Over the past five decades, Singapore’s financial sector has multiplied by developing a progressive and sound financial center. It has also ensured the financial industry serves the local economy and extends to the Asia Pacific region.
Since it’s a great financial center, Singapore accommodates over 1200 financial institutions offering various products and services to the people. As the country is well-established in the financial industry, it has attracted many financial advisors.
The Singapore government established the Financial Advisers Act (FAA) to regulate their operations and protect consumers, ensuring financial advisors follow the proper criteria when offering services.
Financial advisers’ regulations guarantee the financial system’s stability and enhance financial institutions’ prudent behavior to help consumers minimize risks.
What Is the Financial Advisers Act in Singapore?
The Financial Advisers Act (FAA) in Singapore is an act that executes the regulation of any financial advisor in the country.
It also includes their supervisors and representatives who offer financial advisory service. It ensures that consumers are protected by imposing standards of conduct on financial advisers and representatives.
The financial advisers’ regulations also ensure that the financial advisers are competent and act with integrity and professionalism in providing financial advisory services.
This Act also entails what a financial advisor has to go through before they become an outstanding financial adviser. It gives guidelines on licensing, registration, and authorization of a financial adviser.
To operate as a financial advisor in Singapore, you must have the Financial Adviser’s License unless you are exempted. You also need to have an organized market and work with a recognized market operator so that you reach a prospective client.
Who Regulates the Financial Advisors in Singapore?
The Monetary Authority of Singapore (MAS) is the organization that regulates and controls the financial advisors in Singapore. It is a Singapore central bank and an integrated financial supervisor or regulator. MAS has been at the forefront of managing systematic financial risk for many years.
Its primary purpose is to develop sound financial institutions throughout Singapore. Besides financial advisors, MAS regulates insurers, banks, capital market intermediaries, finance companies and stock exchanges.
It also issues collective investment schemes under the Securities and Futures Act. Its other function is to create functioning financial markets and proper conduct in the financial sector.
Below are the main objectives of MAS.
- To safeguard the securities of a prospective client.
- To oversee the level of advisory services a specific professional has.
- To hold any business accountable for its behavior and actions under the Companies Act.
- To offer securities to Singapore’s financial system and its financial stability by thoroughly monitoring and regulating systematic financial risk.
- To ensure there is an excellent quality of the payment tools and other technical parts of financial advisory services. Hence stop money laundering.
What Is in the Financial Advisers Act 2001? How Does It Protect the People?
Financial Advisers Act 2001 is an act that gives financial advisors guidelines on licensing, registration, and authorization. Here are various things included in the Financial Adviser’s Act 2001.
One must not act as a financial adviser in the country unless authorized to perform their services in respect of the financial advisory services using a FAL.
A person can be stopped from acting as a financial adviser in Singapore if they engage in practices or conducts that intend to induce the public or any other section to apply the financial advisory service offered by the person.
FAA 2001 protects the people in the following ways:
- Ensures that the licensed financial advisers or any approved holding company are competent and work professionally in providing financial advisory services.
- Protects the consumers by imposing standards of conduct on financial advisers and any provisional representative
- Regulate the conduct of the business of financial advisers and representatives in Singapore. They must have consistent professional standards.
- Provide for the licensing, financial advisers regulations, and supervision of financial advisers and their provisional representatives.
- Establish requirements, research analyses and material information relating to the keeping of accounts and the audit of financial advisers.
- Prohibit certain businesses and practices by licensed financial advisers.
- Provide powers to the MAS to supervise, investigate and take enforcement actions against financial advisers and any provisional representative.
- Provide for appeals against decisions made by the MAS.
- Set out the offenses and penalties for breaches of the Act on a reasonable basis.
What Is a Financial Adviser’s License?
A Financial Adviser’s License (FAL) is a license issued to a business to freely perform financial advisory activities, which are regulated under the FAA unless exempted. Any individuals employing financial advisory services on behalf of exempt FAs or licensed FAS must be appointed as representatives.
You must submit Form 1 using the Financial Advisers Regulation FAR to apply for a financial adviser’s license. Additionally, suppose your business has an FA license under a particular regulated activity and wants to incorporate an extra financial advisory activity into the FA license. In that case, they can submit Form 2 majorly under the FAR.
Moreover, suppose your business appoints individuals to perform a regulated activity under your license. In that case, you must select the individuals as provisional representatives or explicitly appointed for that regulated activity.
You will also have to submit a non-refundable fee of S$500. After that, a free advice manual for that application will be emailed to your company. The FAL is usually valid until the following:
- MAS cancels the financial adviser’s license.
- The license time lapses regarding section 19 of the FAA.
- The license holder stops performing all the regulated activities on the permit; after that, the license is revoked by MAS.
It is vital to note that all approved holding companies that have Financial adviser’s licenses are usually listed in the Financial Institution’s Directory. Also, all other companies that refuse to hold the permit are typically removed from the Financial Institutions Directory.
Here is a sample scenario to illustrate how the Financial Advisers Act might come into play:
John is a licensed financial adviser who works for a licensed financial advisory service firm in Singapore. He provides investment advice and financial planning services to clients, helping them to manage their finances and make informed decisions about their specific investment products, such as Collective Investment Schemes. As a licensed financial adviser, John is subject to the regulations and requirements in the Financial Advisers Act.
One of John’s clients, Mary, comes to him seeking advice about investing in a particular type of financial product. Mary is interested in investing in a speculative asset that promises high returns but carries high risk. John assesses Mary’s financial situation and specific investment products and determines that the product is unsuitable, given her risk profile and particular products.
Under the Financial Advisers Bill, financial advisers must act in their client’s best interests and provide advice suitable for their client’s circumstances. John, therefore, advises Mary against investing in the specified products and recommends alternative investment products that are better suited to her needs.
Later, John’s firm is audited by the MAS, the regulatory body responsible for enforcing the FAA. During the audit, the auditors reviewed John’s advice to Mary. They determined that he acted per the Act’s requirements by providing advice suitable for her circumstances, client’s money and in her best interests. He did not give misleading statements.
As a licensed financial adviser, John must comply with the Financial Advisers Act and its regulations to ensure that he acts ethically and in his client’s best interest. The Act helps protect consumers by ensuring that financial advisers are appropriately licensed and trained and adhere to strict standards of conduct when providing financial advisory services.
What Is Section 27 of the Financial Advisor Act?
Section 27 of the Financial Advisor Act forbids a financial adviser from creating any recommendation regarding an investment product whenever they have no reasonable objectives for doing that. It aims to prevent consumers from taking risks and make financial advisers stick to their work.
The FAA in Singapore is an act that guides any financial advisor in the country. The Act helps protect consumers by ensuring that financial advisers are appropriately licensed and trained and adhere to strict standards of conduct when providing financial advisory services. The Monetary Authority of Singapore (MAS) is the organization that regulates and supervises financial advisors in Singapore. It safeguards and oversees the safety of the consumers.
- The Financial Advisers Act gives financial advisors guidelines or criteria on licensing, registration, and authorization of their services.
- The Monetary Authority of Singapore (MAS) is the organization that regulates and controls the financial advisors in Singapore. Its primary purpose is to develop sound financial services institutions throughout Singapore.
- A financial adviser’s license is issued to companies or independent advisers to freely perform financial advisory services, which are regulated under the financial adviser’s Act unless exempted.
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