6 July, 2015
The Financial Advisers (Amendment) Bill 2015 and the Insurance (Amendment) Bill 2015 underwent their first reading in Parliament on 11 May 2015. The two amendment bills seek to implement the proposals made under the Financial Advisory Industry Review (“FAIR”). The draft amendment acts were consulted on by the Monetary Authority of Singapore (“MAS”) on 2 October 2014, together with drafts of various related regulations, notices, guidelines, and forms. As the amendment bills do not change the FAIR policies accepted by the MAS, we will not discuss them in detail here.
We would, however, like to highlight the following aspects of the bills that were not in the drafts:
- The Financial Advisers (Amendment) Bill 2015 specifically provides that it is an offence for a licenced financial adviser or an exempt financial adviser to pay any remuneration in relation to the provision of financial advice or sale of any financial product that is not in accordance with the regulations issued by the MAS. In addition, it is also an offence for a financial advisers or representative to request, demand, or accept remuneration that is not in accordance with such regulations. A breach of these prohibitions renders the person liable to a fine not exceeding SGD 25,000, and in the case of a continuing offence, to a further fine not exceeding SGD 2,500 for every day that the offence continues.
- Both the Financial Advisers (Amendment) Bill 2015 and the Insurance (Amendment) Bill 2015 provide that the remuneration framework will apply to agreements entered into prior to the in-force date of the amendment acts, and that compliance with the framework will not breach or frustrate any such agreement. Accordingly, it appears that a financial adviser must comply with the remuneration framework despite the terms of any agreement with its representatives entered into prior to the in-force date of the amendment acts.
- The draft Financial Advisers (Amendment) Bill 2015 had provided for establishment of an independent sales audit unit. It also provided that the unit had to report to the board of directors and chief executive officer of the financial adviser. The tabled bill provides that the unit may instead report to another independent unit if so determined by the board of directors or the chief executive officer. This allows the board or chief executive officer to delegate this function.
- The prohibition in section 55A of the Financial Advisers (Amendment) Bill 2015 against carrying on any business not authorised or regulated by the MAS applies to licensed financial advisers incorporated in Singapore or, if incorporated outside Singapore, to its branches and officers located within Singapore. The MAS has also clarified in its response to feedback on the Consultation that exempt financial advisers are not covered by that provision.
- The Financial Advisers (Amendment) Bill 2015 clarifies that a financial adviser’s representative may carry on any other business that its principal is authorised to provide, including business in respect of non-financial advisory activities. We note in this regard that the MAS had stated, in the Consultation and the Second Draft Amendments to the Financial Advisers Regulations, that financial advisers may only carry on the following nonfinancial advisory activities:
- Acting as introducers or making referrals in respect of non-financial advisory activities to financial institutions licensed by the MAS;
- Providing training and consultancy in respect of financial planning to financial literacy aimed at educating and empowering consumers; and
- Providing will writing, estate planning, and tax planning services.
- A financial adviser’s representative may engage in any other employment or business if his financial adviser gives its consent. The Financial Advisers (Amendment) Bill 2015 specifically provides that such consent must not be given unless the financial adviser is satisfied that the criteria specified by the MAS have been satisfied. A breach of this requirement is an offence punishable with a fine.
For further information, please contact:
Elaine Chan, Partner, WongPartnership