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23 December, 2016
On 12 December 2016, the Monetary Authority of Singapore (“MAS”) issued a consultation paper inviting comments on proposed amendments to the competency requirements for appointed representatives under the Securities and Futures Act (Chapter 289) (the “SFA”) and the Financial Advisers Act (Chapter 110) (the “FAA”). The amendments relate to the Capital Markets and Financial Advisory Services Examination (“CMFAS”) requirements, as well as Continuing Professional Development (“CPD”) training, and are being proposed in light of changes in the regulatory landscape for the capital markets and financial advisory industries.
MAS has stated that its proposals were made with the following principles and considerations in mind:
(a) Raising the competency of appointed representatives;
(b) Building a culture of high ethical standards in the financial industry; and
(c) Offering greater customisation and flexibility to appointed representatives to fulfil their competency requirements.
To recap, appointed representatives are the individual professionals (by whatever name they are called) that carry out the relevant intermediary activity for which the entity they represent are licensed under Part IV of the SFA or under the FAA. Appointed representatives are required to meet requirements set out in notices issued by MAS under the SFA or under the FAA (as the case may be).
This note summarises the various proposals to the CMFAS and CPD requirements.
Enhancement of CMFAS requirements
A. Introduction of ethics and skills content into rules and regulations modules
MAS proposes to introduce content on ethics and skills to the CMFAS curriculum to raise the professional standards of appointed representatives, and better align the CMFAS framework with best practices in other leading jurisdictions. This is along with the existing curriculum, which focuses on rules & regulations and product knowledge.
In relation to content on ethics, the additional content aims to test appointed representatives on their understanding of ethical principles, as well as their responses in ambiguous situations. In relation to content on skills, MAS has stated that whilst it does recognise that many skills are developed through work experience and might be difficult to assess within a paper examination, nevertheless skills-related content will help equip appointed representatives with some understanding, especially with regard to regulatory obligations. Ultimately, the aim would be to help ensure that an appointed representative is suitably equipped with the requisite skills to perform and execute his duties.
This additional content will be added to the current CMFAS module on rules and regulations, under a new Rules, Ethics and Skills module (the “RES module”). This module is intended to be role-based and tailored according to the job function of the appointed representative, so as to provide flexibility when appointed representatives move between roles and without the appointed representative having to re-take the same product knowledge module. In revising the existing list of modules available, MAS has also indicated that it would discontinue the existing module M4B on rules and regulations for advising on corporate finance (solely on debt securities) due to low enrolment rates in recent years.
B. Customisation of content of CMFAS modules
To streamline the requirements and ensure that the CMFAS modules remain relevant, MAS will also streamline and customise the content of each RES module to map against the appointed representatives’ job requirements, rather than against the broader category of regulated activity which they will be conducting under the SFA and/or FAA. This followed from feedback received that some representatives, whose roles cover more than one class of regulated activity (such as dealing staff), were presently being required to clear more than one CMFAS module relating to rules and regulations.
C. Streamlining of securities and derivatives exchange rules content
There are two significant changes proposed in relation to exchange-related content. First, MAS proposes to offer two add-on modules that cover only securities exchange-related and derivatives exchange-related content. In this way, an appointed representative who shifts from a non-exchange member firm to an exchange member firm will have the option of enrolling in these add-on modules without having to repeat the content modules applicable equally to exchange member firms and non-exchange member firms (for which he would already have previously been assessed).
Secondly, MAS proposes that exchange-related content in the CMFAS curriculum be principle-based in order to give appointed representatives the flexibility of trading on different exchanges without necessarily having to take additional examinations. Thus, an appointed representative who engages in a single regulated activity of dealing in securities, but does so on a number of different exchanges, will only be required to clear a single examination module.
D. Redesigning of the product knowledge modules
In 2015, MAS had proposed to expand the scope of coverage of the SFA to include over-the-counter (“OTC”) derivatives contracts. With this broadening in scope, plans have already been announced for various terms in the SFA to be revised.
In alignment with these changes, corresponding amendments to the CMFAS product knowledge module M6A (which covers futures and other securities-based derivatives contracts) will be made so as to include new content on commodity, credit, foreign exchange, and rate-based derivative contracts. This will mean that appointed representatives dealing in exchange-traded derivatives contracts and/or OTC derivatives contracts will, moving forward, be required to take module M6A as revised.
Regardless of the above, MAS will still retain content on collective investment schemes (“CIS”) (as defined under the upcoming amended SFA) within the CMFAS module M6, in order to allow trading representatives who deal in securities as well as in CIS to continue to take a single module. Further, content on CIS within module M6 will be made comparable to module M8 so that appointed representatives who are dealing or advising in both securities and CIS need not further take module M8.
MAS will also retain the current single product knowledge modules (i.e. modules M8, M8A, M9 and M9A) in order that the framework can remain flexible for those appointed representatives who wish to work within a niche product market or who do not wish to transact in complex or multiple product classes. However, MAS will also introduce four new modules, which are combinations of the existing product knowledge modules, as follows:
(i) CIS: Modules M8 and M8A to be combined and renamed “module CM CIS”;
(ii) Life insurance and investment-linked policies: Modules M9 and M9A to be combined and renamed “module CM-LIP”;
(iii) Life insurance, investment-linked policies and CIS: Modules M8, M8A, M9, M9A to be combined and renamed “module CM-LIC”; and
(iv) Securities, CIS, derivatives, CIS (specified investment products) and foreign exchange: Modules M6 and M6A to be combined and renamed “module CM-CMP”.
These changes aim to provide flexibility for appointed representatives who deal in multiple product classes, by enabling them to sit for a lesser number of examination modules and thus enabling them to potentially clear the CMFAS requirements within a shorter time frame.
E. Applicability of the revised CMFAS framework
The proposed new CMFAS framework will be implemented when the other proposed amendments to the SFA take effect. Additionally, it will only affect appointed representatives who are appointed after the date of implementation of the new framework (that is, new entrants to the industry). Existing appointed representatives will be subject to the new CMFAS framework only when they undertake a new or an additional regulated activity, or if there is a change in the scope of their regulated activity arising from the amendments to the SFA.
Alignment of Continuing Professional Development training requirements
In relation to CPD requirements, presently, appointed representatives under the FAA are required to undergo 30 hours of structured CPD training annually, with 12 hours being mandatory (in turn broken down into 4 hours of CPD training on ethics and 8 hours of CPD training on rules and regulations). By contrast, for appointed representatives under the SFA, at present, the CPD training requirements are more generally worded. MAS thus proposes to align the CPD training requirements across the SFA and the FAA. However, appointed representatives who conduct both SFA and FAA activities will not be required to take on the additional hours of CPD training beyond 30 hours. Thus, the fulfilment of the requisite 30 hours can be achieved through a combination of training under the SFA or the FAA.
Consultation Period
The consultation period ends on 13 January 2017.
