you wish to appoint an experienced individual from overseas, you can submit his/her application as a provisional representative provided that he/she meets the following additional requirements:
- Be in the process of relocating or have already relocated to Singapore;
- Possess at least 3 years of working experience relevant to the type of financial advisory service to be conducted as a provisional representative; and
- Comply with the relevant examination requirements within 3 months of being appointed as a provisional representative (these exam requirements can be found at page 8 of these Guidelines).
The appointment period for a provisional representative is a maximum of 3 months. Once the provisional representative has met the relevant examination requirements, their appointment will be converted to that of an appointed representative.
What are Some Ongoing Compliance Obligations After You Have Obtained a Financial Adviser’s Licence?
As a licensed financial adviser, you are required to comply with some reporting requirements by MAS. Chiefly, you will have to prepare and lodge with MAS a true and fair profit and loss account and a balance sheet made up to the last day of your financial year, together with an auditor’s form, within 5 months after the end of your financial year.
Additionally, you will also be responsible for the conduct of your representatives (i.e. the “agents” representing your company). For example, if you have received word about any misconduct committed by your representatives, you are required to lodge a report with MAS within 14 days of such discovery, and take disciplinary action against those representatives.
It is important to bear these ongoing compliance requirements in mind, because the penalties for breaching such requirements, as well as the other terms and conditions of the licence, are the revocation of your licence. In 2019, the MAS revoked the financial adviser’s licence of a corporation for failing to adhere to the licence requirements. In that case, the financial adviser wanted to stop providing financial advisory services, and was required under one of its licence conditions to ensure that its liabilities and obligations to all clients have been fully discharged or provided for prior to the cessation of its financial advisory licence.
However, despite repeated requests from MAS, the financial adviser failed to provide the auditor’s certification of the above. Accordingly, the corporation’s licence was revoked for its failure to comply with MAS’ written direction.
If you wish to conduct financial advisory services in Singapore, you should first consider whether you need a financial adviser’s licence to do so, or if you fall under one of the categories of exempted institutions or uses stated above. The next steps would be to actually apply for the financial adviser’s licence (if you are not exempted from holding it), and comply with the terms and conditions of the licence while it is valid.
As the list of exemptions and the eligibility criteria for obtaining a financial adviser’s licence can be quite technical, you should consult a fintech lawyer who will be able to provide tailored advice for your company. Additionally, the lawyer can help you with your application, including the compilation and submission of the required supporting documents, as well as advise on your ongoing compliance obligations as a licensed financial adviser.
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