Guide to Singapore Financial Services License

Who Looks After the Financial Services Industry in Singapore?

The Monetary Authority of Singapore, or MAS, governs the financial services industry in Singapore.

What Is the Legislation that Provides Regulation for the Financial Services Industry?

The Securities and Futures Act and Financial Advisers Act come together to form a single, modular licensing model, an integrated regulatory framework that provides industry participants with a sound and transparent set of rules. This framework aims to ensure that standards across all institutions providing fund management services remain uniform, with consistent requirements, while at the same time, affording the financial services industry the flexibility of accommodating high-level innovation among its participants.

So What Are the Licenses I’m Going to Need If I Want to Run a Financial Services Business in Singapore?

As mentioned above, the Securities and Futures Act and the Financial Services Act form a modular licensing model, meaning that a financial intermediary only needs to hold a single license, whichever one is more suitable for the intermediary’s activities.

There are two licenses available:

(1) Capital Markets Services License or

(2) Financial Advisers License.

If you’re a financial intermediary, you’ll need one of these two licenses in order to do business, unless you fall under specific exemptions. These licenses allow the intermediary to conduct one or several types of regulated activities: property fund management, asset/portfolio management, investment advisory services, securities dealing and futures trading, advising on corporate finance measures, etc. This guide will help you determine which of these two licenses is applicable to you, as well as go over eligibility requirements, how to obtain these licenses, any possible exemptions and other related information.

Tell Me All I Need to Know About the Capital Markets Services License.

Who Needs a Capital Market Services License?

If you’re engaged in any of the below activities, which are regulated by the Securities and Futures Act, you’ll need to apply for a Capital Markets License:

• Dealing in securities
• Trading in Futures contracts
• Securities financing
• Providing custodial services for securities
• Leveraged Foreign Exchange trading
• Advising on corporate finance matters
• Fund Management
• Real Estate Investment Trust Management

So if you are engaged in any of these activities, you must obtain the Capital Markets Services License (CMS License), except if you fall under a specific exemption. Only a corporation can be granted the CMS License. If an individual wishes to act as a representative of the CMS License holder in conducting any of the above activities, they’ll need to acquire the requisite CMS Representative’s License, unless they are exempted from doing so.

Who Are Exempted from Needing a Capital Market Services License?

These entities are exempted from holding a CMS License:

• Banks, merchant banks, finance companies, and insurance companies are all exempt from requiring a CMS License. These entities are already regulated by the Monetary Authority of Singapore (MAS) under separate legislation.
• Individuals who are acting on the behalf on an exempt person (exempt person in this case referring to someone who is exempt from holding a CMS License)
• Individuals who are acting on behalf of those CMS License holders who engage in custodial services for securities or securities financing.
• Individuals who are employees of banks or merchant banks, and who are registered as associate persons of the Singapore Exchange Derivatives Trading Ltd.

Because the goal of the Securities and Futures Act is to ensure uniform standards among all industry participants that are engaged in the same types of activities, those who are exempted from holding a CMS License will still need to be in compliance with the same requirements (on market practices and conduct) as those who do hold Capital Markets Services Licenses. These requirements include meeting minimum academic qualifications and examination standards, being honest and basically fit and proper, and ensure compliance with the requirements on market practices and conduct. To go through these requirements thoroughly, please visit the Monetary Authority of Singapore’s (MAS) website.

Eligibility Criteria for the Application of a Capital Markets Services License:

If you want to apply for a Capital Markets Services License, these are the eligibility criteria you’ll have to take into account before actually applying:

• The application must be a corporation, with its main form of business being one of the regulated activities specified in the Second Schedule to the Securities and Futures Act.
• You’ll need to be able to show the track record, management skills and financial soundness of said application for the last 5 years. This will apply to the any parent company of major shareholders as well.
• Having business plans and projections for the future.
• Having good and strong internal compliance systems.
• Able to satisfy the minimum financial requirements that are listed under the Securities and Futures Act.
• The applicant’s fitness and propriety, as well as that of its employees, officers and substantial shareholders.
• Before the applicant appoints a CEO or director, it should seek approval from Monetary Authority of Singapore (MAS). Any CEO or Director should also be a Singaporean resident.
• The applicant must have at least 2 full-time employees in each of the regulated activity that the corporation is seeking license for. Each of these employees will also need to hold a Representative’s License for the activity, as required under the Securities and Futures Act.
• If the applicant is applying for the license in order to deal in securities or trade in futures contracts, they should have minimum group shareholders’ funds of SGD 200 million for the former activity, and SGD 100 million for the latter.
• If the applicant is applying for the license in order to engage in fund management, they should have at least SGD 1 billion’s worth of global funds under management.
• If the applicant is applying for the license in order to engage in fund management or the advising on corporate finance matters of both, the Monetary Authority of Singapore (MAS) may decide to impose a license condition – one that specifies that the applicant has to purchase a Professional Indemnity Insurance policy and is in compliance with the basic requirements as set out by MAS.
• If the applicant is applying for the license in order to engage in fund management or the advising on corporate finance matters of both, the Monetary Authority of Singapore (MAS) may decide to impose a license condition – one that specifies that the applicant has to purchase a Professional Indemnity Insurance policy and is in compliance with the basic requirements as set out by MAS.

Eligibility Criteria for the application of a Capital Markets Services Representative’s License:

If you want to apply for a Capital Markets Services Representative’s License, these are the eligibility criteria you’ll have to take into account before actually applying:

• The application has to be an individual, and be 21 years old or above.
• The applicant must meet the minimum academic qualification and examination requirements as set out by MAS.
• The applicant has to fulfill MAS’s various criteria for being a fit and proper person, once who can be issued with the Capital Markets Services Representative’s License.

To Apply for CMS License or CMS Representative’s License:

Complete the application forms and submit it to the Monetary Authority of Singapore (MAS), accompanied by all supporting documents. A non-refundable application fee must be paid during the application process. Successful applications will usually be processed within 6 months. If successful, the applicant will receive a CMS License or CMS Representative’s License, together with an ‘Annual License Fee Advice’ document that specifies the exact amount of license fees payable. The license is valid for up to 3 years but license fees are paid on an annual basis. Renewal applications have to be submitted at least a month before the license’s expiry date is up. There should be no reasons for MAS to reject your application if you have submitted all the necessary documentation and accurate information. If you do get rejected, however, you may file an appeal, within one month of being rejected. Expect the review process to take up to two months.

Tell Me All I Need to Know About the Financial Advisers License.

Who Needs a Financial Advisers License?

If you’re engaged in any of the below activities, which are regulated by the Financial Advisers Act, you’ll need to apply for a Financial Advisers License:

• Providing advice on investment products. This include securities (and unit trusts), futures contracts, life insurance policies (includes investment-linked life insurance policies), foreign exchange and leveraged foreign exchange contracts, and other structured products.
• Issuing reports on investment products.
• Making arrangement for life insurance products.
• Marketing collective investment schemes, for example, unit trusts.

Note: It should be noted that the Financial Services Act does not regulate the following activities:

• Bank Deposits – regulated under the Banking Act.
• General Insurance – arranged by intermediaries and falls under the Insurance Act. Not considered to be an investment product.
• Loans and Mortgages – not regulated because these are not investment activities.

So if you are engaged in any of these activities, you must obtain the Financial Advisers License (FA License), except if you fall under a specific exemption. Only a corporation can be granted the FA License. If an individual wishes to act as a representative of the FA License holder in conducting any of the activities that require a FA License (as mentioned above), they’ll need to acquire the requisite FA Representative’s License, unless they are exempted from doing so.

Who are exempted from needing a Financial Advisers License?

These entities are exempted from holding a FA License:

• Banks, merchant banks, finance companies, insurance companies, insurance brokers and holders of a CML License are all exempt from requiring an FA License. These entities are already regulated by the Monetary Authority of Singapore (MAS) under separate legislation.
• Individuals who are acting on the behalf on an exempt person (exempt person in this case referring to someone who is exempt from holding a FA License)
• Individuals who Singaporean residents who acts (directly or indirectly) as a financial adviser who gives advice on investment products (excluding life insurance policies) to no more than 30 “accredited investors” on any occasion. “Accredited Investor” can be definite as (1) Individual whose income in the preceding 12 months is either $300,000 or more, or whose net personal assets exceeds SGD 2 million (2) corporation with a net asset amount that is in excess of SGD 10 million or (3) a trustee of a trust, or any such person, as the authorities in question may decide.
• Because the goal of the Financial Advisers Act is to ensure uniform standards among all industry participants that are engaged in the same types of activities, those who are exempted from holding a FA License will still need to be in compliance with the same requirements (on market practices and conduct) as those who do hold FA Licenses.

These requirements include meeting minimum academic qualifications and examination standards, being honest and basically fit and proper, ensure compliance with the requirements on market practices and conducts, as well as complying with reporting requirements for those who are exempt from needing an FA License. To go through these requirements thoroughly, please visit the Monetary Authority of Singapore’s (MAS) website.

Eligibility Criteria for the application of a Financial Advisers License:

If you want to apply for a Financial Advisers License, these are the eligibility criteria you’ll have to take into account before actually applying:

• The application must be a corporation, and it must have established a physical presence in Singapore.
• The applicant must satisfy the minimum financial requirements as set out in Regulation 15 of the Financial Advisers Regulation (please refer to the MAS website).
• Having business plans and projections for the future.
• Having good and strong internal compliance systems.
• The applicant’s fitness and propriety, as well as that of its employees, officers and substantial shareholders.
• The applicant must have, at the very least, 3-years’ worth of experience in the financial advisory industry. Executive Directors, including the CEO, must have at least 5 years of relevant working experience, as well as the proper academic/professional qualifications.
• The application must be in possession of an active professional indemnity insurance policy. The limit of the indemnity covered should be SGD 500,000 or more. The allowable deductible must not exceed 20% of said applicant’s net asset value at the end of the immediately preceding financial year.

Eligibility Criteria for the application of a Financial Advisers Representative’s License:

If you want to apply for a Capital Markets Services Representative’s License, these are the eligibility criteria you’ll have to take into account before actually applying:

• The application has to be an individual, and be 21 years old or above.
• The applicant must meet the minimum academic qualification and examination requirements as set out by MAS.
• The applicant has to fulfill MAS’s various criteria for being a fit and proper person, once who can be issued with the Capital Markets Services Representative’s License.

To Apply for FA License or FA Representative’s License:

Complete the application forms and submit it to the Monetary Authority of Singapore (MAS), accompanied by all supporting documents. A non-refundable application fee must be paid during the application process. Successful applications will usually be processed within 6 months. If successful, the applicant will receive a FA License or FA Representative’s License, together with an ‘Annual License Fee Advice’ document that specifies the exact amount of license fees payable. The license is valid for up to 3 years but license fees are paid on an annual basis. Renewal applications have to be submitted at least a month before the license’s expiry date is up. There should be no reasons for MAS to reject your application if you have submitted all the necessary documentation and accurate information. If you do get rejected, however, you may file an appeal, within one month of being rejected. Expect the review process to take up to two months.