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Singapore clarified new requirements for digital advisors

Oct 11, 2018

Recently the MAS (Monetary Authority of Singapore) has announced a lot of new rules and initiatives planned to develop the government fintech industry, with its latest move purposed at making life easier for digital investment consultants that operate as financial advisers. The MAS has made great progress in facilitating the use of modern technologies in the financial services area.

The above-mentioned requirements apply to all financial organizations offering digital advisory services in Singapore. Digital advisory services involve the use of automatic tools, and may come in the form of professional-oriented tools which assist financial professionals in servicing their customers, or client-oriented tools, which are also known as robo-advisers.

Digital consultants based in Singapore will have to be certified for fund management, dealing in capital markets products and/or providing financial advisory services under the respective Acts.The type of license directly depends on the operating model of the digital advisor.

Usually digital consultants help clients to pass their buy or sell orders (e.g. CIS, bonds and stocks) to brokerage firms for execution. Taking of such orders to brokerage firms for execution forms dealing in capital markets products under the Singaporean laws.

To allow FAs to improve its services, digital advisers which are FAs are relieved from the need to hold capital markets services license if they purely assist to pass on clients’ buy or sell orders to brokerage firms for execution, provided that such dealing is incidental to their financial advisory activities.

It is mandatory for digital advisers that wish to be exempted from applicable requirements to:

  • warrant that the activity is carried out only for portfolios comprising solely listed and unlisted collective investment schemes;

  • receive a one-time prior written permission from the client to rebalance the portfolio units;

  • provide a written disclosure to the customer regarding (1) the scope of rebalancing activities (including periodicity and methodology of rebalancing); (2) charges payable and any other substantial terms and conditions related to periodic rebalancing; (3) advance notice period that will be provided prior to carrying out any rebalancing activities; and

  • advise the client prior to all rebalancing transaction.

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