5 mins | September 29th, 2021 | The financial services industry has shifted and repositioned itself over the last few years. Spurred by the pandemic, the industry has seen a rise in digitalisation efforts to maintain the relationships they have between the company, employees, and customers. Business licenses are required for most business, and the financial services industry is no different.
What Are the Types of Financial Services Licenses in Singapore
Setting up a company offering financial services, especially in FinTech, in Singapore could be a smart move now. Ranked 2nd in biggest growth by industry in Singapore by the Ministry of Trade, the finance and insurance industry recorded a 5% growth in 2020.
To operate a financial service company, you will need to hold one of the two business licenses:
- Capital Market Services (CMS) License
Financial Adviser’s (FA) License
Capital Market Services License
Those who conduct activities which are regulated by the Securities and Futures Act must apply for a Capital Markets Services License, unless exempted. These activities include:
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
The CMS License can only be applied by corporations. If an individual intends to act as a representative of the CMS License holder in conducting any of the above activities, the individual will need to acquire the related CMS Representative’s License, unless there is an exemption.
Financial Adviser’s License
Those who conduct activities which are regulated by the Financial Advisers Act must apply for a Financial Adviser’s License. These activities include:
- Providing advice on investment products such as securities and unit trusts, futures contracts, life insurance policies including investment-linked life insurance policies), foreign exchange and leveraged foreign exchange contracts, and other structured products
Issuing reports on investment products
- Making arrangements for life insurance products
- Marketing collective investment schemes such as unit trusts
The Financial Services Act does not regulate the following areas:
- Bank deposits – regulated under the Banking Act.
General insurance – arranged by intermediaries according to the Insurance Act and not considered to be an investment product.
- Loans and mortgages – not regulated, also not investment activities.
Similar to the CMS license, only corporations can apply for the FA license and individuals acting as a representative of the FA license holder will need to acquire the FA Representative’s License, unless exempted.
Exempted Entities
There are some entities who do not apply for such licenses. The list includes the following:
| Capital Market Service License | Financial Adviser’s License |
|---|---|
| Banks, merchant banks, finance companies, and insurance companies – these entities are already regulated by the Monetary Authority of Singapore (MAS) under a separate legislation | Banks, merchant banks, finance companies, and insurance companies – these entities are already regulated by the Monetary Authority of Singapore (MAS) under a separate legislation |
| Individuals who are acting on behalf of an exempt person | Individuals who are acting on behalf of an exempt person |
| Individuals who are acting on behalf of CMS license holders who are engaged in custodial services for securities or securities financing | Individuals who are Singaporean residents and act (directly or indirectly) as financial advisers who give advice on investment products excluding life insurance policies to no more than 30 accredited investors on any occasion. An accredited investor is an individual whose income over the preceding 12 months is either S$300,000 or whose net personal assets exceed S$2 million, a corporation with a net asset amount that exceeds S$10 million, or a trustee of a trust. |
| Individuals who are employees of banks or merchant banks and who are registered as associate persons of the Singapore Exchange Derivatives Trading Ltd. |
Eligibility Criteria for License Application
As with every business license, there is a set of eligibility criteria that you must fulfill before applying for them. The requirements for CMS and FA licenses are listed below.
| License Type | Eligibility |
|---|---|
| CMS License |
|
| CMS Representative’s License |
|
| FA License |
|
| FA’s Representative’s License |
|
Procedure for Applying the Licenses
The procedure to apply for both CMS and FA licenses
- Complete all application forms and submit to MAS, along with supporting documents
- Payment of fee during application process
- Successful applicants will receive their CMS license or CMS Representative’s License and Annual License Fee Advice – the license is valid for 3 years.
Renewal of the license must be submitted at least 1 month before expiry.
Starting A Company in Singapore
Looking to start your financial service company in Singapore? Don’t be taken aback by the complex business license requirements, we’re here to help!
Reach out to us for a free consultation for your company incorporation, and other corporate services today!
FAQs
Some industries do not require any business license. You may check out our Singapore Business License Guide (link to the business license guide) to learn more about the licensing requirements.
The Securities and Futures Act is an act created to regulate activities in the securities and derivatives industry. It also manages the institutions which operate within these industries. It was first enacted in 2001 and most recently revised in 2006.
The Financial Advisers Act is an act created to regulate financial advisers across Singapore. It also regulates the actions of their representatives and supervisors. It was first enacted in 2001 and most recently revised in 2007.