Who are You Dealing With


What is the transaction or sales process? Who am I dealing with?

Before you invest in a product , make sure you know who you are dealing with. MAS’ regulatory regime aims at safeguarding your interests by ensuring that only competent and professional persons provide financial services. If you choose to deal with persons that are not regulated by MAS, you forgo the protection afforded under laws administered by MAS, particularly if these persons are based overseas. 

Who are you dealing with?

Check if the party you are dealing with is authorised by MAS.

Financial institution

Look up the Financial Institutions Directory on the Monetary Authority of Singapore (MAS)’s website to see if the entity you intend to deal with is regulated in Singapore, and the specific regulated activities it is authorised to conduct in Singapore. MAS only regulates entities with a presence in Singapore.

Is the individual you are dealing with authorised?

Find out more about the individual representing the financial institution you are dealing with. If he is authorised to deal in or provide advice on life insurance and investment products, he will have been assigned a unique representative number. You should request for your representative's unique number and conduct your own check on the MAS Register of Representatives. Use the Register to verify whether the person is an appointed representative, the regulated activities which the representative is allowed to conduct, the financial institution the representative acts for and if there are any suspensions, revocations and prohibition orders issued against the representative by MAS.

Do financial institutions and their representatives offer products from one or several product providers?

Product providers are entities that manufacture or issue financial products. Examples include asset management companies and life insurance companies. Some financial institutions only offer products from a single product provider, while some have tie-ups with more than one product provider to offer customers more choices. You may wish to find out from your representative the range of products offered at the start of your relationship with the financial institution.

 

What if I want advice - who can give me advice on investment products?

MAS regulates the following types of firms or persons who can give advice on investment products to consumers:

  •  Licensed financial advisers (Licensed FAs)
    These companies are required to hold a financial adviser’s (FA) licence before they may conduct regulated activities governed under the Financial Advisers Act (FAA). A financial adviser may only conduct activities for which it is licensed in.
  • Exempted financial advisers (Exempt FAs)
    Banks, merchant banks, finance companies, insurance companies, insurance brokers, and holders of a capital markets service licence, i.e. brokerage firms, which are Exempt FAs are authorised to provide advice. These entities are exempted from holding an FA licence because MAS already regulates them under separate legislation. They must meet similar business conduct rules under the FAA as licensed FAs.

    Not all brokerage firms are Exempt FAs. Those which are not Exempt FAs are not authorised to provide advice and can provide an execution-only service. You will need to seek your own advice from another FA if you wish to deal with these entities. Consumers are encouraged to check with the financial institution on the scope of services before deciding to deal with them. There are also brokerage firms that make the business decision to provide an execution-only service and do not offer advisory services although they are authorised to do so.
  • Financial adviser (FA) representatives
    These are individuals who are employees or agents appointed by licensed FAs or exempt FAs to provide financial advice on investment products to consumers on their behalf.

    These would include remisiers where they are also appointed as financial adviser representatives. 

What happens during the transaction/sales process? What documents will I receive? 

This depends on whether you merely instruct the financial institution to carry out a transaction (e.g. to buy or sell a product) or you want to receive advice from a financial institution.

Instructing a financial institution to carry out transaction /Execution-only transaction

This is commonly known as execution-only if you are trading and/or your trading account has been approved to trade Specified Investment Products. The financial institution will carry out the transaction based on your instructions. It is not required to advise if the product is suitable for you. Do note that in such situations, you will be solely responsible for ensuring that the product is suitable for you.

The financial institution is not required to provide verbal and written information on the product.

Transactions where advice/recommendation is provided

If you wish to receive advice on an investment product, you will need to deal with a financial institution and individuals authorised under the FAA. They must disclose product information clearly when they recommend investment products to you.

They must have a reasonable basis for any recommendation made, taking into consideration your financial situation, particular needs, investment objectives, and knowledge and experience in the product, where relevant.

To understand your needs, the financial adviser representative should go through a "Know-Your-Client" (KYC) process.

The KYC process will help your financial adviser representative understand:

Example 

your investment objectives

Are you accumulating funds for your retirement or for your children's education?

your financial situation and personal needs

Do you have many dependents? Are you likely to need access to cash for example to pay for medical treatment?

your source of income, whether this is stable or irregular, and also your risk profile

Do you earn a salary or is your income largely dependent on commissions? If you suffer an investment loss, will this damage your ability to service your debt commitments or meet your financial goals?

how much you can afford to invest after meeting your current commitments and liabilities

What liabilities do you have, say home loan payments or insurance premiums?

other products you have (to see if product offered will complement or supplement what you have or over expose you to certain risks or leave you over-insured)

Other products include other investments or insurance products owned.

The financial adviser representative must explain why the investment products recommended are suitable for you. He must also explain the features of the products as well as the costs and charges involved.

Your financial adviser representative must also provide you with the following document:

  • Financial Needs Analysis

This contains information you shared with your financial adviser representative for him to identify your financial goals / investment objectives and financial situation including risk preference and affordability. The document will also state the recommended product and the basis for this recommendation. You should discuss this basis with your financial adviser representative and assess if the recommended plan meets your needs. Make sure that the information is accurately captured and that you agree with the risk profile indicated. Make sure you understand the terms used to describe risk profile and that the description reflects the level of risk you are prepared to withstand.

What if you disagree with recommendation or fact-find documentation?

If you don’t think the documents present an accurate picture, e.g. if you are more uncomfortable with the risks and losing money than indicated in the documents, then do clarify with your financial adviser representative and ask for corrections. Always ask for the clarifications in writing.

If you disagree with your financial adviser representative’s recommendation, make sure you clarify your needs. Do ask about other products.

Specified Investment Products

Some financial products are classified as Specified Investment Products (SIPs), for example exchange traded funds, investment-linked plans, structured notes and contracts for differences*. Do check with your financial institution whether the product you are considering is an SIP.

Consumers should be aware that SIPs contain features that can be more difficult to understand. You should ensure that you understand the key risks and features of such products before investing in them. Financial institutions are required to assess whether you have the relevant knowledge or experience to understand the risks and features of SIPs before selling them to you.

The process is known as the Customer Account Review (CAR) if you wish to open an account to trade SIPs listed on an exchange, and the Customer Knowledge Assessment if you wish to transact or invest in an SIP that is not listed on an exchange.

The financial institutions will inform you if you are assessed not to possess the relevant knowledge or experience. If you still intend to proceed with the transaction, the financial institution must provide advice to you. Only financial institutions that are authorised to provide advice may do so. Certain safeguards will also apply.

Read the Consumer Guide on SIPs.

*With effect from October 2012, some products currently classified as SIPs will not be considered as SIPs provided they meet certain requirements.

  • Product information

Financial institutions are required to disclose the features, risks and costs of investment products to you. Here are the key documents you must receive depending on the product you buy:

Product Product Summary
& Benefit Illustration
Product Highlights Sheet Prospectus Key Terms Sheet
Life insurance (non-investment-linked plan) Yes No No No
Investment-linked plan Yes Yes No No
Unit trust No Yes Yes No
Structured notes No Yes Yes No
Exchange traded funds No Yes Yes No
Structured warrants No No No Yes
Bonds No No Yes Yes

Please note that the requirement to provide a prospectus, product summary and benefit illustration and product highlights sheet only applies to financial advisers when providing a recommendation on a collective investment scheme (e.g. fund, unit trust or ETF), debentures or investment linked plans. While issuers are required to issue Key Terms Sheet, MAS does not require brokers or financial advisers to provide these when dealing with or advising consumer on structured warrants or bonds.

Tips:

1. Do not rush through the process. Take time to understand the product and make sure it meets your needs before you finalise your decision. Read all documents and forms, which may include some of the following: prospectus / product summary / product highlights sheet / key terms sheet and terms and conditions, before you sign anything. Never sign blank forms. Ask if there is any free-look period. Life insurance policies have a 14 day free look period and unit trusts have a 7 day free look period. Remember there may be cost and/or investment losses if you change your mind about purchasing the product, or decide to sell it or switch to another product prematurely.

2. Do note that if you purchase an investment product on your own (i.e. without receiving advice or recommendation from a financial adviser representative) or against the recommendation of a financial adviser representative, it is your responsibility to ensure that you have a full understanding of the product and that the product is suitable for you.