Singapore: Public consultation on changes to the Representative Notification Framework

The Monetary Authority of Singapore (MAS) has issued a consultation paper on 25 September 2017 seeking comments and feedback on:

• the proposal to streamline the Representative Notification Framework (RNF) in not requiring financial institutions (FIs) (including fund management companies) to submit notifications for their representatives who serve only non-retail customers, and
• whether to consider Expert Investors (as defined under the Securities and Futures Act (Chapter 289 of Singapore) (SFA)) as retail or non-retail customers for the purposes of the proposed changes to the RNF.

Proposal not to require FIs to lodge notifications for representatives who serve only non-retail customers

The MAS is seeking comments on this proposal as it feels that non-retail customers are generally better informed or better able to access resources to protect their own interests.

The proposal is likely to impact FIs and/or its representatives in the following aspects:

• FIs will not need to lodge notifications for newly engaged representatives performing regulated activities under the SFA and the Financial Advisers Act (Chapter 110 of Singapore) (FAA) if such representatives only serve non-retail customers
• Such representatives would be exempted from the requirements to be an Appointed Representative, Provisional Representative or Temporary Representative
• FIs may continue to lodge notifications for newly engaged representatives serving non-retail customers if they wish to do so and such representatives will then need to comply with all applicable entry and ongoing obligations
• FIs are expected to be satisfied that all their representatives are fit and proper and to have systems and controls in place to ensure the proper conduct of their representatives
• FIs are expected to maintain their own records of representatives who serve non-retail customers and such records must be promptly made available to the MAS upon request
• FIs are required to satisfy itself as to the competency of representatives who are not notified under the RNF, and have the discretion to subject such representatives to the CMFAS examination modules, and
• FIs are still expected to put in place compliance functions and internal controls to ensure that their representatives comply with all applicable laws, codes of conduct and standards of good practice.

This proposal seeks to reduce FIs’ administrative burden as it reduces the number of notifications that they have to lodge and should provide FIs greater flexibility in the competency assessment of its representatives, taking into account the types of products their customers are interested in.

This proposal is related to the MAS’ consultation paper dated 12 December 2016 on the review of competency requirements for representatives conducting regulated activities under the SFA and the FAA (December 2016 Consultation Paper). Under the December 2016 Consultation Paper, the MAS sought to enhance the Capital Markets and Financial Advisory Services Examination (CMFAS) and grandfather certain categories of individuals from the revised CMFAS. In addition, the MAS had indicated in its response to the December 2016 Consultation Paper that subject to the outcome of the proposal, representatives who only serve non-retail customers will not need to take the CMFAS examinations going forward.

Whether to consider Expert Investors as retail or non-retail customers for the purposes of the proposed changes to the RNF

As the main category of persons who qualify as Expert Investors are individuals who work for FIs as traders in respect of their personal trading activities, some of them may also meet the applicable Accredited Investor (as defined under the SFA) eligibility criteria under the proposed Opt-in Regime for Accredited Investors. As such, certain Expert Investors may opt in to be treated as an Accredited Investor. The MAS is seeking comments on whether to consider Expert Investors as retail or non-retail customers for the purposes of the proposed changes to the RNF.

The public consultation will end on 27 October 2017.

If you have any questions or would like to find out more, please contact us.