On 4 June 2018, the Monetary Authority of Singapore (MAS) issued a consultation paper proposing to introduce two new sets of guidelines: (1) guidelines on provision of financial advisory service; and (2) guidelines on the design of advisory and sales form. This article focuses on the proposed financial advisory service guidelines.

The financial advisory guidelines seek to provide clarity to the industry on how the MAS assesses if a person is deemed to be carrying on the business of financial advisory services, and is particularly relevant to online activities, digital business models and software and aggregator tools.

The MAS also provides clarity on specific business activities such as distribution of research reports and portfolio allocation services provided by robo-advisory websites.

Scope of advisory services

Under the Financial Advisers Act (FAA), any person who carries on the business of providing any financial advisory service is required to hold a financial adviser’s licence, unless the person is exempted. Financial advisory services include:

(1) Advising others either directly or through publications or writings, whether in electronic, print or other form, concerning any investment product; and

(2) Advising others by issuing or promulgating research analyses or research reports, whether in electronic, print or other form, concerning any investment product.

In assessing if a person is deemed to be carrying on the business of financial advisory services as described above, MAS applies a two-stage test:

(1) Whether the activity amounts to providing financial advice; and

(2) If the answer is yes, whether the person is carrying on business in such activity.

Stage 1: Does the activity amount to providing financial advice? A communication (oral, electronic or print) is unlikely to constitute financial advice if the communication:

(1) Contains only factual information (i.e. information that is objective, verifiable and the accuracy of which cannot be reasonably questioned), and such information is not presented in a biased manner intended to persuade the recipient to buy, sell or hold an investment product or class of investment product; and

(2) Does not contain any statement of opinion on investment product or class of investment products.

Where a communication contains a statement of opinion on an investment product or a class of investment products, or contains purely factual information but is presented in a biased manner as described above, or both, the MAS will still consider the overall impression created by the communication, and the context and surrounding circumstances in which it is communicated, before concluding if a communication constitutes financial advice.

Such a communication will likely constitute financial advice only if the recipient can reasonably expect the communication to be financial advice that is to be relied upon in making an investment decision. In determining this, the MAS will consider if the communication is tailored to the particular circumstances of the recipient, whether it recommends the recipient to take specific action with respect to an investment product or class of investment products, and whether the communication provider purports to be in the business of providing financial advice.

The MAS also encourages communication providers to include appropriate disclaimers in the communication, to the effect that the information is meant for information purposes only and should not be relied upon as financial advice. However, the use of a disclaimer does not, of itself, determine whether the communication amounts to providing financial advice. Ultimately, the substance of the communication needs to be examined to determine if any elements of financial advice are present.

The proposed financial advisory guidelines set out examples of services and activities that fall within and outside financial advice, to illustrate the application of the general principles described above.

Stage 2: Does the activity amount to providing financial advice? Where a person provides communication that amounts to financial advice, the MAS will further consider if the provider is carrying on a business of providing financial advice, and is hence required to be licensed under the FAA.

In determining the second stage test, the MAS will consider:

(1) Whether the advice is given systematically and with continuity, or is one-off or random. A person is more likely to be considered to be carrying on a business if the person has an organized or structured method of conducting his activities, and does so with sufficient regularity. Conversely, one-off or random activities are less likely to be considered with respect to carrying on a business; and

(2) Whether the provider is remunerated for the advice. The carrying on of business may be more readily inferred if the provider is remunerated, but the absence of remuneration does not automatically mean that the provider is not carrying on business of providing financial advice. The MAS provides illustrations on how the Stage 2 test is applied to specific case examples.

MAS on specific activities

Distribution and production of research reports. The MAS clarifies that a person who reproduces, publishes, distributes or otherwise disseminates analyses or reports concerning investment products not written by such persons, will not be regarded as providing financial advice. These are considered passive distribution conduits and may include publishers, information service providers or internet portal operators.

The MAS also clarified that passive distribution conduit should:

(1) Only reproduce/distribute reports that originate from licensed/exempt financial institution regulated by the MAS;

(2) Attribute the reports accurately;

(3) Not exercise editorial control over, or modify, the contents of the reports; and

(4) Not endorse or otherwise comment on the reports.

Portfolio allocation. The MAS clarifies that portfolio allocation advice that does not involve recommendations on a specific investment product, or class of investment products, does not constitute financial advice.

Such service providers should ensure that any advice given does not extend to a clearly identifiable investment product or class of investment products.

The service provider should also inform recipients that the provision of such advice is not regulated under the FAA, and that the recipient may wish to approach a financial adviser before relying on the advice provided to make any decision to buy, sell or hold any investment product.

The MAS gives the example of robo-advisory services that generate recommendations on allocation of a client’s funds to broad asset types (e.g. shares v bonds), but does not specify any identifiable investment product or class of investment product. Advice of this nature will not constitute financial advice.

The MAS has not put forward an effective date for the proposed guidelines.

Business Law Digest is compiled with the assistance of Baker McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker McKenzie by emailing Danian Zhang at