Exempt Financial Advisor License in Singapore
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 an Exempt Financial Advisor firm?
As mentioned earlier, corporations interested in offering financial advice services must acquire a CMS license except for some cases. We refer to these cases as exempt financial advisor firms since they are allowed by the Monetary Authority of Singapore (MAS) to operate without these licenses. Even if a firm already has other licenses, they need the CMS license to offer financial advice unless it meets the requirements to become an exemption.
Requirements to become an Exempt Financial Advisor
For a company to have the permission to offer Financial Advisor License services without the proper licensing, MAS requires you to meet some requirements:
- 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 holders Vs Exempt Financial Advisor License
- 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
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.
