FAQs on Licensing and Business Conduct (Other than for Fund Management Companies)

The Monetary Authority of Singapore, MAS, has published updated frequently asked questions (FAQs) on the licensing and business conduct of financial market participants other than fund management companies. The FAQs provide guidance to numerous market participants, including venture capital funds, investment trusts, exempt OTC derivatives brokers, and certain (other) Capital Market Service (CMS) license holders with respect to the scope of a CMS license, the applicable business conduct rules, and the appointment of representatives, to name a few. In this latest version, MAS has added the following seven FAQs – as quoted:
Q83: Do appointments of Chief Executive Officer and Directors, or change in the nature of appointments require MAS’ prior approval?
A83: MAS’ prior approval is required for:
(a) the appointment of a Chief Executive Officer, which refers to any person, by whatever name called, who is principally responsible for the management and conduct of the business of the CMS licence holder in Singapore;
(b) the appointment of a director of a CMS licence holder which is incorporated in Singapore;
(c) the appointment of a director of a CMS licence holder that operates in Singapore as a branch office of a foreign company who resides or is to reside in Singapore and/or is directly responsible for the business of the licence holder in Singapore.; and
(d) the change in nature of appointment from a non-executive director to an executive director of the following persons:
(i) a director of a CMS licence holder which is incorporated in Singapore; and
(ii) a director of a CMS licence holder that operates in Singapore as a branch office of a foreign company who, at the time of change, resides or is to reside in Singapore and/or is directly responsible for the business of the licence holder in Singapore.
Q84: What are CMS licence holders required to do before seeking MAS’ approval for the proposed appointments of Chief Executive Officer and Directors?
A84: The CMS licence holder must satisfy itself that the proposed appointee meets MAS’ Guidelines on Fit and Proper Criteria before seeking MAS’ approval for such appointments. A non-exhaustive list of checks to be performed includes:
(a) screening for adverse information;
(b) conducting reference checks;
(c) conducting financial probity checks;
(d) assessing if the proposed appointee has the relevant experience for the role; and
(e) assessing if there is any potential conflict of interests from the proposed appointee’s outside business interests and substantial shareholdings.
The onus is on the CMS licence holder to determine that the proposed appointee is and remains fit and proper.
Q85: What should CMS licence holders do if there is adverse information from the checks conducted on the proposed appointee?
A85: The CMS licence holder should assess the adverse information and take appropriate action to address the adverse information, before seeking MAS’ approval for the appointments. This may include instituting conflict management measures to address potential conflict of interests from the proposed appointee’s outside business interests, implementing adequate monitoring mechanisms , or taking a decision not to proceed with the appointment. The CMS licence holder’s assessment should consider the seriousness of the adverse information and its impact on the effectiveness of the proposed appointee in carrying out his duties in the company, taking into account the role and responsibilities the appointee will assume in the company.
Q86: Will MAS require a CMS licence holder to provide supporting documents for the checks and assessment performed in connection with the appointment of Chief Executive Officer and Directors?
A86: Yes. MAS may call upon a CMS licence holder at any point in time to provide details and supporting documents relating to the checks and assessment it performed.
Q87: Is there a guidance on what is considered “relevant experience” for Chief Executive Officer and Directors?
A87: The expectation is for the Chief Executive Officer and Directors to have at least 10 years of relevant experience in the regulated activity or activities that the CMS licence holder carries out, of which 5 years of experience should be in a managerial or supervisory capacity. For CMS licence holders dealing in capital markets products for retail investors, the Chief Executive Officer and Directors must possess relevant experience in serving retail customers in capital markets products that the CMS licence holder is licensed to deal with. The relevance of a proposed appointee’s experience should also be assessed in the context of the role that the proposed appointee will perform in the company.
Q88: What if the proposed appointee for Chief Executive Officer or Director falls short of the relevant experience criteria?
A88: If the proposed appointee falls slightly short of the relevant experience criteria (i.e., by less than one year), the CMS licence holder must ensure that its board of directors collectively possesses sufficient relevant experience to provide the necessary guidance to the appointee with the shortfall in relevant experience.
Q89: Are CMS licence holders expected to conduct checks on an ongoing basis for existing Chief Executive Officers and Directors?
A89: Yes. The onus is on the CMS licence holder to ensure that its Chief Executive Officer and Directors remain fit and proper. The CMS licence holder must institute adequate checks on an ongoing basis, such as performing periodic screening checks, and obtaining annual declarations from its existing appointees. The CMS licence holder must assess the information obtained and take the appropriate action upon knowledge of any adverse information, as set out in A88 above.