MAS Robo-Adviser Guidelines
The Monetary Authority of Singapore (MAS) has a robust regulatory framework for Robo-advisers. They are well-known as digital advisers. This sector provides calculated proposals and advice on products that investors wish to join. How does the digital adviser sector operate? It gives clients access to algorithm-operated tools that have less or no interaction with experts. The Digital Adviser firms have rules that they must follow as they operate in Singapore, which address the registration requirements, supervision of this sector’s operations, and other obligations.
The guidelines in this sector come close to what the conventional financial advisers work with in the industry. There are various models that a digital advisor firm can choose to operate under, which determines if a firm needs to acquire an operation license, the market products they deal with and the way they work in the firm.
All the Digital Adviser firms must get a license to be legit unless for some exemptions. The companies may qualify to work without the financial adviser (FA) license if they already have CMS (Capital Market Services) approval under the SFA (Security and Future Act). Another feature that can make a digital adviser company fit as an exemption is holding a license under other acts in the country’s administration, including Insurance Act, Banking Act and others.
The Singapore government commands that every digital adviser providing advisory services in the country must register for an FA license in the Financial Advisers Act unless in exceptional cases. The current regulatory framework states an FA can provide some incidental services that naturally need a permit under the Security and Future Act even without owning an SFA license.
However, for a digital adviser to provide services to clients that aren’t incidental to the services they offer, they need to obtain the proper licenses to avoid crushing with the law. For instance:
- A digital adviser operating an order execution platform must register for a CMS license since they are working in another sector
- Digital advisers discrete over the investment portfolio of their clients, then it also needs a CMS license to qualify to operate in the Fund Management sector
The MAS is a supportive arm of the government regulating the way digital advisors work in various sector. They have a friendly licensing regulatory framework for firms applying for the Fund Management License. The licensing criteria don’t consider the assets under a firm and their reputation during the license application process; instead, all the digital advisers have to do is to satisfy some conditions in the operating sector and meet some personal qualifications.
Digital advisers work with algorithmic-operated tools, and the MAS current regulations support transparency in the way they serve their clients. It states that the senior management teams and the board must take responsibility for the tools’ performance. Also, the firms must disclose critical details about these tools to their clients.
Another major thing digital advisers must account for is risk management. The regulatory sector stresses that digital advisers must implement procedures to deal with financial risks, especially the terrorism financing issue and money launder. Besides, these advisers must set up policies to deal with technological threats since the tools used need minimal human interaction.
