Knowledge Highlights 18 September 2020
The Monetary Authority of Singapore (“MAS”) issued a consultation paper on 4 September 2020 and is seeking feedback on draft notices setting out the competency requirements for representatives conducting regulated activities under the Financial Advisers Act (“FAA”) and the Securities and Futures Act (“SFA”). The consultation closes on 5 October 2020.
Currently, appointed representatives under the FAA and the SFA have to meet minimum academic qualifications, pass the relevant modules under the Capital Markets and Financial Advisory Services (“CMFAS”) Examination, and fulfil Continuing Professional Development (CPD) requirements, depending on the regulated activities undertaken. These requirements are set out under FAA-N13 Notice on Minimum Entry and Examination Requirements for Representatives of Licensed Financial Advisers and Exempt Financial Advisers (“FAA Notice”) and SFA 04-N09 Notice on Minimum Entry and Examination Requirements for Representatives of Holders of Capital Markets Services Licence and Exempt Financial Institutions (“SFA Notice”).
MAS, in its consultation paper on “Draft Notices on Competency Requirements for Representatives Conducting Regulated Activities under the Financial Advisers Act and Securities and Futures Act” issued on 4 September 2020 (“Consultation Paper”), states that the following key changes will be made to the CMFAS Examination:
- Introduce ethics and skills content into the existing rules and regulations modules to form the rules, ethics and skills (“RES”) modules;
- Tailor the RES modules for appointed representatives trading on the respective securities and derivatives exchanges; and
- Provide appointed representatives with the option to take new combined product knowledge modules.
The following information can be found in the Consultation Paper:
- Current and revised CMFAS Examination modules, comprising both RES and product knowledge modules administered by the Institute of Banking and Finance (“IBF”) and Singapore College of Insurance (“SCI”); and
- Applicable RES modules for an individual whose principal is a member of an approved exchange.
By way of background, MAS had sought feedback from 12 December 2016 to 13 January 2017 on the proposals in its consultation paper on a “Review of Competency Requirements for Representatives Conducting Regulated Activities under the Securities and Futures Act and Financial Advisers Act”. The proposals sought to make changes to the CMFAS Examination to raise the competency of appointed representatives, build a culture of high ethical standards in the financial industry, and offer greater customisation and flexibility to appointed representatives to fulfil the competency requirements. On 25 September 2017, MAS published its response to feedback received on the proposals. MAS is now consulting on the amendments to the FAA Notice and SFA Notice (“revised Notices”) to implement changes to the CMFAS Examination.
Grandfathering arrangements and continued exemption for private banking representatives who only serve accredited investors
MAS will grandfather existing appointed representatives who are continuing their current regulated activities from the need to take the revised CMFAS Examination modules. Existing appointed representatives wishing to undertake additional regulated activities will have to pass the relevant revised CMFAS Examination modules for those activities.
Continued exemption for private banking representatives who only serve accredited investors
Currently, specialised units serving high net worth individuals (“s100(2) units”) that are exempted under section 100(2) of the FAA (“s100(2) Exemption”) are exempted from certain business conduct requirements under the FAA. Private banking (“PB”) representatives of these s100(2) units who carry out regulated activities under the FAA or SFA are exempted from CMFAS Examination requirements. Instead, these PB representatives are subject to the Private Banking Code of Conduct and have to pass the Client Advisory Competency Standards (CACS) examination.
With the adoption of the opt-in regime for accredited investors (“AI”), the s100(2) Exemption will be revoked on 8 January 2021. PB representatives of existing s100(2) units serving only AI clients will not be subject to the applicable CMFAS Examination if they intend to continue conducting regulated activities under the FAA or SFA, as MAS will continue to exempt these representatives from the CMFAS Examination requirements. In this regard, MAS will grandfather existing PB representatives who continue to serve only AI clients after 8 January 2021 from the CMFAS Examination requirements. MAS will also exempt PB representatives who are appointed after 8 January 2021 and only serve AI clients, from these requirements. These include PB representatives who provide financial advisory services to AI clients and whose dealing in capital markets products involve the passing or keying in of client orders, which are incidental to their provision of financial advisory services to their clients.
Existing representatives of s100(2) units who move on to serve non-AI clients will have to pass the applicable CMFAS examinations for conducting regulated activities under the FAA and SFA.
MAS will work with IBF and SCI to implement the revised CMFAS Examination in Q1 2021 (“T-date”). On T-date, the revised Notices will take effect and IBF and SCI will cease to offer the existing CMFAS Examination and will only offer the revised CMFAS Examination. Individuals who are currently studying for the CMFAS Examination and who intend to take the current CMFAS Examination have until T-1 date to do so. For candidates taking the revised CMFAS Examination, IBF and SCI plan to make available the study guides for the revised modules and allow candidates to register for the revised CMFAS Examination at least two months before T-date.
- Consultation Paper on Draft Notices on the Competency Requirements for Representatives Conducting Regulated Activities under the Financial Advisers Act and Securities and Futures Act
- Annex A: Draft FAA Exam Notice
- Annex B: Draft SFA Exam Notice
- Template for response
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