Financial Advisers Act (FAA)
The Financial Advisers Act (FAA) is passed by the Singapore Parliament in 2002 as “An Act to regulate financial advisers and their representatives, and for other purposes relating thereto or connected therewith.”
The FAA regulates the following activities:
* Providing advice on investment products including securities (including unit trusts), futures contracts, foreign exchange and leveraged foreign exchange contracts, and life insurance policies (including investment-linked life insurance products);
* Issuing reports on investment products;
* Marketing collective investment schemes, i.e. unit trusts; and
* Arranging life insurance products.
The FAA does not regulate the following:
* General insurance – These are arranged by insurance intermediaries under the Insurance Act. They are consumption-based and are therefore not considered investment products.
* Bank deposits – These are offered by banks regulated under the Banking Act. They have lower risks and are generally well-understood by the public.
* Loans and mortgages – These do not have any investment element.
MAS is proposing to issue guidelines on the sale of structured deposits under the FAA.
2 kinds of companies
In Singapore legal system the term Financial Adviser “FA” refers to a company, the individual is called Financial Adviser Representative “FARs”. However, for purpose of discussion on, we will use the term Financial Adviser as a person.
* Licensed Financial Advisers (Licensed FAs)
These companies hold a financial adviser’s (FA) licence under the FAA. Among other things, they must have a minimum paid-up capital of either $150,000 or $300,000 depending on the activities they conduct, and professional indemnity insurance.
* Exempt financial advisers (Exempt FAs)
These are banks, merchant banks, finance companies, insurance companies, insurance brokers and holders of a capital markets services licence. Exempt FAs are exempt from holding a FA licence because MAS already regulates them under separate legislation. They must meet similar business conduct rules under the FAA as licensed FAs.
The term “Financial Adviser”, is regulated, MAS does not restrict the use, nor regulate entities under other similar titles, “financial planner”, etc. You can check the MAS website at under “Financial Institutions Directory” for the list of companies authorised to provide financial advisory activities in Singapore.
Entry Requirements and compliance
Individuals are put through sets minimum entry and examination requirements, must be fit and proper. In dealing with consumers, FAs and FARs must have a reasonable basis for the recommendations they make. They have to take into account your investment objectives, financial situation and personal needs when recommending a product.
In addition, Financial Advisers must disclose material information to you, including the risks of the product and the fees and charges to be paid by you.
Learn more about Financial Advisers