1B.2 Licensing and business operations
How a firm becomes and stays licensed, how representatives are registered, and the controls around advertising, customer accounts, privacy, records and customer money. The examination tests who needs what licence, which assessment applies to which account, and the notification clocks.
2.1 Introduction
Section titled “2.1 Introduction”CMS licence holders are licensed under the SFA. Corporations need a licence for regulated activities unless exempt; individuals acting for a holder must be appointed, provisional or temporary representatives unless exempt. Licensing exists to secure confidence, stability, professional conduct, adequate resources, competent representatives and controls proportionate to the business.
2.2 Grant of a CMS licence
Section titled “2.2 Grant of a CMS licence”2.2.1 Base capital requirements
Section titled “2.2.1 Base capital requirements”For securities, CIS units and exchange-traded derivatives the common BCR categories are:
| Entity | BCR |
|---|---|
| Clearing member | S$5 million |
| Trading member | S$1 million |
| Non-member | S$1 million |
| Introducing broker | S$500,000 |
| Other eligible firms | S$50,000 |
If more than one BCR applies, the highest applicable amount is required; exchange rules may impose a higher figure.
2.2.2 Applicant criteria
Section titled “2.2.2 Applicant criteria”The applicant should be primarily engaged in one or more regulated activities, operate from a physical Singapore office, and be able to discharge its duties efficiently, honestly and fairly. MAS considers reputation, at least five years’ relevant track record, home supervision, and the fit-and-proper status of the applicant, its holding and related companies, officers, employees, representatives and substantial shareholders.
2.2.3 Management criteria
Section titled “2.2.3 Management criteria”The board needs at least two members and at least one resident in Singapore; the CEO should be Singapore-resident. MAS approval is required for relevant CEO and director appointments. The firm should employ at least two full-time representatives for each regulated activity.
2.2.4 Change of particulars
Section titled “2.2.4 Change of particulars”MAS must be informed within 14 days of changes to the firm’s name, principal place of business, regulated activities/products, trading name or other prescribed particulars, or of the cessation of a regulated activity.
2.2.5 Lapse, revocation and suspension
Section titled “2.2.5 Lapse, revocation and suspension”A licence lapses on winding-up/dissolution or a prescribed event. MAS may revoke or suspend it where the firm or its people fail to act efficiently, honestly and fairly, fail to act in customers’ best interests, or breach licence conditions. Continuing to operate after lapse, suspension or revocation is a serious offence.
2.2.6 Approvals
Section titled “2.2.6 Approvals”MAS prior approval is required for CEO and director appointments, and directors and CEOs must remain fit and proper.
2.2.7 Duties of CMS licence holders
Section titled “2.2.7 Duties of CMS licence holders”Maintain written operating, financial, accounting, compliance and internal-audit policies; identify, address and monitor risks; audit compliance with law and exchange/clearing-house rules; set written limits for discretionary powers; document monitoring; ensure accurate and complete reports; segregate duties; maintain qualified representatives and an examination/exemption register; and report representative misconduct within 14 days of discovery.
2.3 Registration of representatives
Section titled “2.3 Registration of representatives”2.3.1 Notification and the one-principal rule
Section titled “2.3.1 Notification and the one-principal rule”An individual may conduct a regulated activity only after the relevant notification/registration as an appointed, provisional or temporary representative, or under an exemption. A representative may act for one principal only unless MAS permits more or the principals are related corporations.
2.3.2 Competency requirements
Section titled “2.3.2 Competency requirements”The representative must satisfy education, relevant work-experience, CMFAS and fit-and-proper requirements.
2.3.3 Due diligence
Section titled “2.3.3 Due diligence”The principal should verify identity and work authorisation, conduct reference and public-register checks, review regulatory/criminal/disciplinary history, and check financial soundness, bankruptcy, credit status and relevant CPF obligations for self-employed persons.
2.3.4 Representative Notification Framework and RNF
Section titled “2.3.4 Representative Notification Framework and RNF”The Representative Notification Framework allows electronic notification. The RNF number stays with the individual when changing principals.
2.3.5 Public register
Section titled “2.3.5 Public register”The public register shows permitted activities, recent principals and formal MAS action. MAS considers seriousness, relevance and time elapsed when refusing, revoking or suspending registration.
2.3.6 Cessation of status
Section titled “2.3.6 Cessation of status”Status can cease when the principal notifies MAS, the person stops acting for one month, MAS revokes it, the principal ceases the activity, or the principal’s licence lapses/revokes/is prohibited. Provisional status is limited to three months; temporary appointments are limited to the permitted short-term periods. A representative reports changes to the principal within seven days, and the principal reports to MAS within 14 days.
2.3.7 Continuing education
Section titled “2.3.7 Continuing education”Continuing education should cover ethics, market conduct, products, compliance and other relevant skills, with minimum core and supplementary CPD expectations.
2.4 Advertising
Section titled “2.4 Advertising”Product advertisements must not be false or misleading; must be fair and balanced, clear and legible; must meet electronic-font requirements; must carry the statement “This advertisement has not been reviewed by the Monetary Authority of Singapore”; and must receive documented written approval before publication.
Non-product advertisements must not be false or misleading, must not promise a supposedly free service unless it is genuinely free without conditions, and must not exaggerate in a way that exploits inexperience.
2.5 Customer accounts and SIPs
Section titled “2.5 Customer accounts and SIPs”Before trading, the firm completes account opening, documentation, suitability/risk profiling and any required Customer Account Review (CAR) or Customer Knowledge Assessment (CKA).
| Listed SIP | Unlisted SIP | |
|---|---|---|
| Assessment | CAR | CKA |
| Knowledge/experience in | derivatives or listed SIPs | the particular unlisted SIP |
| Validity | 3 years (subject to transaction-continuity rule) | 1 year (positive CKA) |
- A relevant diploma, professional finance qualification, six qualifying transactions in the preceding three years, or three consecutive years of relevant experience in the preceding ten years may satisfy the assessment; a prescribed independent learning module may help.
- Senior management or designated personnel independent of the account-opening process must approve a SIP account.
- A customer may request advice at any time. For unlisted SIPs the firm should offer advice; if declined, obtain written confirmation and explain the customer’s responsibility for suitability.
- If the customer lacks knowledge/experience, notify him in writing. For a listed SIP, obtain written confirmation of intent to proceed, explain general features and risks in writing, and state the customer is responsible for understanding the products. For an unlisted SIP, the firm cannot transact unless it is also an exempt financial adviser providing the required advisory service.
- Keep profile, education, work/investment experience, assessment, outcome, approval and relevant trade communications; update profiles at least annually.
Overseas-listed investment products: provide the risk-warning statement and obtain acknowledgement before the first relevant transaction. Risks include different investor protection, laws and redress, tax and currency exposure, additional costs, counterparty/correspondent-broker default and political/economic/social developments. Retain the acknowledgement for at least five years. Without a reliable EIP-classification system the product is treated as a SIP and CAR applies; outsourced classification remains the CMS holder’s responsibility.
2.6 Privacy of customer information
Section titled “2.6 Privacy of customer information”Customer and order information is confidential. Banking Act s.47 permits disclosure only in specified circumstances — customer consent, operational/risk-management or audit needs, or legal/regulatory investigation. An order may be disclosed only when needed to execute it, permitted by market/clearing rules, or required by MAS. PDPA requires disciplined collection, use, accuracy, storage and disclosure of personal data. Check the Do Not Call Registry before marketing calls and obtain clear, unambiguous consent.
2.7 Managing trading accounts
Section titled “2.7 Managing trading accounts”Open the account, obtain legal documents, complete suitability and risk profiling, and keep trading within the customer’s profile.
2.7.1 Contract notes
Section titled “2.7.1 Contract notes”Issue a contract note by the next business day after a purchase or sale, or by the next business day after a required late detail becomes available. It should identify: firm and address; principal/dealing-against-customer status where relevant; customer; date; product and quantity; price; consideration; adjustments; commission; and taxes/duties. Overseas transactions may follow the overseas exchange’s requirements. Maintain channels for discrepancy reports and complaints.
2.7.2 Statements
Section titled “2.7.2 Statements”Monthly statements show transactions and prices, derivatives/spot-FX positions and marked-to-market unrealised P&L, custody assets and collateral, asset movements and reasons, money movement/balance, and charges/credits.
| A monthly statement is not required where… |
|---|
| CDP/clearing-house information already supplies it |
| there has been no account change |
| an eligible non-retail customer uses agreed real-time electronic statements or requests non-receipt in writing |
If the last month of a calendar quarter has no monthly statement, send a quarterly statement with the same information.
2.8 Books and audit trails
Section titled “2.8 Books and audit trails”Keep books and transaction records in English for at least five years, in a form permitting proper audit and true/fair financial statements. Records cover customer and guarantor details, authorised traders, customer assets and custody movements, powers of attorney, agreements, risk disclosures, acknowledgements, account-opening documents, orders, advertisements and advice, ledgers/invoices, transaction confirmations, proprietary transactions, income/expenses, liabilities, assets, OTC transactions, and underwriting/placement allotment bases (the list is not exhaustive).
Appoint an auditor and lodge annual accounts, balance sheet and auditor’s report with MAS within five months of the financial year-end. The auditor must immediately report material financial deterioration, SFA contraventions/fraud or irregularities affecting customer money/assets, with a copy to an approved exchange where relevant. Destroying, concealing, altering or sending books/assets out of Singapore to obstruct examination or audit is an offence; reasonable precautions must prevent falsification.
2.9 Customer money and assets
Section titled “2.9 Customer money and assets”2.9.1 Customer money — definition
Section titled “2.9.1 Customer money — definition”Customer money generally includes funds received for purchases/sales, holding products, maintaining trading accounts, product financing, fund management or the firm’s business — subject to exclusions such as amounts already directed to repay the customer’s debt, pay the customer/another entitled person, pay proper charges, or certain institutional OTC transactions.
2.9.2 Customer money — segregation and permitted use
Section titled “2.9.2 Customer money — segregation and permitted use”Treat customer money as belonging to the customer.
- Retail customer money for OTC derivatives: must be segregated in trust.
- Other retail and non-retail money: placed in a permitted trust/segregated account or an account directed by the customer under the rules.
- Deposit by the next business day. Do not commingle with firm money or use it for another person’s margin, guarantee or credit.
- Permitted institutions: licensed banks, merchant banks and finance companies; certain foreign-currency deposits may be placed with an authorised foreign custodian with prior written consent.
- Disclose trust-account arrangements, commingling, insolvency consequences, clearing-house placements and foreign-jurisdiction risks to retail customers. Perform initial and periodic due diligence on the institution and obtain its written acknowledgement that the money is held on trust, separately designated and not subject to set-off for the firm’s debt.
- Customer money may be placed with clearing houses/members to facilitate positions or invested in permitted government securities/debt instruments. Interest and returns belong to customers, except the firm may retain returns on its own money advanced to maintain the account.
- Withdrawals are limited to entitled payments, customer obligations, proper charges, written directions (with the retail exception), reimbursement of advances without creating underfunding, clearing/investment purposes, or lawfully authorised purposes.
2.9.3 Customer assets
Section titled “2.9.3 Customer assets”Customer assets are beneficially owned securities and assets other than money, subject to the institutional OTC carve-out. Deposit them in a custody account on trust, separately from firm assets, normally by the next business day. Permitted custodians include banks, merchant banks, finance companies, depository agents, approved trustees and licensed custodians; a foreign custodian requires prior written consent. Disclose commingling, insolvency and foreign-law risks; obtain the custodian’s written acknowledgement and conduct initial and periodic suitability due diligence.
- Customer agreements must explain instructions, authority, liens/security interests, collateral realisation, custodian default, commingling records, registration, income/entitlements, information and fees.
- Custody agreements must require separate identification, restrict liens and withdrawals, and provide records, entitlement procedures, custodian liability and fees.
- Lending specified products requires risk explanation and written consent for retail/non-exempt customers, plus agreements.
- A mortgage/charge/pledge/hypothecation must not exceed the amount owed; retail customers require disclosure, risk explanation and written consent.
- Withdrawals are allowed only for entitled delivery, customer obligations, written instructions, specified-product lending, lawful collateralisation, clearing-house purposes or law.
Exam cues
Section titled “Exam cues”- BCR: memorise the five tiers (S$5m / S$1m / S$1m / S$500k / S$50k); where more than one applies, take the highest.
- Clocks: 14 days for licence-particular changes, representative reporting and misconduct reports; 7 days for a representative to inform the principal; 3 months provisional; 1 month cessation trigger.
- SIP accounts: listed → CAR (3 years); unlisted → CKA (1 year); six transactions in three years or three years in ten; approval independent of account opening.
- One principal only (unless related corporations or MAS permits).
- Customer money vs customer assets: money is segregated in trust; assets sit in a custody account on trust; both by the next business day.
- Trap: a written disclaimer or risk acknowledgement does not remove the firm’s SFA/FAA liability, and outsourced EIP classification remains the CMS holder’s responsibility.