Exempt Financial Advisor License in Singapore – CMS & FAA Exemptions Explained
The financial advisor (FA) sector plays a crucial role in the financial industry. However, in Singapore, firms that specialize in offering financing advice need proper licensing to become legit. Why is that? This sector follows strict regulations that every corporate must follow to ensure maximum security of the customers. The regulatory framework is under Singapore’s Securities and Futures Act. It requires all the parties interested in the sector to get a Capital Market License for financial advisor except for some exemptions. This article will explain the exempt Financial Advisor License and some of the requirements necessary to fit in this class.
Who is Considered an Exempt Financial Advisor Firm in Singapore?
In Singapore, corporations seeking to provide corporate finance advisory services or financial planning must obtain a CMS license unless they qualify for CMS License Exemption under the Securities and Futures Act (SFA). Firms that meet specific criteria under FAA Exemptions or SFA Section 99 may be allowed to operate without a license. These firms must still comply with the Monetary Authority of Singapore (MAS) framework and submit relevant notifications such as MAS Form 22 or Form 26 depending on their advisory scope
MAS Conditions to Qualify for an Exempt Financial Advisor License in Singapore
MAS allows Singapore corporate finance advisory exemption under strict conditions. For example, financial advisors that only serve accredited investors or institutional investors may qualify. Advisors under related company corporate finance exemption (e.g., advising parent or subsidiary firms) also benefit from FAA exemptions. However, these firms must adhere to business conduct requirements, including regulatory compliance for exempt corporate finance firms and proper client classification under MAS guidelines.
- Financial advisors that assist only accredited investors. The details they offer must not serve the public capital market products or other investors.
- Advisors that offer services to related companies and this information isn’t for the capital market products. Also, these investors must ensure the advice shouldn’t serve shareholders of companies listed on the public exchange
- A firm that holds a license to function as a bank, insurance company or finance company and operates under other regulatory frameworks by MAS can be an exempt Financial Advisor License firm. These companies are free to offer financial advice services without a license but are required to follow the market requirements under the Securities Futures Act
All the corporate finance advisory firms that match under the three classes may apply to become exempt in the CMS licensing. The exempt financial advisor firms may have restrictions on the investors they can work with, but they don’t have to follow most of the requirements under the CMS license.
CMS License vs. Exempt Financial Advisor License – Key Differences
- Offices: Both CMS license holders and exempt Financial Advisor License firms must have physical offices in Singapore
- Staff requirements: CMS license holder must have at least two directors where one of them resides in Singapore, the CEO must also be Singapore-based and must have a minimum of 2 MAS representatives. For the exempt cases, MAS requires these firms to feature a minimum of two experts with five years’ experience and a Singapore-based CEO or director
- Track records: CMSL holders don’t require any track record, while the exemptions must have at least five years of experience in other financial sectors
- Professional Insurance: The CMSL holders need minimal insurance requirements while the exempt cases don’t need any insurance basis
How to Apply for MAS Corporate Finance Exemption
Under specific rules set by the Monetary Authority of Singapore, some corporate finance companies in Singapore can be exempted from getting a Capital Markets Services (CMS) license. A company can take part in regulated activities through a MAS corporate finance exemption if it obeys strict rules and continues to follow the Securities and Futures Act (SFA).
The first thing for firms to do is determine if they are exempt because they advise accredited investors, institutional investors or related corporations. Existing regulations for banks or insurance companies may allow some companies to be considered exempt as well.
After that, you should provide MAS with the necessary documents, mainly Form 22 (Notification of Intention to Act as an Exempt Corporate Finance Adviser). Depending on the exemption, a taxpayer might additionally be asked to submit Form 25 or Form 26 if applicable. You generally upload these documents using the MAS e-filing system called MASNET.
In addition to other responsibilities, firms should follow AML/CFT policies, act according to business conduct standards and regularly file reports. Even though these firms do not hold a license, they must follow proper management and business standards.
Following the instructions described earlier allows qualified firms to take advantage of CMS license exemption in Singapore when giving advisory services.
Benefits of Corporate Finance License Exemption
If a firm holds a Corporate Finance License in Singapore, it can provide M&A, fundraising and IPO services to its clients. Such a license that is issued by MAS under CMS lets firms trade without being questioned under regulatory laws.
Having a corporate finance license allows you to work with a bigger variety of clients. Licensed companies can assist all types of investors, supporting a larger group of people. As a result, the company has more opportunities to increase its revenue and improve its brand recognition among Singapore’s financial organizations.
Moreover, a licensed firm is considered more reliable by organizations and investors. When a firm is MAS-regulated, stakeholders can be sure that it follows strong rules and meets obligations such as the fit and proper requirement, risk management and controls against AML/CFT. This helps ensure that clients stay with the business over time due to clear communication.
In addition, firms with licenses are allowed to get involved in significant transactions such as major IPOs and overseas mergers. On average, these options are intended for customers with a full CMS license, favoring the firm’s ongoing expansion.
All in all, despite the regulation and protocols in licensing, being licensed allows advisory firms to gain credibility, access the market, build trust among investors and grow in Singapore.
Conclusion
The financial advisory sector is essential in the financial industry; hence the MAS has set up a regulatory framework that governs this sector. There are exemptions to the FA license depending on the class they fall. However, all the parties must follow all the market practices requirements.
