Regulated Activities Under the Financial Advisers Act (FAA) 2001
The Financial Advisers Act (FAA) 2001 primarily regulates financial advisory services related to investment products. These products typically include:
Securities: Shares, bonds, debentures, and other equity or debt instruments.
Futures: Contracts for the purchase or sale of an asset at a future date at a predetermined price.
Life insurance: Contracts providing financial protection in case of death or other specified events.
Key Regulated Activities
Under the FAA, the following activities are considered regulated:
Advising on the purchase or sale of investment products.
Managing investment portfolios.
Distributing investment products.
Dealing in investment products.
While the FAA primarily focuses on investment products, it's essential to remember that not all financial planning activities are regulated under the FAA. For instance, tax and estate planning typically fall outside the scope of the FAA.
Registering a Financial Adviser Entity in Singapore
Understanding the Regulatory Environment
Registering a financial adviser entity in Singapore is subject to stringent regulations imposed by the Monetary Authority of Singapore (MAS). This is to ensure the protection of investors and maintain the integrity of the financial market.
Key Steps Involved
1. Company Incorporation:
Choose a suitable corporate structure (e.g., Pte Ltd).
Register your company with the Accounting and Corporate Regulatory Authority (ACRA).
2. Meet Capital and Insurance Requirements:
Ensure your company meets the minimum paid-up capital requirements set by MAS. The amount depends on the type of financial advisory services offered.
Base Capital Requirement
The base capital requirement for a financial adviser in Singapore depends on the nature of the financial advisory services provided:
Research-only firms: These firms only issue or promulgate research analyses or research reports. They are required to maintain a minimum base capital of S$250,000.
Other financial advisory activities: This includes all other types of financial advisory services. Firms can either:
Maintain a minimum base capital of S$500,000.
Maintain a lower base capital of S$300,000 and purchase additional professional indemnity insurance of S$500,000.
Financial Resources Requirement
Financial resources are essentially a safety net to ensure the financial stability of the financial adviser. The amount required is the higher of:
25% of the relevant annual expenditure of the preceding financial year.
S$150,000.
This requirement helps ensure that the firm has sufficient funds to cover its operational expenses.
Professional Indemnity Insurance (PII)
PII is crucial for protecting the financial adviser against claims arising from professional negligence or errors. The required PII coverage varies based on the type of financial advisory services and the firm's revenue:
Research-only firms: A PII limit of S$500,000 is required.
Other financial advisory activities:
For firms with revenue not exceeding S$5 million, a PII limit of S$1 million is required.
For firms with revenue exceeding S$5 million, the PII limit is the lower of:
20% of gross revenue
S$10 million
3. Appoint Key Personnel:
Minimum of 2 directors, at least one of whom is resident in Singapore: This is a general corporate requirement in Singapore. It ensures local accountability and oversight.
Chief Executive Officer (CEO), who is resident in Singapore, with at least 10 years of relevant experience, of which at least 5 years must have been in a managerial capacity: This specific requirement demonstrates the need for strong leadership and experience in the financial industry for the CEO role.
Minimum of 3 full-time Singapore-based individuals with at least 5 years of relevant working experience: This requirement ensures that the firm has a sufficient number of experienced professionals to support its operations.
These individuals must meet MAS's fit and proper criteria.
4. Develop Robust Systems and Controls:
Establish effective systems and controls for risk management, compliance, and customer protection.
5. Apply for Financial Adviser's License:
Submit the required application form and supporting documents to MAS.
The application process involves a thorough assessment of your business plan, financial position, management team, and compliance framework.
Form 1
Purpose: Used for new applications for a Financial Adviser (FA) license.
Content: Contains detailed information about the company, its directors, shareholders, business plan, financial position, and proposed regulated activities.
Form 2
Purpose: Used by existing FA license holders who wish to expand their regulated activities.
Content: Outlines the additional regulated activities the company wants to undertake and provides supporting information.
Key Points:
Both forms are submitted to the Monetary Authority of Singapore (MAS).
The MAS will assess the application based on the information provided in the form and other supporting documents.
There are specific requirements and guidelines for completing both Form 1 and Form 2.
A crucial aspect of managing a financial adviser entity in Singapore is the appointment of representatives to conduct regulated activities under the FA license.
Key Points:
Mandatory Appointment: If your company hires or appoints individuals to carry out regulated activities, they must be appointed as representatives.
Representative Types: There are two main types of representatives:
Appointed Representative: An individual employed by the financial adviser to conduct regulated activities.
Provisional Representative: An individual who is not employed by the financial adviser but is authorized to conduct regulated activities on behalf of the company.
6. Comply with Ongoing Regulatory Requirements:
Once licensed, adhere to MAS's ongoing regulatory obligations, including reporting, record-keeping, and conduct of business rules.
Essential Considerations
Legal and Regulatory Compliance: Stay updated with the latest regulations and seek legal advice to ensure compliance.
Business Plan: Develop a comprehensive business plan outlining your target market, services, revenue model, and risk management strategy.
Financial Resources: Secure sufficient capital to meet operational expenses and regulatory requirements.
Qualified Personnel: Recruit experienced professionals with relevant qualifications and expertise.
Technology Infrastructure: Invest in robust IT systems to support your operations and comply with data protection regulations.
Processing Time for a Financial Adviser License
The standard processing time for a Financial Adviser (FA) license application in Singapore is generally 4 months from the date of application.
However, this timeframe can vary depending on several factors, including:
Completeness of the application: A complete and accurate application will expedite the process.
Complexity of the business model: Simpler business models tend to have shorter processing times.
Additional information required: If MAS needs clarification or additional information, the process may take longer.
It's essential to submit a comprehensive and well-prepared application to minimize processing time.
Application Fee for a Financial Adviser License in Singapore
The application fee for a Financial Adviser (FA) license in Singapore is S$500. This fee is non-refundable.
Please note that this is just the application fee. There may be additional costs involved such as:
Incorporation fees
Capital requirements
Professional indemnity insurance premiums
Ongoing regulatory fees
It's essential to factor in these costs when planning your financial adviser business.
Additional Resources
Monetary Authority of Singapore (MAS): https://www.mas.gov.sg/
Accounting and Corporate Regulatory Authority (ACRA): https://www.acra.gov.sg/
How Bestar Can Help
Engaging Bestar can significantly streamline the process of registering a financial adviser entity in Singapore. We offer a wealth of expertise and can handle many of the complexities involved.
Company Incorporation: We can assist with the formation of your company, ensuring compliance with all statutory requirements.
Regulatory Compliance: We can guide you through the complex regulatory landscape, helping you meet the capital, personnel, and other requirements.
Application Preparation: We can prepare the necessary application forms and supporting documents, ensuring accuracy and completeness.
Ongoing Compliance: We can provide ongoing support in maintaining compliance with regulatory obligations, such as reporting and record-keeping.
Legal Advice: We can offer expert legal advice on various aspects of the registration process, including corporate structure, licensing, and regulatory compliance.
Contract Drafting: We can assist in drafting essential contracts, such as shareholder agreements, employment contracts, and client agreements.
By leveraging the expertise of Bestar, you can increase your chances of a successful application and ensure that your financial adviser entity is well-positioned for long-term success.
Requirements for obtaining a financial adviser license
Financial Adviser's Licence - Monetary Authority of Singapore
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