Financial Advisers (Amendment) Bill

This Act may be cited as the Financial Advisers (Amendment) Act 2015 and comes into operation on such date as the Minister may, by notification in the Gazette, appoint.

The long title to the Financial Advisers Act (referred to in this Act as the principal Act) is amended by inserting, immediately after the word “representatives”, the words “and supervisors”.

Section 2(1) of the principal Act is amended —

by inserting, immediately after the definition of “futures exchange”, the following definition:“ “independent sales audit unit”, in relation to a licensed financial adviser, means a unit of the licensed financial adviser which —

audits the quality of the provision of financial advisory services by representatives of the licensed financial adviser; and

is independent from all units of the licensed financial adviser which provide financial advisory services;”; (b)by inserting, immediately after the definition of “substantial shareholder”, the following definition:“ “supervisor”, in relation to a financial adviser, means any person (by whatever name described) who —

is in the direct employment of, is acting for, or has an arrangement with the financial adviser; and

is responsible, whether directly or indirectly, for the supervision or management of the conduct and performance of any representative of the financial adviser or another supervisor;”; and

by inserting, immediately after the definition of “trading in futures contracts”, the following definition:“ “unit” means a group of individuals carrying out a common activity of a licensed financial adviser, each of whom is directly employed by, is acting for, or has an arrangement with the licensed financial adviser;”.

Section 9 of the principal Act is amended —

by deleting paragraph (b) of subsection (1) and substituting the following paragraph:“(b)the applicant is unable to meet the financial requirements prescribed under section 104 or specified by the Authority by written notice to the applicant;”; (b)by inserting, immediately after the word “prescribed” in subsection (1)(c), the words “under section 104 or specified by the Authority by written notice to the applicant”; and

by inserting, immediately after subsection (4), the following subsection:“(5) A written notice issued under this section need not be published in the Gazette.”.

Section 10 of the principal Act is amended —

by deleting paragraph (a) of subsection (1) and substituting the following paragraph:“(a)comply, at all times during the currency of its licence, with such financial requirements as may be prescribed or specified under section 9(1); and”;

by inserting, immediately after the words “as may be prescribed” in subsection (1)(b), the words “or specified”; (c)by deleting the words “minimum financial requirements or such other requirements as may be prescribed” in subsection (2)(b)(i) and (iii) and substituting in each case the words “financial requirements prescribed or specified”;

by inserting, immediately after the words “in force a professional indemnity insurance policy,” in subsection (2)(b)(ii), the words “the cover of which is consistent with the limit and deductible requirements prescribed or specified under section 9(1)(c),”; and

by deleting the words “maintain minimum” in the section heading and substituting the words “comply with”.

The principal Act is amended by inserting, immediately after section 22, the following section:“Regulation of payment, etc., of remuneration 22A.—

A licensed financial adviser or an exempt financial adviser, or a representative or supervisor of a licensed financial adviser or an exempt financial adviser must not request or demand payment of, or accept any remuneration, in relation to —

the provision of any financial advisory service in connection with any type of investment product; or

the sale of any type of investment product following the provision of any financial advisory service,except in accordance with regulations made under section 104 or a written notice issued by the Authority.

A licensed financial adviser or an exempt financial adviser must not pay another licensed financial adviser or exempt financial adviser, or a representative or supervisor of the firstmentioned licensed financial adviser or exempt financial adviser, or of another licensed financial adviser or exempt financial adviser, any remuneration in relation to —

the provision of any financial advisory service in connection with any type of investment product; or

the sale of any type of investment product following the provision of any financial advisory service,except in accordance with regulations made under section 104 or a written notice issued by the Authority.

The regulations or written notice referred to in subsection (1) or (2) may prescribe or specify the following:

the type and amount of the remuneration which may be payable in any particular period;

how the payment is to be made.

Subsections (1) and (2) apply only to payment of remuneration which accrues —

on or after the date of commencement of section 6 of the Financial Advisers (Amendment) Act 2015 (called in this section the commencement date); and

under any agreement or arrangement whether made before, on or after the commencement date.

Any person required to comply with subsection (1) or (2) must do so despite —

any written law in force on the commencement date or rule of law to the contrary; or

any agreement or arrangement entered into before, on or after the commencement date.

Any person who complies with subsection (1) or (2) is not to be treated as having breached —

any rule of law or written law referred to in subsection (5)(a); or

any agreement or arrangement referred to in subsection (5)(b) which was entered into before the commencement date,and no such agreement or arrangement is taken to be brought to an end by frustration solely by reason of any act done in compliance with subsection (1) or (2), or any regulation or written notice referred to in that subsection.

Any person who contravenes subsection (1) or (2) shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $25,000 and, in the case of a continuing offence, to a further fine not exceeding $2,500 for every day or part of a day during which the offence continues after conviction.

A written notice issued under this section need not be published in the Gazette.

In this section, “remuneration” includes —

any monetary commission, incentive, benefit or reward; (b)any non-monetary incentive, benefit or reward; and

such other consideration as may be prescribed under section 104 or specified by the Authority by written notice.”.

Section 23 of the principal Act is amended —

by inserting, immediately after the words “Insurance Act (Cap. 142)” in subsection (1)(c), the words “or a company registered as an insurance broker under that Act”; and

by deleting the words “and 36” in subsection (4) and substituting the words “, 36, 38 and 39”.

The principal Act is amended by inserting, immediately after section 23, the following section:“Financial requirements or professional indemnity insurance policy for certain exempt financial advisers23AA.—

An exempt financial adviser which is also a company registered as an insurance broker under the Insurance Act (Cap. 142) referred to in section 23(1)(c), must, at all times when it carries on the business of providing any financial advisory service —

comply with such financial requirements prescribed under section 104 or specified by the Authority by written notice to the exempt financial adviser; and

have in force a professional indemnity insurance policy the cover of which is consistent with such limit and deductible requirements as may be prescribed under section 104 or specified by the Authority by written notice to the exempt financial adviser, or such other measure as may be approved by the Authority in lieu of a professional indemnity insurance policy.

Where an exempt financial adviser contravenes subsection (1), the Authority may, without prejudice to any other remedy available to the Authority under this Act —

permit the exempt financial adviser to continue providing any financial advisory service in accordance with such conditions as the Authority may impose; or

impose on the exempt financial adviser requirements specified in written directions, including requiring the exempt financial adviser —

to stop providing any financial advisory service other than for the purpose of giving effect to any agreement, transaction or arrangement entered into before the time of contravention of subsection (1); or

to submit such statements or reports on a weekly basis or at such other interval as the Authority may require, until the exempt financial adviser meets the financial requirements prescribed or specified under subsection (1)(a).

Any exempt financial adviser which, without reasonable excuse, contravenes subsection (1) or any condition imposed by the Authority under subsection (2)(a) shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $50,000.

A written notice issued under this section need not be published in the Gazette.”.

Section 23B of the principal Act is amended —

by inserting, immediately after subsection (1), the following subsections:“(1A) Without prejudice to subsection (1), a person must not act as a representative or hold himself out as doing so, if the person is concurrently engaged in, whether or not for remuneration —

any employment with another person; or

any business, trade, profession or vocation, whether for himself or another person,which does not involve the person performing any financial advisory service.

Subsection (1A) does not apply if the person complies with the conditions and requirements prescribed under section 104 or specified by the Authority by written notice, when engaging in such employment, business, trade, profession or vocation.”;

by inserting, immediately after subsection (3), the following subsections:“(3A) Without prejudice to subsection (3), a licensed financial adviser in Singapore or an exempt financial adviser in Singapore must not appoint as its appointed representative or provisional representative an individual whom the financial adviser knows or has reasonable grounds to believe, is concurrently engaged in, whether or not for any remuneration —

any employment with any person; or

any business, trade, profession or vocation, whether for himself or another person,which does not involve the individual performing any financial advisory service.

Subsection (3A) does not apply if the licensed financial adviser or exempt financial adviser is satisfied that the criteria prescribed under section 104 or specified by the Authority by written notice for the purposes of this subsection have been satisfied.”; and

by inserting, immediately after subsection (5), the following subsections:“(6) A person who contravenes subsection (1A) or (3A) shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $12,500.

A written notice issued under this section need not be published in the Gazette.

In this section, “financial adviser in Singapore” means —

a financial adviser which is incorporated in Singapore; or

in the case of a financial adviser incorporated outside Singapore, the branches or offices of the financial adviser located within Singapore.”.

The principal Act is amended by inserting, immediately after section 37, the following Division:“Division 5 — Remuneration Remuneration framework for representatives and supervisors38.—

A licensed financial adviser must establish and maintain a remuneration framework in conformity with subsection (2) for the purpose of —

reviewing and assessing the performance of its representatives and its supervisors; and

determining the remuneration of its representatives and supervisors.

Every remuneration framework in respect of representatives and supervisors of a licensed financial adviser must contain terms consistent with the requirements prescribed under section 104 or specified by the Authority by written notice, from time to time.

A licensed financial adviser must ensure that every agreement or arrangement entered into between the licensed financial adviser and each of its representatives or supervisors on or after the date of commencement of section 10 of the Financial Advisers (Amendment) Act 2015 (called in this section the commencement date) does not contain terms which are inconsistent with the remuneration framework referred to in subsection (1).

A licensed financial adviser must —

review and assess the performance, and determine the remuneration of its representatives and supervisors; and

pay remuneration accruing on or after the commencement date to its representatives and supervisors, in accordance with the remuneration framework referred to in subsection (1).

This section applies despite —

any written law in force on the commencement date or rule of law to the contrary; or

any agreement or arrangement entered into before, on or after the commencement date.

In carrying out any act in accordance with the remuneration framework referred to in subsection (1), the licensed financial adviser is not to be treated as having —

breached any rule of law or written law referred to in subsection (5)(a); or

breached any agreement or arrangement referred to in subsection (5)(b) entered into before the commencement date,and no such agreement or arrangement is taken to be brought to an end by frustration solely by reason of any act done in compliance with the remuneration framework or any requirements prescribed or specified under subsection (2).

Any licensed financial adviser which contravenes subsection (1), (3) or (4) shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $25,000 and, in the case of a continuing offence, to a further fine not exceeding $2,500 for every day or part of a day during which the offence continues after conviction.

The Authority may by regulations under section 104 prescribe —

the persons to whom this section does not apply; and

the circumstances in which this section does not apply.

A written notice issued under this section need not be published in the Gazette.

In this section, “remuneration” includes —

any monetary commission, incentive, benefit or reward; (b)any non-monetary incentive, benefit or reward; and

such other consideration as may be prescribed under section 104 or specified by the Authority by written notice.Independent sales audit unit39.—

A licensed financial adviser must have an independent sales audit unit comprising only individuals who have the qualification or experience and perform the duties prescribed under section 104 or specified by the Authority by written notice. (2) The licensed financial adviser must ensure that the independent sales audit unit reports only to —

the board of directors and chief executive officer of the licensed financial adviser; or

such other unit of the licensed financial adviser determined by the board of directors or the chief executive officer, which is independent from all units of the licensed financial adviser which provide financial advisory services.

The licensed financial adviser must ensure that the independent sales audit unit —

audits the quality of the financial advisory services provided by the representatives of the licensed financial adviser at such times and in such manner as may be prescribed under section 104 or specified by the Authority by written notice; (b)carries out such other functions and duties as may be prescribed under section 104 or specified by the Authority by written notice; and (c)applies the processes, criteria and methods prescribed (if any) under section 104 or specified by the Authority by written notice, in connection with the functions and duties in paragraphs (a) and (b). (4) Any licensed financial adviser which contravenes subsection (1), (2) or (3) shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $25,000 and, in the case of a continuing offence, to a further fine not exceeding $2,500 for every day or part of a day during which the offence continues after conviction. (5) The Authority may by regulations under section 104 prescribe —

the licensed financial adviser or class of licensed financial advisers to whom this section does not apply; and

the circumstances in which this section does not apply.

A written notice issued under this section need not be published in the Gazette.”.

The principal Act is amended by inserting, immediately after section 55, the following Part: “PART IVAProhibited BUSINESSESProhibited businesses of licensed financial advisers in Singapore55A.—

A licensed financial adviser in Singapore must not —

carry on any business, whether in Singapore or elsewhere; or

enter into any partnership, joint venture or any other arrangement with any person to carry on any business, whether in Singapore or elsewhere,except the following:

the business of providing any financial advisory service authorised by its financial adviser’s licence; (ii)any business, the carrying on of which is regulated or authorised by the Authority under any other written law or would be so regulated or authorised by the Authority if carried on in Singapore; (iii)such other business as may be prescribed under section 104 or approved by the Authority specially for the licensed financial adviser. (2) In prescribing or approving any business under subsection (1)(iii), the Authority may prescribe under section 104 or specify by written notice conditions which the licensed financial adviser in Singapore must comply with in relation to the business.

Nothing in this section is to be read as exempting a licensed financial adviser in Singapore from any requirement which the licensed financial adviser is required to comply with under any other written law for the conduct of any activity. (4) Any licensed financial adviser in Singapore which contravenes this section or fails to comply with any condition imposed or prescribed under this section shall be guilty of an offence.

A written notice issued under this section need not be published in the Gazette.

In this section, “financial adviser in Singapore” means —

a financial adviser which is incorporated in Singapore; or

in the case of a financial adviser incorporated outside Singapore, the branches or offices of the financial adviser located within Singapore.Prohibition against acting for financial adviser for prohibited businesses 55B.—

An appointed representative or a provisional representative of a licensed financial adviser may only act (whether in Singapore or elsewhere) for the licensed financial adviser in respect of —

the business of providing any financial advisory service which the representative is appointed to provide and which is not prescribed under section 104, or specified by the Authority by written notice, to be a prohibited business; or

any business which its principal may conduct under section 55A(1)(ii) or (iii) and which is not prescribed under section 104, or specified by the Authority by written notice, to be a prohibited business.

An appointed representative or a provisional representative of an exempt financial adviser may only act (whether in Singapore or elsewhere) for the exempt financial adviser in respect of —

the business of providing any financial advisory service which the representative is appointed to provide and which is not prescribed under section 104, or specified by the Authority by written notice, to be a prohibited business; or

any other business if —

the principal is satisfied that the conditions prescribed under section 104 for the purposes of this section are fulfilled; and

the business is not prescribed under section 104, or specified by the Authority by written notice, to be a prohibited business. (3) Nothing in this section is to be read as exempting an appointed representative or a provisional representative from any requirement which the appointed representative or provisional representative is required to comply with under any other written law for the conduct of any activity. (4) Any person who contravenes this section shall be guilty of an offence.

For the purposes of this section, a person acts for another in respect of any business whether or not the person does so under a contract of employment with the other.

A written notice issued under this section need not be published in the Gazette.Prohibition against representative engaging in employment, etc., outside scope of appointment55C.—

Except with the consent of the financial adviser, an appointed representative or a provisional representative of a financial adviser must not engage in, whether or not for remuneration —

any employment with another person; or (b)any business, trade, profession or vocation, whether for himself or another person. (2) The financial adviser must not give its consent to the appointed representative or provisional representative unless it is satisfied that the criteria prescribed under section 104 or specified by the Authority by written notice, for the purposes of this section have been satisfied. (3) Any person who contravenes this section shall be guilty of an offence.

A written notice issued under this section need not be published in the Gazette.”.

Section 58 of the principal Act is amended —

by deleting the word “or” at the end of paragraph (c) of subsection (1), and by inserting immediately thereafter the following paragraph: “(ca)any supervisor of a financial adviser; or”;

by deleting the words “or (c)” in subsection (1)(d) and substituting the words “, (c) or (ca)”;

by inserting, immediately after sub-paragraph (i) of subsection (2)(a), the following sub-paragraph:“(ia)the standards to be maintained by any supervisor of a financial adviser in the conduct of the supervisor’s functions and duties;”; and

by deleting sub-paragraph (iii) of subsection (2)(a) and substituting the following sub-paragraph:“(iii)the qualifications (including educational qualifications), experience, expertise or training of representatives, supervisors or officers (including the chief executive officer and any director) of a licensed financial adviser or an exempt financial adviser referred to in section 23;”.