Singapore Financial Services Licensing Guide

The legal framework under the Securities and Futures Act and Financial Advisers Act, is a single, modular licensing model, providing a sound and transparent set of rules for market participants, and at the same time the flexibility to accommodate market innovation. This integrated regulatory framework ensures consistency in requirements and uniform standards across institutions providing fund management services. The financial services industry is governed by Monetary Authority of Singapore (MAS). 

Today, under the single licencing regime an intermediary needs to hold only a single licence, either a Capital Markets Services licence or Financial Advisers licence, to conduct one or more financial services regulated activities, unless specifically exempted. These regulated activities include asset/portfolio management, investment advisory services, property fund management and other activities like securities dealing and futures trading, leveraged foreign exchange trading, advising on corporate finance etc. 

This guide provides a basic introduction to the two type of licences (ie Capital Markets Services Licence and Financial Advisers Licence), exemptions, how to obtain these licences, eligibility requirements, application procedure, and other related information. The information presented here is for general guidelines only and not meant to replace professional advice.

Note: Need consultation or assistance in filing relevant application(s) for financial services licenses or exemption status? We will be pleased to assist. Drop us an email, if you are seriously considering to pursue this further.

Deciding on the type of license required

Before familiarising yourself with the procedures of applying for a licence it is important to ascertain which licence is applicable to you. For this purpose we have defined the activities that are covered by the Financial Advisers Act and consequently require a Financial Advisers Licence. Likewise a person engaged in the activities covered by the Securities and Futures Act, requires a Capital Markets Services Licence. Certain individuals/institutions are exempt from holding these licences, the details of which are provided below. 

Who should opt for a Capital Markets Licence?

The Securities and Futures Act (SFA) regulates the following activities and issues a Capital Markets Licence to persons engaged in:

1. dealing in securities
2. trading in futures contracts
3. leveraged foreign exchange trading
4. advising on corporate finance
5. fund management
6. real estate investment trust management
7. securities financing
8. providing custodial services for securities 

Except for those who are specifically exempted, any person who wishes to carry on business in any of the above mentioned regulated activities will need to obtain the requisite Capital Markets Services (CMS) licence under the Securities and Futures Act (SFA). A CMS licence is granted only to a corporation. Any individual who wishes to act as a representative to conduct any of the above mentioned regulated activities for a CMS licence holder will need to obtain the requisite Representative’s licence, unless otherwise exempted. 

Who should opt for a Financial Advisers Licence?

The Financial Advisers Act (FAA) regulates the following activities and issues a Financial Advises Licence to persons engaged in:

1. Providing advice on investment products including securities (which includes unit trusts), futures contracts, foreign exchange and leveraged foreign exchange contracts, and life insurance policies (which includes investment-linked life insurance products) and structured products
2. Issuing reports on investment products
3. Marketing collective investment schemes, i.e. unit trusts and
4. Arranging life insurance products 

The FAA does not regulate the following:

1. General insurance - These are arranged by insurance intermediaries under the Insurance Act. They are consumption-based and are therefore not considered investment products.
2. Bank deposits - These are offered by banks regulated under the Banking Act. They have lower risks and are generally well-understood by the public.
3. Loans and mortgages - These do not have any investment element. 

Except for those who are specifically exempted, any corporation which carries on the business of providing any of the financial advisory services under the Financial Advisers Act (FAA) is required to obtain a Financial Adviser FA licence. Any individual who provides financial advisory services on behalf of a licensed FA must obtain a Representative's licence, unless otherwise exempted. 

Exemptions from holding a Licence

Exemption from CMS Licence and CMS Representative's Licence

• Banks, merchant banks, finance companies and insurance companies are exempt from holding a CMS licence because MAS already regulates them under separate legislation.
• The following individuals are exempted from holding a CMS Representative’s licence:
  • Those acting on behalf of exempt persons, i.e. persons exempted from the requirement to hold a CMS licence
  • Those acting on behalf of CMS licence holders, which provide securities financing or custodial services for securities.
  • An employee of a bank or merchant bank who is registered as an associated person of the Singapore Exchange Derivatives Trading Ltd. 

To level the playing field and apply uniform standards to all market participants engaging in the same types of activities, Exempt bodies will be required to comply with similar requirements on market conduct and practices as Licenced Capital Markets Services bodies. These include: 

1. Satisfying the minimum academic qualification and examination requirements as prescribed in the Notice on Minimum Entry and Examination Requirements for Representatives of Holders of Capital Markets Services licence and Exempt Financial Institutions under the SFA.
2. Satisfying the fit and proper criteria set out in the Guidelines on Fit and Proper Criteria.
3. Complying with requirements on market conduct and practices and other requirements as specified in the Securities and Futures (Licensing and Conduct of Business) Regulations 2002. 

Exemption from Financial Advisors Licence and FA Representative's Licence

• Exempt FAs are exempt from holding a FA licence because MAS already regulates them under separate legislation.
• Exempted bodies include banks, merchant banks, finance companies, insurance companies, insurance brokers and holders of a capital markets services licence.
• Individuals who provide financial advisory services on behalf of institutions that are exempt from holding a FA licence are exempt from holding a Representative's Licence. Additionally, a person resident in Singapore who acts, whether directly or indirectly, as a financial adviser in giving advice, or in issuing or promulgating analyses or reports, concerning any investment product (other than life policies), to not more than 30 accredited investors on any occasion is exempt from holding a financial adviser’s licence. An "accredited investor" is defined as:
  • an individual whose a) net personal assets exceed SGD 2 million or its equivalent value in any foreign currency; or b) whose income in the preceding 12 months is not less than S$300,000;
  • a corporation with net assets exceeding SGD 10 million or its equivalent value in any foreign currency 
  • the trustee of a trust or such other person as the authorities may prescribe

Although Exempt FAs do not need to hold a licence to engage in the regulated activities under the FAA, there are certain compliances to be met with, on par with those of Licensed Financial Advisers. These include:

1. Satisfying the minimum academic qualification and examination requirements as prescribed in the Notice on Minimum Entry and Examination Requirements for Representatives of Licensed Financial Advisers and Exempt Financial Advisers.
2. Satisfying the fit and proper criteria set out in the Guidelines on Fit and Proper Criteria.
3. Complying with requirements on market conduct and practices as specified in the Guidelines on Standards of Conduct for Financial Advisers.
4. Complying with the reporting requirements of exempt FAs. 

Applying for a Capital Markets Services Licence

Before filling in the application form for Capital Markets Service (CMS) Licence or CMS Representative's Licence, you must be aware of the key criteria that is taken into consideration by MAS, amongst several other factors. 

Eligibility Criteria taken into account for Capital Markets Services Licence:

• The applicant is a corporation and is primarily engaged in the business of conducting any one of the regulated activities specified in the Second Schedule to the SFA.
• The track record, management expertise and financial soundness of the applicant and its parent company or major shareholders for at least the past 5 years.
• Ability to meet the minimum financial requirements prescribed under the Securities and Futures Act.
• Strength of internal compliance systems.
• Business plans and projections.
• Fitness and propriety of the applicant, its officers, employees and substantial shareholders.
• The applicant employs at least 2 full time individuals
  • in respect of each regulated activity for which the corporation is seeking to be licensed and
  • who each hold a representative’s licence for the relevant regulated activity as required under the SFA
• The applicant should obtain the approval of MAS prior to appointing a person as its Chief Executive Officer or its director, who should both be resident in Singapore.
• An applicant which is applying to carry out the regulated activity of dealing in securities or trading in futures contracts should have minimum group shareholders’ funds of SGD 200 million and SGD 100 million, respectively.
• An applicant which is applying to carry out the regulated activity of fund management should have global funds under management of at least SGD 1 billion.
• Where an applicant applies to carry out the regulated activities of fund management or advising on corporate finance or both, MAS may impose a licence condition requiring the applicant to purchase a Professional Indemnity Insurance policy that complies with the basic requirements set out by MAS. 

Eligibility Criteria for Capital Markets Services Representative's Licence:

• The applicant must be an individual and at least 21 years old.
• The applicant must satisfy the minimum academic qualification [at least 4 credits in the GCE 'O' level Examination (or its equivalent)], and satisfy the examination requirements as prescribed by MAS.
• The applicant has to satisfy MAS that he is a fit and proper person to be licensed, in accordance with MAS criteria.

Once you have decided to apply for the CMS Licence or CMS Representative's Licence, completed application forms along with supporting documents and non-refundable application fee must be submitted to Monetary Authority of Singapore (MAS).

Upon approval of the licence application (can take up to 6 months), MAS will send out licences to the applicants along with a 'Annual Licence Fee Advise' specifying the amount of licence fees payable. Each licence issued will be valid for up to 3 years. However, licence fees will be paid on an annual basis. Licensees must renew their licences if they wish to continue with their regulated activities and must submit renewal applications at least one month before the expiry dates of the licence. 

Applying for a Financial Advisers Licence

The following pre-requisites apply before you can proceed with the financial advisers licence or financial advisers representative's licence application filing in Singapore. 

Admission Criteria for Financial Advisers Licence:

• A financial adviser’s licence will only be granted to a corporation that has established a physical presence in Singapore.
• Ability to meet the minimum financial requirements prescribed in Regulation 15 of the Financial Advisers Regulations.
• An applicant must have in force a professional indemnity insurance policy under which the limit of indemnity covered should should not be less than SGD 500,000, under which the deductible allowed must not exceed 20% of the applicant's net asset value at the end of its immediately preceding financial year.
• All Executive Directors, including the Chief Executive Officer, must have a minimum of 5 years of relevant working experience and acceptable academic/professional qualifications.
• An applicant must have a minimum 3-year proven track record in the financial advisory business.
• Strength of internal compliance systems.
• Fitness and propriety of the applicant, its officers, employees and substantial shareholders. 

Admission Criteria for Financial Advisers Representative's Licence:

• The applicant must be an individual and at least 21 years old.
• The applicant must satisfy the minimum academic qualification and examination requirements as prescribed by MAS.
• The applicant has to satisfy MAS that he is a fit and proper person to be licensed, in accordance with MAS criteria.

Once you have decided to apply for the FA Licence or FA Representative's Licence, completed application forms along with supporting documents and non-refundable application fee must be submitted to Monetary Authority of Singapore (MAS).

Upon approval of the licence application (can take up to 6 months), MAS will send out licences to the applicants along with a 'Annual Licence Fee Advise' specifying the amount of licence fees payable. Each licence issued will be valid for up to 3 years. However, licence fees will be paid on an annual basis. Licensees must renew their licences if they wish to continue with their regulated activities and must submit renewal applications at least one month before the expiry dates of the licence. 

Rejected applications

If you have met the necessary requirements, submitted all the necessary documents and accurate information in your application, there is no reason for the MAS to reject you. If, however, you have been rejected, you may file an appeal within one month of your application being rejected and the review process may take up to two months.