FTT Securities & Futures Regulations 4 — Questions and Answers
Question 1: What does 'authorised scheme' mean under the SFA?
- A collective investment scheme constituted in Singapore and approved by MAS to be offered to retail investors (Correct answer)
- A scheme only open to institutional investors
- A government-backed investment fund
- A scheme listed on the Singapore Exchange
Correct answer: A collective investment scheme constituted in Singapore and approved by MAS to be offered to retail investors
An authorised scheme is a collective investment scheme (CIS) constituted in Singapore that has been authorised by MAS after review of its prospectus and trust deed, allowing it to be offered to retail investors in Singapore.
Question 2: What is a 'recognised scheme' under the SFA?
- A collective investment scheme constituted overseas but recognised by MAS to be offered to retail investors in Singapore (Correct answer)
- A locally constituted scheme approved by SGX
- A scheme recognised only by institutional investors
- A government-recognised pension scheme
Correct answer: A collective investment scheme constituted overseas but recognised by MAS to be offered to retail investors in Singapore
A recognised scheme is constituted overseas (in a jurisdiction with comparable regulatory standards) and recognised by MAS, allowing it to be marketed to retail investors in Singapore subject to the regulatory framework of its home jurisdiction.
Question 3: Under the SFA, what is the definition of an 'accredited investor' (individual)?
- Net personal assets exceeding S$2 million or annual income of not less than S$300,000 (Correct answer)
- Annual income exceeding S$100,000 only
- Net assets exceeding S$500,000
- Any individual with a brokerage account
Correct answer: Net personal assets exceeding S$2 million or annual income of not less than S$300,000
Under the SFA, an accredited investor (individual) is defined as a person whose net personal assets exceed S$2 million (primary residence capped at S$1 million) or whose annual income is not less than S$300,000. AI status allows access to a broader range of investment products.
Question 4: What is a 'prospectus' under the SFA and why is it required?
- A document offering securities to the public that must be registered with MAS to ensure full disclosure for investor protection (Correct answer)
- A marketing brochure prepared by a company
- A financial report submitted annually to MAS
- A contract between an investor and a broker
Correct answer: A document offering securities to the public that must be registered with MAS to ensure full disclosure for investor protection
A prospectus is a legally required disclosure document that must be registered with MAS before securities are offered to the public. It provides investors with material information about the issuer and the securities to enable informed investment decisions.
Question 5: Which of the following is a 'capital markets product' under the SFA?
- Securities, units in a collective investment scheme, derivatives contracts, and spot foreign exchange contracts (for leveraged trading) (Correct answer)
- Only shares listed on SGX
- Only government bonds
- Only futures contracts traded on SGX
Correct answer: Securities, units in a collective investment scheme, derivatives contracts, and spot foreign exchange contracts (for leveraged trading)
Capital markets products under the SFA include a broad range of instruments: securities (shares, bonds, debentures), units in collective investment schemes, derivatives contracts (futures, options, swaps, structured notes), and foreign exchange contracts entered into for investment or leveraged trading purposes.
Question 6: What is the obligation of a CMS licence holder under MAS Notice SFA 04-N02 regarding 'best execution'?
- Take reasonable steps to obtain the best outcome for clients when executing orders, considering price, costs, speed, and likelihood of execution (Correct answer)
- Always execute at the lowest commission rate
- Execute orders only at the market opening price
- Best execution applies only to institutional clients
Correct answer: Take reasonable steps to obtain the best outcome for clients when executing orders, considering price, costs, speed, and likelihood of execution
MAS Notice SFA 04-N02 requires CMS licence holders dealing in securities to establish policies and procedures to achieve best execution for clients, taking into account factors such as price, costs, speed, likelihood of execution, and settlement — not just price alone.
FTT Securities & Futures Regulations 4
What does 'authorised scheme' mean under the SFA?