Bill No. 47/04. Financial Advisers (Amendment) Bill Read the first time on 19th October 04. A BILL i n t i t u l e d An Act to amend the Financial Advisers Act (Chapter 1 of the 02 Revised Edition). Be it enacted by the President with the advice and consent of the Parliament of Singapore, as follows:
Short title and commencement 2 1. This Act may be cited as the Financial Advisers (Amendment) Act 04 and shall come into operation on such date as the Minister may, by notification in the Gazette, appoint. 5 Amendment of long title 2. The long title to the Financial Advisers Act (referred to in this Act as the principal Act) is amended by inserting, immediately after the word representatives, the words, and for other purposes relating thereto or connected therewith. Amendment of section 2 3. Section 2(1) of the principal Act is amended (a) by inserting, immediately after the definition of advocate and solicitor, the following definitions: approved holding company has the same meaning as in section 2(1) of the Securities and Futures Act (Cap. 289); auditor means a public accountant who is registered or deemed to be registered under the Accountants Act 04 (Act 4 of 04); ; (b) by deleting the words or (2) in the definition of exempt financial adviser ; (c) by deleting the definition of futures contract and substituting the following definition: futures contract means (a) a contract the effect of which is that (i) one party agrees to deliver a specified commodity, or a specified quantity of a specified commodity, to another party at a specified future time and at a specified price payable at that time pursuant to terms and conditions set out in the business rules or practices of a futures market; or
3 (ii) the parties will discharge their obligations under the contract by settling the difference between the value of a specified quantity of a specified commodity agreed at the time of the making of the contract and at a specified future time, such difference being determined in accordance with the business rules or practices of a futures market at which the contract is made, and includes a futures option transaction within the meaning of section 2(1) of the Securities and Futures Act (Cap. 289); or (b) such other contract or class of contracts as the Authority may prescribe; ; (d) by deleting the definition of futures exchange and substituting the following definition: futures exchange has the same meaning as in section 2(1) of the Securities and Futures Act; ; (e) by deleting the definition of recognised trading system provider and substituting the following definition: recognised market operator has the same meaning as in section 2(1) of the Securities and Futures Act; ; and (f) by deleting the definition of securities exchange and substituting the following definition: securities exchange has the same meaning as in section 2(1) of the Securities and Futures Act;. Amendment of section 7 4. Section 7 of the principal Act is amended by deleting subsection (1) and substituting the following subsection: (1) No person shall act as or hold himself out to be a representative of a financial adviser unless the following conditions are satisfied: (a) that person is an individual;
4 (b) where the financial adviser is a licensed financial adviser, that person holds a representative s licence that is related to that financial adviser; and (c) where the financial adviser is an exempt financial adviser, that person is a representative of that financial adviser.. Amendment of section 8 5. Section 8(1) of the principal Act is amended by deleting the words prescribed manner in paragraph (c) and substituting the words manner specified by the Authority. Amendment of section 9 6. Section 9(1) of the principal Act is amended by inserting, immediately after paragraph (d), the following paragraph: (da) any information or document that is furnished by the applicant to the Authority is false or misleading;. Amendment of section 11 7. Section 11(1) of the principal Act is amended by inserting, immediately after paragraph (c), the following paragraph: (ca) any information or document that is furnished by the applicant to the Authority is false or misleading;. Amendment of section 16 8. Section 16 of the principal Act is amended (a) by deleting the words prescribed manner in subsection (2)(a) and substituting the words manner specified by the Authority ; and (b) by inserting, immediately after the words such conditions in subsection (3), the words or restrictions. Repeal and re-enactment of section 17 9. Section 17 of the principal Act is repealed and the following section substituted therefor:
5 False statements in relation to application for grant, renewal or variation of licence 17. Any person who, in connection with an application for the grant, renewal or variation of a licence (a) without reasonable excuse, makes any statement which is false or misleading in a material particular; or (b) without reasonable excuse, omits to state any matter or thing without which the application is misleading in a material respect, shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $50,000.. Amendment of section 19. Section 19(2) of the principal Act is amended (a) by deleting sub-paragraph (iv) of paragraph (a) and substituting the following sub-paragraphs: (iv) it appears to the Authority that the financial adviser is carrying on its business in a manner that is (A) likely to be detrimental to its clients; or (B) contrary to the public interest; (iva) any information or document that is furnished by the financial adviser to the Authority is false or misleading; or ; and (b) by deleting sub-paragraph (iv) of paragraph (b) and substituting the following sub-paragraphs: (iv) it appears to the Authority that the representative is carrying on his functions in a manner that is (A) likely to be detrimental to the clients of the financial adviser of which he is a representative; or (B) contrary to the public interest; (iva) any information or document that is furnished by the representative to the Authority is false or misleading;.
Amendment of section 11. Section of the principal Act is amended 6 (a) by deleting the words grant, renew or vary a licence in paragraph (a) and substituting the words grant a licence to him, or to renew or vary his licence ; and (b) by deleting the words a licence in paragraph (b) and substituting the words his licence. Amendment of section 23 12. Section 23 of the principal Act is amended (a) by deleting the word and at the end of subsection (1)(e); (b) by inserting, immediately after paragraph (e) of subsection (1), the following paragraph: (ea) a securities exchange, a futures exchange, a recognised market operator, or an approved holding company, in respect of the provision of any financial advisory service that is solely incidental to its operation of a securities market, a futures market, or to its performance as an approved holding company, as the case may be; and ; (c) by deleting subsections (2) and (3); (d) by deleting the words, 36 and 70 in subsections (4) and (5) and substituting in each case the words and 36 ; (e) by deleting the words subsection (1)(f) or (2) in subsections (4) and (5) and substituting in each case the words subsection (1)(ea) or (f) ; (f) by deleting subsection (5A) and substituting the following subsections: (5A) Subject to the provisions of this Act, sections, 26 and 36 shall apply, with the necessary modifications, to (a) a person referred to in subsection (1)(ea) in respect of its business of providing any financial advisory service as if it is a licensed financial adviser; and
7 (b) any of its representatives in respect of his acting as such as if he is a licensed representative. (5B) Subject to the provisions of this Act, section 70 shall apply, with the necessary modifications, to (a) an exempt financial adviser in respect of its business of providing any financial advisory service as if it is a licensed financial adviser; and (b) a representative of an exempt financial adviser in respect of his acting as such as if he is a licensed representative. (5C) For the avoidance of doubt, references in subsections (4), (5), (5A) and (5B) to specific sections in this Act that apply to exempt financial advisers or their representatives, respectively, do not include references to any regulations made under those sections unless the Authority prescribes that such regulations so apply. ; (g) by deleting the words or (2) in subsections (6) and (7); (h) by deleting the words or (5) in subsection (6) and substituting the words, (5), (5A) or (5B) ; and (i) by deleting the words (2) or in subsection (8). New section 23A 13. The principal Act is amended by inserting, immediately after section 23, the following section: Annual fees 23A. (1) Every exempt financial adviser and representative of an exempt financial adviser shall pay to the Authority such annual fee as may be prescribed and in such manner as may be specified by the Authority. (2) Any annual fee paid by an exempt financial adviser or a representative of an exempt financial adviser to the Authority under subsection (1) shall not be refunded or remitted if
8 (a) during the period to which the annual fee relates, the exemption of the exempt financial adviser or representative, as the case may be, is withdrawn; (b) during the period to which the annual fee relates, the exempt financial adviser or representative, as the case may be, fails or ceases to provide any financial advisory service; or (c) a prohibition order has been made against the exempt financial adviser or representative, as the case may be, under section 59. (3) Subject to subsection (2), the Authority may, where it considers appropriate, refund or remit the whole or part of any annual fee paid or payable to it.. Amendment of section 24 14. Section 24 of the principal Act is amended (a) by deleting subsections (1) and (2); and (b) by deleting the words step-son, daughter, step-daughter, brother or sister in subsection (4)(a) and substituting the words adopted son, step-son, daughter, adopted daughter, step daughter, brother, step-brother, sister or step-sister. Amendment of section 27. Section 27 of the principal Act is amended by inserting, immediately after subsection (4), the following subsection: (5) This section shall not apply to any licensee or class of licensees in such circumstances or under such conditions as may be prescribed.. Amendment of section 37 16. Section 37(2) of the principal Act is amended by deleting the words recognised trading system provider in paragraph (c) and substituting the words recognised market operator. Amendment of section 48 17. Section 48 of the principal Act is amended by deleting subsections (4) and (8).
Amendment of section 57 9 18. Section 57(1) of the principal Act is amended by deleting the words justification or in paragraph (b). 5 Amendment of section 58 19. Section 58 of the principal Act is amended (a) by deleting the words or 0 in subsection (1)(c); (b) by deleting sub-paragraph (i) of subsection (2)(a) and substituting the following sub-paragraph: (i) the standards to be maintained by (A) a licensee; (B) any person exempt under section 23 or 0; or (C) any representative of a person exempt under section 23, in the conduct of his business, including the provision of any financial advisory service to any person outside Singapore and the duties to be undertaken when making recommendations to clients in respect of investment products; ; and (c) by deleting the words or to imprisonment for a term not exceeding 12 months or to both in subsection (5). Amendment of section 59. Section 59(1) of the principal Act is amended (a) by deleting the word or at the end of paragraph (c); and (b) by deleting the full-stop at the end of paragraph (d) and substituting the word ; or, and by inserting immediately thereafter the following paragraph: (e) the person has been convicted of an offence involving the contravention of any law or requirement of a foreign country or territory relating to any financial advisory service provided by that person..
Amendment of First Schedule 21. The First Schedule to the principal Act is amended (a) by inserting, immediately after the words commission or other consideration in paragraph 3(c), the words, apart from any fee received from subscription to or purchase of the newspaper, ; (b) by inserting, immediately after the words commission or other consideration in paragraph 4(c), the words, apart from any fee received from subscription to the service, ; and (c) by deleting the words subsections (1)(f) and (2) in paragraph 11 and substituting the words subsection (1)(f). Amendment of Second Schedule 22. Paragraphs 1 and 2 of the Second Schedule to the principal Act are deleted and the following paragraphs substituted therefor: 1. Advising others, either directly or through publications or writings, and whether in electronic, print or other form, concerning any investment product, other than (a) in the manner set out in paragraph 2; or (b) advising on corporate finance within the meaning of the Securities and Futures Act. 2. Advising others by issuing or promulgating research analyses or research reports, whether in electronic, print or other form, concerning any investment product.. Amendment of Third Schedule 23. Item 1 in the Third Schedule to the principal Act is deleted and the following item substituted therefor: 1. Section 23(6). Transitional and savings provisions 24. The Authority may, by regulations, prescribe such transitional and savings provisions in relation to this Act as it may consider necessary or expedient within 2 years of the date of commencement of this Act.
11 EXPLANATORY STATEMENT This Bill seeks to amend the Financial Advisers Act (Cap. 1) (a) to incorporate policy changes and further streamline the Act; and (b) to align with the amendments to be made to the Securities and Futures Act (Cap. 289) by the Securities and Futures (Amendment No. 2) Bill 04. Clause 1 relates to the short title and commencement. Clause 2 amends the long title to reflect that the Monetary Authority of Singapore (the Authority) may regulate other matters relating to or connected with financial advisers or their representatives. Clause 3 amends section 2(1) (a) to introduce the definition of approved holding company, which appears in section 23 (as amended by clause 12); (b) to introduce the definition of auditor to clarify the use of the term in the Act; (c) to amend the definition of exempt financial adviser as a consequence of the deletion of subsection (2) of section 23 (by clause 12); (d) to amend the definition of futures contract as a consequence of the amendment of the definition of this term in the Securities and Futures Act by the Securities and Futures (Amendment No. 2) Bill 04; and (e) to align the definitions of futures exchange, recognised market operator (which replaces the term recognised trading system provider ) and securities exchange with the definitions in the Securities and Futures Act. Clause 4 amends section 7(1) to make it clear that where a person is a representative of a financial adviser which is a licensed financial adviser, the person must hold a representative s licence in respect of that financial adviser. Clause 5 amends section 8(1) to empower the Authority to specify the manner in which the fee for an application for the grant or renewal of a licence must be paid. Clause 6 amends section 9(1) to enable the Authority to refuse an application for the grant or renewal of a financial adviser s licence if any information or document that is furnished by the applicant to the Authority is false or misleading. Clause 7 amends section 11(1) to enable the Authority to refuse an application for the grant or renewal of a representative s licence if any information or document that is furnished by the applicant to the Authority is false or misleading. Clause 8 amends section 16 (a) to empower the Authority to specify the manner in which the fee for an application to vary a licence may be paid; and (b) to clarify that the Authority may also impose restrictions when approving an application by a licensee to vary his licence.
Clause 9 repeals and re-enacts section 17 with the following changes: 12 (a) to remove the mental element of wilfulness from the offence in that section (which involves the making of a false or misleading statement or omission in relation to an application for the grant, renewal or variation of a licence); (b) to provide that the offence is committed if the statement or omission is made without reasonable excuse; and (c) to remove the imprisonment term for the offence. Clause amends section 19(2) to empower the Authority to revoke a licence of a licensed financial adviser or a licensed representative (a) if it appears to the Authority that the financial adviser is carrying on its business, or the licensed representative is performing his functions, in a manner that is contrary to the public interest; or (b) if any information or document that is furnished to the Authority by the financial adviser or the representative is false or misleading. Clause 11 amends section to clarify that only the person who has applied for the grant, renewal or variation of a licence which the Authority has refused, or whose licence is revoked or suspended by the Authority, may appeal to the Minister. Clause 12 amends section 23 (a) to exempt securities exchanges, futures exchanges, recognised market operators and approved holding companies from holding a licence if their provision of any financial advisory service is solely incidental to their operation of any securities market or futures market, or to their performance as approved holding companies, as the case may be; (b) to require the exempt securities exchanges, futures exchanges, recognised market operators and approved holding companies, and their representatives, to comply with sections, 26 and 36 when providing any financial advisory service; and (c) to clarify that section 70 applies to all exempt financial advisers and their representatives. Clause 13 inserts a new section 23A to empower the Authority to impose annual fees on exempt financial advisers and their representatives. Clause 14 deletes subsections (1) and (2) of section 24 to remove the prohibition on the grant of unsecured credit facilities by licensed financial advisers to their directors, officers, employees and representatives for the purpose of dealing in investment products. The clause further amends the definition of the term director to include the adopted children and step-siblings of a director of a licensed financial adviser. Clause inserts a new subsection (5) in section 27 to empower the Authority to exclude the application of the section in certain circumstances or under certain conditions to be prescribed by regulations.
13 Clause 16 amends section 37(2) to substitute the words recognised market operator in paragraph (c) for the words recognised trading system provider. Clause 17 amends section 48 by deleting subsections (4) and (8), which are not necessary by virtue of the insertion of the definition of auditor (by clause 3). Clause 18 amends section 57(1) to remove the reference to justification in paragraph (b), which is not necessary. Clause 19 amends section 58 to expressly provide that the Authority may issue written directions to any licensee, any person exempt under section 23 or 0, or any representative of a person exempt under section 23, with respect to the standards to be maintained in the provision of financial advisory services to persons outside Singapore. The clause also removes the imprisonment term for the offence in section 58(5) for the contravention of any requirement in a written direction. Clause amends section 59(1) to empower the Authority to issue prohibition orders against persons who have been convicted for an offence of contravening a law or requirement in a foreign country or territory relating to any financial advisory service provided by such persons. Clause 21 amends paragraphs 3(c) and 4(c) of the First Schedule to clarify that the commission or other consideration referred to in those paragraphs does not include fees received for subscription to or purchase of a newspaper, or subscription to an information service, respectively. The clause also amends paragraph 11 of the First Schedule as a consequence of the deletion of subsection (2) of section 23 (by clause 12). Clause 22 amends paragraph 2 of the Second Schedule to refer to financial advisory services involving the giving of advice concerning any investment product by way of research analyses or research reports. The clause also amends paragraph 1 of the Second Schedule as a consequence of the amendment of paragraph 2. Clause 23 amends item 1 of the Third Schedule as a consequence of the deletion of subsection (2) of section 23 (by clause 12). Clause 24 is a provision enabling transitional and savings provisions to be made by the Authority in relation to the Bill. EXPENDITURE OF PUBLIC MONEY This Bill will not involve the Government in any extra financial expenditure.