Last updated November 22, 2022
Endowus Singapore Pte. Ltd. (“Endowus”) is required under Singapore law to provide you with certain information before you opt-in to be an accredited investor ("Accredited Investor", "AI").
What does being treated as an Accredited Investor mean?
At Endowus, an accredited investor (“Accredited Investor”) will have access to a wider range of financial products and services.
Please note that being treated as an Accredited Investor means, among other things, that you will be deemed to have more knowledge and the ability to understand and manage the risks of the financial products that you choose to invest in. This means that we are allowed to assume that you have a certain level of understanding of financial products, including collective investment schemes, and are not obliged to determine your precise level of understanding of such products.
We are also allowed to assume that you have sought independent advice prior to purchasing or participating in any financial instrument or investment. In addition, when you hold certain financial instruments or participate in certain activities, you will be afforded fewer statutory protections and remedies than retail investors.
Where you are purchasing capital markets products offered pursuant to section 275 or 305 of the SFA, you should be aware that the restrictions and prohibition on subsequent transfers of those products will apply to you. Please also note that Endowus will be exempted from fulfilling the regulatory safeguards as stipulated in the Schedule.
Therefore, even if Endowus asks you about your investment objectives, financial situation, or needs or informs you about material information relating to your investments, you understand that Endowus is not required to do so and shall not be construed in any way to be waiving our reliance on the abovementioned exemptions.
General Warning
Accredited investors are assumed to be better informed, and better able to access resources to protect their own interests, and therefore require less regulatory protection. Investors who agree to be treated as Accredited Investors, therefore, forgo the benefit of certain regulatory safeguards. For example, issuers of securities are exempted from issuing a full prospectus registered with the Monetary Authority of Singapore in respect of offers that are made only to Accredited Investors, and intermediaries are exempted from a number of business conduct requirements when dealing with Accredited Investors. Investors should consult a professional adviser if they do not understand any consequence of being treated as an Accredited Investor.
By choosing to opt-in as an Accredited Investor, you confirm that you:
- know and understand the consequences of consenting to be treated as an Accredited Investor;
- consent to being treated as an Accredited Investor for the purposes of all of the consent provisions as set out below under “Explanation of Effect of Being Treated as an Accredited Investor under Consent Provisions”
- know that you may at any time withdraw consent in writing to being treated as an Accredited Investor for the purposes of all consent provisions, upon which Endowus and UOB Kay Hian Pte Limited (“UOB Kay Hian”) will cease to treat you as an Accredited Investor within 14 working days upon receipt of email request and if required, fulfillment of the “Customer Knowledge Assessment” requirement; and
- represent and warrant that the information and confirmations you have provided in the email response, and all information contained in this document and any other documentation that you provide to Endowus and UOB Kay Hian are complete, true, and accurate. If there is any change in circumstances relating to your (i) net personal or financial asset holdings or income that may affect any of your declarations and representations set out above or (ii) status as an accredited investor under Singapore law such that you cease to be an accredited investor at any time, you undertake to inform us within 14 working days of such change in circumstances. If such changes cannot be rectified, you acknowledge and accept that Endowus and UOB Kay Hian have full discretion to decide to refrain from treating you as an Accredited Investor.
Can you withdraw your consent to being treated as an AI after you have signed the Opt-In Declaration, and what are the consequences?
Yes, in the event that you have signed an Opt-In declaration and consented to be treated as an Accredited Investor by Endowus for the purposes of all the Consent Provisions in connection with your account, investments, holdings held with Endowus and UOB Kay Hian, you have a right to withdraw your consent at any time.
You can do this by giving written notice to us via support@endowus.com. Your withdrawal of consent will take effect upon 14 working days after we receive your Opt-Out notice in writing and if required, fulfillment of the “Customer Knowledge Assessment” requirement. (“Opt-Out Withdrawal Effective Date”).
You understand that Endowus and UOB Kay Hian may no longer be able to offer certain investment products to you for subscription or purchase after the Opt-Out Withdrawal Effective Date. Please note that your existing investments with Endowus and UOB Kay Hian will not be affected.
Please note that Endowus will not be liable to you under any circumstances for any losses you may suffer as a result of you opting out of being treated as an Accredited Investor.
EXPLANATION OF EFFECT OF BEING TREATED AS AN ACCREDITED INVESTOR UNDER CONSENT PROVISIONS
Regulatory Safeguards that do not extend to Accredited Investors
Where we deal with you as an Accredited Investor, we would be exempt from complying with certain requirements under the Financial Advisers Act, Chapter 110 of Singapore (“FAA”) and certain regulations, notices, and guidelines issued thereunder, as well as certain requirements under the Securities and Futures Act, Chapter 289 of Singapore (“SFA”) and certain regulations and notices issued thereunder.
Please note that the regulatory requirements that we are exempted from when dealing with you as an Accredited Investor may be amended and updated from time to time due to regulatory changes or otherwise. Any amendments and updates would be set out on our website.
CONSENT PROVISIONS UNDER SFA AND THE REGULATIONS AND NOTICES ISSUED THEREUNDER:
Prospectus Exemptions under Sections 275 and 305 of the SFA. Under Part XIII of the SFA, all offers of securities and securities-based derivatives contracts, and units of collective investment schemes are required to be made in or accompanied by a prospectus in respect of the offer that is lodged and registered with the MAS and which complies with the prescribed content requirements, unless exempted. The SFA further provides for criminal liability for false and misleading statements contained in the prospectus, omissions to state any information required to be included in the prospectus, or omissions to state new circumstances that have risen since the prospectus was lodged with the MAS which would have been required to be included in the prospectus if it had arisen before the prospectus was lodged with the MAS. In addition, certain persons, including the person making the offer, the issuer, the issue manager, and the underwriter (the “Persons”) may be liable to compensate any person who suffers loss or damage as a result of the false or misleading statement in or omission from the prospectus, even if such persons were not involved in the making of the false or misleading statement or the omission.
Sections 275 and 305 of the SFA are exemptions from the prospectus registration requirement under the SFA, and exempt the offeror from registering a prospectus when the offer of securities and securities-based derivatives contracts, and units of collective investment schemes is made to relevant persons. Relevant persons include Accredited Investors. In addition, secondary sales made to institutional investors and relevant persons, which include Accredited Investors, remain exempt from the prospectus registration requirement provided that certain requirements are met.
Subsequent Sales: Subsequent sales of securities, securities-based derivatives contracts, and collective investment schemes are subject to restrictions under Section 276(1) and 276(2) or, as the case may be, Sections 305A(1)(b) such that subsequent sales to relevant persons (including Accredited Investors) will continue to be exempt from prospectus requirements.
Where securities, securities-based derivatives contracts and collective investment schemes are subscribed or purchased under Section 275 or 305 of the SFA by a relevant person which is:
- a corporation (which is not an Accredited Investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an Accredited Investor (the “Corporation”); or
- a trust (where the trustee is not an Accredited Investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an Accredited Investor (the “Trust”),
inter alia, securities of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the securities, securities-based derivatives contracts, and collective investment schemes pursuant to an offer made under Section 275 or 305 of the SFA except, inter alia, to an institutional investor or to a relevant person.
If you opt to be treated as an Accredited Investor, the above restrictions will not apply and you will not be prohibited from being a transferee of the securities of the Corporation or interests in the Trust in the circumstances specified.
When we deal with you as an Accredited Investor, the issuer and/or offeror is exempt from the prospectus requirements under Part XIII of the SFA pursuant to the exemptions under Sections 275 and 305 of the SFA. As a result of this, the issuer and/or offeror is not under any statutory obligation to ensure that all offers of the relevant products to you are made in or accompanied by a prospectus that is lodged and registered with the MAS and which complies with the prescribed content requirements. Consequently, the issuer and/or offeror is not subject to the statutory prospectus liability under the SFA and you would not be able to seek compensation from the Persons under the civil liability regime for prospectuses even if you suffer loss or damage as a result of any false or misleading statement in or omissions in the offering document. Subsequent sales of securities, securities-based derivative contracts and collective investment schemes first sold under inter alia Section 275 and 305 can also be made to you, as well as transfers of securities of Corporations and interests in Trusts. You are therefore not protected by the prospectus registration requirements of the SFA.
As a practical effect, you will, as an Accredited Investor, have access to a broader range of securities and units of collective investment schemes (“Funds”), including Funds that are not authorised or recognised by the MAS for offering to retail investors, such as restricted schemes. Funds that are authorised or recognised by the MAS for offer to retail investors are protected under the various regulatory safeguards as described above.
Restrictions on Advertisements under Sections 251 and 300 of the SFA. Sections 251 and 300 of the SFA prohibit any advertisement or publication referring to an offer or intended offer of securities and securities-based derivatives contracts, and units of collective investment schemes from being made, except in certain circumstances. In this regard, where a preliminary document has been lodged with the MAS, certain communications may be made. These include the dissemination of, and presentation of oral or written material on matters contained in, the preliminary document which has been lodged with the MAS to institutional investors and relevant persons under Sections 251(3), 251(4)(a), 300(2A) and 300(2B)(a) of the SFA. Relevant persons include Accredited Investors.
When we deal with you as an Accredited Investor, you may receive communications relating to a preliminary document that has been lodged with the MAS. You are therefore not protected by the requirements of Sections 251 and 300 of the SFA. See above for practical effect.
Part III of the Securities and Futures (Licensing and Conduct of Business) Regulations (“SFR”).
Part III of the SFR stipulates the requirements imposed on us in relation to the treatment of customers’ assets. While we remain under the statutory obligation to deposit all assets received on your account in a custody account maintained in accordance with Regulation 27 of the SFR or any other account into which you direct the assets be deposited, as an Accredited Investor, the enhanced safeguards in relation to the assets that we receive on your account will not apply.
We are also exempt from the following statutory obligations:
(i) the disclosure requirements pertaining to the manner in which your assets are held (whether locally or in a foreign jurisdiction), as specified under Regulation 27A of the SFR;
(ii) the prohibition against transferring title in your assets to us or any other person except in certain prescribed circumstances relating to the borrowing or lending of your specified products and using your assets to meet our own obligations under Regulation 34A and 35 of the SFR;
(iii) the obligation to inform you that we may use your assets for a sum not exceeding the amount owed by you to us, disclose the risks of such use to you and obtain your consent before using your assets, including mortgaging, charging, pledging or hypothecating your assets.
We have summarised the requirements below.
When we deal with you as an Accredited Investor, we are exempt from treating you as a “retail investor” in relation to certain requirements stipulated under Part III of the SFR pertaining to the treatment of a retail customer’s assets. You are therefore not protected by those requirements under Part III of the SFR. However, please note that Endowus does not currently receive or hold any moneys or assets belonging to you in the first place. Your money and assets are maintained in a trust account held with UOBKH. We also arrange for your investments to be purchased through brokers and the holding of your investments are appropriately held with licensed custodians. Further details of this are set out in the Terms, Conditions and Disclosures with us.
Regulation 47BA of the SFR. Regulation 47BA of the SFR provides that a CMS License Holder must not deal with a retail customer as an agent when dealing in capital markets products that are over-the-counter derivatives contracts and/or spot foreign exchange contracts, for the purposes of leveraged foreign exchange trading.
When we deal with you as an Accredited Investor, we are exempt from treating you as a “retail investor” and may therefore deal with you as an agent in relation to over-the-counter derivatives contracts and/or spot foreign exchange contracts, for the purposes of leveraged foreign exchange trading.
Regulation 47E of the SFR. Regulation 47E(1) and (2) of the SFR provide for certain risk disclosure requirements that a CMS License Holder deals in capital markets products and provides fund management services respectively must comply with in relation to trading in futures contracts, spot foreign exchange contracts for the purposes of leveraged foreign exchange trading, and foreign exchange over-the-counter derivatives contracts for retail customers that are not related corporations of the CMS License Holder.
A CMS License Holder that deals in capital markets products must not open a trading account for a retail customer who is not its related corporation for the purpose of entering into transactions of sale and purchase of the abovementioned capital markets products unless it has furnished the customer with a written risk disclosure document disclosing the material risks of the specified capital markets products in a prescribed form (Form 13), and receives an acknowledgment signed and dated by the customer that he has received and understood the nature and contents of Form 13.
A CMS License Holder that provides fund management services shall not solicit or enter into an agreement with a prospective retail customer who is not its related corporation for the purpose of managing or guiding the retail customer’s trading account for the purposes of futures contracts, spot foreign exchange contracts for the purposes of leveraged foreign exchange trading, and foreign exchange over-the-counter derivatives contracts by means of a systematic programme that recommends specific transactions unless it has delivered the prospective retail customer with a written risk disclosure document in a prescribed form (Form 14), and received an acknowledgment signed and dated by the prospective retail customer that he has received and understood the nature and contents of Form 14.
Regulation 47E also specifies that copies of Forms 13 and 14 are kept in Singapore.
When we deal with you as an Accredited Investor, we are not under any statutory obligation to provide you with the risk disclosures in the manner contemplated under Regulation 47E of the SFR. You are therefore not protected by the risk disclosure requirements under Regulation 47E of the SFR. However, we should highlight that Endowus does not offer such products and services at the current time.
Regulation 33(1)(a) or 33(2) of the SFR- Lending of Customer’s Specified Products. Regulation 33(2) of the SFR provides that a CMS holder shall not lend or arrange for a custodian to lend the specified products of the customer unless it has explained the risks involved to the customer (as provided in paragraph (a) of the regulation) and obtained the customer’s written consent to do so (as provided in paragraph (b) of the regulation). The requirement to explain the risks involved to the customer does not apply where the customer is an accredited investor, expert investor or institutional investor. However, regardless of whether the customer is a retail investor or an accredited investor, Endowus shall nevertheless enter into an agreement with the customer to set out the terms and conditions for such lending, or as the case may be, enter into an agreement with the custodian setting out the terms and conditions for the lending and disclose these terms and conditions to the customer.
When we deal with you as an Accredited Investor, we are not under any statutory obligation to explain the risks involved to you prior to us lending or arranging for a custodian to lend your specified products. However, we should highlight that Endowus does not currently engage in any lending of specified products belonging to you.
Regulation 40 of the SFR- Provision of Statements of Accounts. Regulation 40(1) of the SFR provides that a CMS License Holder is required to furnish to each customer on a monthly basis a statement of account containing certain particulars prescribed under Regulation 40(2) of the SFR. In addition, Regulation 40(3) of the SFR provides that a CMS License Holder is required to furnish to each customer, at the end of every quarter of a calendar year, a statement of account containing, where applicable, the assets, derivatives contracts of the customer and spot foreign exchange contracts for the purposes of leveraged foreign exchange trading of the customer that are outstanding and have not been liquidated and cash balances (if any) of the customer at the end of that quarter.
When we deal with you as an Accredited Investor and provided we have made available to you (on a real-time basis) the prescribed particulars in the form of electronic records stored on an electronic facility and you have consented to those particulars being made available in this manner or you have requested in writing not to receive the statement of account, we are not under any statutory obligation to furnish a monthly or quarterly statement of account to you. You are therefore not protected by the requirements of Regulations 40(1) and (3) of the SFR.
Regulation 45 of the SFR – Borrowing and Lending of Specified Products. Regulation 45 of the SFR provides that borrowing and lending of specified products by a CMS license holder (i) must be recorded in a prior written agreement between the CMS license holder and the lender or borrower or their duly authorised agent where such agreement includes certain prescribed details; and (ii) must be collateralised. In particular, the CMS license holder is required to ensure that the collateral provided must, throughout the period that the specified products are borrowed or lent, have a value of not less than 100% of the market value of the specified products borrowed or lent. Regulation 45 of the SFR further sets out the acceptable forms of collateral for these purposes.
When we deal with you as an Accredited Investor, we are not under any statutory obligation to provide collateral to you under Regulation 45 of the SFR when we borrow specified products from you. Where we provide assets to you as collateral for the borrowing, the agreement shall specify whether the specified products borrowed and the assets provided comprising specified products (if any) are marked to market and if so, the procedures for calculating the margin. However (unlike for retail investors), the agreement does not have to include the requirement to mark-to-market on every business day the specified products that are borrowed nor the minimum collateral comprising specified products nor procedures for calculating the margins. However, we should highlight that Endowus does not engage in the borrowing of specified products belonging to you.
Regulation 47DA of the SFR- General Risk Disclosures. Regulation 47DA(1) and (2) of the SFR provide for certain general risk disclosure requirements that a CMS License Holder dealing in specified capital markets products must comply with. For this purpose, “specified capital markets products” means capital markets products other than futures contracts, spot foreign exchange contracts for the purposes of leveraged foreign exchange trading, and foreign exchange over-the-counter derivatives contracts. In particular, the CMS License Holder must not open a trading account for a customer for the purpose of entering into transactions of sale and purchase of any specified capital markets products unless it has furnished the customer with a written risk disclosure document disclosing the material risks of the specified capital markets products, and receives an acknowledgment signed and dated by the customer that he has received and understood the nature and contents of the risk disclosure document. Further, the CMS License Holder must not enter any transaction of sale or purchase of any specified capital markets products unless it has informed the customer whether it is acting in that transaction as a principal or agent and/or its intention to do so.
When we deal with you as an Accredited Investor, we are not under any statutory obligation to provide you with the risk disclosures, and the capacity in which we act, in the manner contemplated under Regulation 47DA of the SFR. You are therefore not protected by the requirements under Regulation 47DA of the SFR.
Regulation 47A(3)(a)(i) SFR- Disclosure of Interests in Specified Products recommended to Customers. Where a CMS license holder has entered into any underwriting or sub-underwriting agreement with respect to specific products (such as securities, securities-based derivatives contracts, and units in collective investment schemes), and offers those specified products, the CMS license holder must disclose its interest in those specified products arising from the underwriting or sub-underwriting agreement, when offering the specified products to investors.
Where you are treated as an Accredited Investor, Endowus is not obliged to disclose any such interests arising from any underwriting or sub-underwriting agreement, in any specified products offered to you. Endowus does not ordinarily engage in any underwriting activities.
CONSENT PROVISIONS UNDER THE FAA AND THE REGULATIONS, NOTICES AND GUIDELINES ISSUED THEREUNDER:
Regulation 4A(6) of the Financial Advisers Regulations (FAR)- Additional Safeguards when provisional representatives deal with retail customers. Under the FAA, representatives of a licensed or exempt financial adviser who conduct financial advisory services will need to be registered with the MAS as appointed representatives or provisional representatives. Broadly, provisional representatives refer to representatives who are given a grace period to pass all applicable exam modules. Appointed representatives are registered full-time representatives with the MAS, and are required to pass applicable exam modules unless exempted. Any provisional representative who meets, communicates, or corresponds with retail customers is required to be accompanied by appointed representatives or keep appointed representatives copied in any written correspondence.
Endowus is not obliged to ensure that full-time appointed representatives are involved in any dealings between provisional representatives and you if you are treated as an Accredited Investor.
Regulation 28 of the FAR- Exemption from Licensing and Standards of Conduct. Regulation 28 of the FAR provides an exemption to a corporation, not being a licensed financial adviser or an exempt financial adviser, which carries on the business of advising others either directly or through publications or writings or by issuing or promulgating research analyses or research reports, concerning bonds to an expert investor or an Accredited Investor, from having to hold a financial adviser’s license in respect of the above-stated activity.
Regulation 28 also exempts certain exempt financial advisers from having to comply with requirements set out in sections 26 to 29 and 36 of the FAA. Briefly, these requirements are as follows. Section 26 of the FAA imposes an obligation on a financial adviser not to make any false or misleading statement or to employ any device, scheme or artifice to defraud. Section 27 of the FAA requires a financial adviser to have a reasonable basis for any recommendation on an investment product that is made to a client. Section 28 of the FAA provides that the MAS may by regulations determine the manner in which a financial adviser may receive or deal with client’s money or property or prohibit a financial adviser from receiving or dealing with client’s money or property in specified circumstances or in relation to specified activities. Section 29 imposes an obligation on a financial adviser to furnish information about any matter related to its business to the MAS if required by MAS for the discharge of its functions under the FAA. Section 36 of the FAA provides for certain disclosure of interest requirements when a financial adviser sends a circular or other written communication in which a recommendation is made in respect of specified products (i.e. securities, specified securities-based derivatives contracts or units in a collective investment scheme).
When we deal with you as an Accredited Investor, in the course of us providing advice or analyses on bonds, we will not be required to comply with the requirements set out in sections 26 to 29 and 36 of the FAA. You are therefore not protected by these requirements.
Regulation 32C of the FAR- Foreign Research Houses. Regulation 32C of the FAR exempts a foreign research house from having to hold a financial adviser’s license in respect of advising others by issuing or promulgating any research analyses or research reports concerning any investment product to any investor under an arrangement between the foreign research house and a financial adviser in Singapore, subject to certain conditions. These include a condition that where the research analysis or research report is issued or promulgated to a person who is not an Accredited Investor, expert investor or institutional investor, the analysis or report must contain a statement to the effect that the financial adviser in Singapore accepts legal responsibility for the contents of the analysis or report without any disclaimer limiting or otherwise curtailing such responsibility.
When we deal with you as an Accredited Investor, we need not expressly accept legal responsibility for the contents of any research analysis or research report issued or promulgated to you pursuant to an arrangement between us and a foreign research house. We are also not limited by the requirement to not include a disclaimer limiting or otherwise curtailing such legal responsibility. You are therefore not protected by these requirements under Regulation 32C of the FAR.
Section 25 of the FAA and MAS Notice on Information to Clients and Product Information Disclosure [Notice No. FAA-N03]. Section 25 of the FAA imposes an obligation on a financial adviser to disclose to its clients and prospective clients all material information relating to any designated investment product recommended by the financial adviser, and provides that MAS may prescribe the form and manner in which the information shall be disclosed. “Material information” includes the terms and conditions of the designated investment product and the benefits and risks that may arise from the designated investment product.
The MAS Notice on Information to Clients and Product Information Disclosure [Notice No. FAA-N03] sets out the standards to be maintained by a financial adviser and its representatives with respect to the information they disclose to clients. The Notice also sets out the general principles that apply to all disclosures by a financial adviser to its clients and the specific requirements as to the form and manner of disclosure that the financial adviser has to comply with in relation to, among others, section 25 of the FAA.
As a result of our exemption from compliance with these requirements when we deal with you as an Accredited Investor, we are not under any statutory obligation to provide you with all material information on any designated investment product in the prescribed form and manner, e.g. the benefits and risks of the designated investment product and the illustration of past and future performance of the designated investment product. You are therefore not protected by the disclosure requirements in section 25 of the FAA and MAS Notice on Information to Clients and Product Information Disclosure [Notice No. FAA-N03].
Section 27 of the FAA and MAS Notice on Recommendations on Investment Products [Notice No. FAA-N16]. Section 27 of the FAA requires a financial adviser to have a reasonable basis for any recommendation on an investment product that is made to a client. The financial adviser is required to give consideration to the investment objectives, financial situation and particular needs of the client, and to conduct investigation on the investment product that is the subject matter of the recommendation, as is reasonable in all the circumstances. Failure to do so could, if certain conditions are satisfied, give the client a statutory cause of action to file a civil claim against the financial adviser for investment losses suffered by the client. The conditions are that the client suffers loss or damage as a result of doing a particular act (or refraining from doing a particular act) in reliance on the recommendation, where it is reasonable (having regard to the recommendation and all other circumstances) for the client to have done so in reliance on the recommendation.
The MAS Notice on Recommendations on Investment Products [Notice No. FAA-N16] sets out requirements that apply to a financial adviser when it makes recommendations on investment products to its clients. In particular, the Notice sets out: (i) the type of information the financial adviser needs to gather from its client as part of the “know your client” process; (ii) the manner in which the financial adviser should conduct its analysis of the client’s financial needs and how it should present its investment recommendations; and (iii) documentation and record-keeping requirements relating to this process. In this connection, a financial adviser is required to ensure that, before it makes any recommendation on an investment product that is neither listed nor quoted on an organised market, it has been informed by the product manufacturer of the investment product as to whether the investment product is a “Specified Investment Product” (“SIP”). The financial adviser is required to keep proper records of such information and accordingly convey this information to a client who intends to transact in the investment product. SIPs include collective investment schemes and structured notes. A financial adviser is required to conduct a review of a client’s knowledge and experience in derivatives for the purpose of making a recommendation to the client on, or allowing the client to transact in, a SIP which is approved in-principle for listing and quotation on, or listed for quotation or quoted on, an organised market (“Listed SIP”), before making a recommendation on any Listed SIP (“Customer Account Review”). Alternatively, if an investment product is an unlisted or unquoted SIP, prior to making a recommendation on such investment product, a financial adviser is required to conduct an assessment of the client’s knowledge and experience in unlisted and unquoted SIPs (“Customer Knowledge Assessment”). In both cases, the financial adviser must take into account information on the client’s educational qualifications, investment experience and work experience, where the client is a natural person. The financial adviser is required to comply with various procedures (“Procedures”) depending on whether the client has the requisite knowledge and experience in the Listed SIP or the unlisted or unquoted SIP (as the case may be), including the provision of financial advice and/ or obtaining senior management approvals. A financial adviser is also required to furnish a client with certain prescribed risk warning statements before making a recommendation on any overseas-listed investment product (“Overseas-Listed Investment Product”) for the first time on or after 8 October 2018, and obtain the customer’s acknowledgment in respect of such risk warning statement.
As a result of our exemption from compliance with these requirements when we deal with you as an Accredited Investor, we are not under any statutory obligation to ensure that we have regard to the information possessed by us concerning your investment objectives, financial situation and particular needs and have given consideration to and conducted an investigation of the subject matter of any recommendation and that the recommendation is based on such consideration and investigation. We are also not statutorily required to conduct a Customer Knowledge Assessment* or Customer Account Review* to determine your investment experience and knowledge, nor are we required to comply with the Procedures. Further, you will not be able to rely on section 27 of the FAA in any claim against us for losses that may be suffered in respect of any investment that we may have recommended to you. You are therefore not protected by the requirements of section 27 of the FAA and MAS Notice on Recommendations on Investment Products [Notice No. FAA-N16].
Section 36 of the FAA. Section 36 of the FAA provides that when sending a circular or other written communication in which a recommendation is made in respect of specified products (i.e. securities, specified securities-based derivatives contracts or units in a collective investment scheme), a financial adviser is required to include a concise statement, in equally legible type, of the nature of any interest in, or any interest in the acquisition or disposal of, those specified products that it or any associated or connected person has at the date on which the circular or other communication is sent. Such circular or written communication must be retained by the financial adviser for five years.
As a result of our exemption from compliance with section 36 of the FAA when we deal with you as an Accredited Investor, we are not under any statutory obligation to include such a statement of interest in specified products in any written recommendation or document that we may send to you. You are therefore not protected by the requirements of section 36 of the FAA if no disclosure is made of any interest that we or any associated or connected person may have in the specified products that we may recommend in such document.
Sections 38 and 39 of the FAA, and MAS Notice on Requirements for the Remuneration Framework for Representatives and Supervisors (“Balanced Scorecard Framework”) and Independent Sales Audit Unit [Notice No. FAA-N20] (“BSC Notice”) and MAS Guidelines on the Remuneration Framework for Representatives and Supervisors (“Balanced Scorecard Framework”), Reference Checks and Pre-Transaction Checks [Guideline No. FAA-G14] (“BSC Guidelines”)*. Section 38 of the FAA provides that a financial adviser must establish and maintain a remuneration framework that contains terms consistent with the requirements prescribed by MAS for the purpose of (a) reviewing and assessing the performance of its representatives and supervisors; and (b) determining the remuneration of its representatives and supervisors. The financial adviser must review and assess the performance, and determine and pay the remuneration, of its representatives and supervisors in accordance with such remuneration framework.
Section 39 of the FAA provides that a financial adviser must have an independent sales audit unit that reports to the board of directors and chief executive officer of the financial adviser or such unit determined by the board of directors or chief executive officer which is independent of all units of the financial adviser which provide financial advisory services. Such independent sales audit unit is required to audit the quality of the financial advisory services provided by the representatives of the financial adviser and to carry out the functions and duties prescribed by MAS, in the prescribed manner.
The BSC Notice sets out the requirements in relation to the design and operation of the balanced scorecard framework which a financial adviser is required to put in place in their remuneration structures for their representatives and supervisors, and the independent sales audit unit. The BSC Guidelines provide general guidance on some of the requirements of the BSC Notice, such as the post-transaction checks and classification of infractions by the independent sales audit unit. In addition, the BSC Guidelines set out the measures to be applied to all existing and newly recruited representatives who have been assigned a balanced scorecard grade of “E” and all supervisors who have been assigned a balanced scorecard grade of “Unsatisfactory” under the balanced scorecard framework, as well as obtaining and sharing of information on the representatives’ and supervisors’ balanced scorecard grades during reference checks. The BSC Guidelines also set out the MAS’ expectation for a financial adviser to conduct pre-transaction checks to minimise the impact of the balanced scorecard framework on its representatives and supervisors.
As a result of our exemption from compliance with these requirements when we deal with you as an Accredited Investor, we are not under any statutory obligation to either (a) establish or maintain such a remuneration framework, or to review and assess the performance, and determine and pay the remuneration, of our representatives and supervisors in accordance with such a remuneration framework, or (b) to have an independent sales audit unit to audit the quality of the financial advisory services provided by our representatives. You are therefore not protected by the requirements of sections 38 and 39 of the FAA, the BSC Notice and the BSC Guidelines*.
Regulation 18B of the FAR. Regulation 18B of the FAR provides that before selling or marketing certain new products, a financial adviser is required to carry out a due diligence exercise to ascertain whether such new product is suitable for the targeted client. The due diligence exercise must include an assessment of several areas, including (i) an assessment of the type of targeted client the new product is suitable for and whether the new product matches the client base of the financial adviser; (ii) the key risks that a targeted client who invests in the new product potentially faces; and (iii) the processes in place for a representative of the financial adviser to determine whether the new product is suitable for the targeted client, taking into consideration the nature, key risks and features of the new product. The financial adviser is prohibited from selling or marketing any new product to any targeted client unless every member of its senior management has, on the basis of the result of the due diligence exercise, personally satisfied himself that the new product is suitable for the targeted client and personally approved the sale or marketing of the new product to the targeted client. “Targeted client” excludes Accredited Investors.
As a result of our exemption from compliance with Regulation 18B of the FAR when we deal with you as an Accredited Investor, we are not under any statutory obligation to carry out a due diligence exercise to ascertain whether any new product we wish to sell or market to you is suitable for you. You are therefore not protected by the requirements of Regulation 18B of the FAR.
Financial Advisers (Complaints Handling and Resolution) Regulations 2021 (“FA(CHR)R”)* (takes effect on 3 January 2022). FA(CHR)R provides that a financial adviser is required to establish an independent unit to handle and resolve complaints and shall comply with an established process for handling and resolving complaints which is made by an individual or a sole proprietorship and which relate to the provision of financial advisory services. In addition, FA(CHR)R sets out the requirements in relation to (i) the complaints handling and resolution process, (ii) senior management oversight, (iii) information on the complaints handling and resolution being made publicly available, (iv) centralized system for managing complaints and (v) reporting obligations.
When we deal with you as an Accredited Investor, we are not under any statutory obligation to comply with the requirements set out in the FA(CHR)R. You are therefore not protected by the complaints handling and resolutions requirements of the FA(CHR)R for any complaints made as an accredited investor, expert investor or institutional investor.
* Requirements only apply to customers who are natural persons.