FTT MAS Licensing Requirements 2 — Questions and Answers
Question 1: What does 'dealing in securities' as a regulated activity cover under the SFA?
- Buying, selling, or exchanging securities as agent or as principal, or making or offering to make agreements to do so (Correct answer)
- Only executing trades on behalf of retail clients
- Only proprietary trading for the firm's own account
- Providing research and analysis on securities only
Correct answer: Buying, selling, or exchanging securities as agent or as principal, or making or offering to make agreements to do so
Dealing in securities as a regulated activity under the SFA covers any person who buys, sells, or exchanges securities as agent or as principal, or who makes or offers to make agreements to do so. It includes both acting for clients (agency) and trading for the firm's own account (principal).
Question 2: What must a CMS licence holder do to add a new regulated activity to its licence?
- Apply to MAS to have its CMS licence varied to include the additional regulated activity (Correct answer)
- Simply commence the new activity as it already holds a CMS licence
- Obtain a separate licence from SGX for the new activity
- Register with ACRA for the new business activity
Correct answer: Apply to MAS to have its CMS licence varied to include the additional regulated activity
A CMS licence is specific to the regulated activities approved by MAS. If a licence holder wishes to conduct additional regulated activities, it must apply to MAS to have its licence varied (amended) to include those activities.
Question 3: What is the 'financial resources requirement' (FRR) for CMS licence holders?
- A risk-based minimum financial resources requirement calculated using a prescribed formula, which must be maintained at all times (Correct answer)
- A requirement to hold a minimum of S$1 million in cash at all times
- An obligation to maintain a debt-to-equity ratio below 2:1
- A requirement to contribute to an industry compensation fund
Correct answer: A risk-based minimum financial resources requirement calculated using a prescribed formula, which must be maintained at all times
The FRR requires CMS licence holders to maintain minimum financial resources (risk-based capital) at all times, calculated using the formula prescribed in the SF(FMR) Regulations, taking into account assets, liabilities, and the risks of their regulated activities.
Question 4: If a CMS licence holder's financial resources fall below the minimum required level, it must:
- Immediately notify MAS and take steps to restore the financial resources to the required level (Correct answer)
- Continue operations normally until the next quarterly reporting date
- Seek a loan from another institution to cover the shortfall
- Reduce its client base to lower risk exposure
Correct answer: Immediately notify MAS and take steps to restore the financial resources to the required level
If a CMS licence holder's financial resources fall below the minimum required level, it has an immediate obligation to notify MAS and take prompt corrective action to restore resources. Failing to notify MAS promptly is itself a separate regulatory breach.
Question 5: Under MAS Technology Risk Management guidelines, within what timeframe must a CMS licence holder notify MAS of a significant operational disruption?
- 1 business day (Correct answer)
- 5 business days
- 14 business days
- 30 business days
Correct answer: 1 business day
Under MAS TRM guidelines and notification requirements, CMS licence holders must notify MAS within 1 business day of becoming aware of a significant operational disruption or technology incident that impacts regulated activities.
Question 6: What is required of an SGX trading member when onboarding a new institutional client?
- Verification of the client's legal status, authorised signatories, and completion of AML/CFT due diligence (Correct answer)
- Only collecting the client's contact details and bank account information
- A 3-month trial period before the client can start trading
- Approval from SGX before the account can be opened
Correct answer: Verification of the client's legal status, authorised signatories, and completion of AML/CFT due diligence
When onboarding institutional clients, trading members must conduct appropriate due diligence including verifying the entity's legal status, identifying authorised signatories and beneficial owners, and completing AML/CFT checks, though the process may differ from retail client onboarding.
FTT MAS Licensing Requirements 2
What does 'dealing in securities' as a regulated activity cover under the SFA?