Guideline No: FAA-G10 is issued pursuant to Section 64 of the FAA. The aim of these Guidelines is to provide guidance on the controls, processes and procedures that the MAS expects licensed financial advisers and exempt financial advisers to implement, in order to monitor switching and ensure that their representatives do not advise clients to switch from one designated investment product referred to as “original product”) to another designated investment product (referred to as “replacement product”) in a manner that would be detrimental to the clients.

In considering whether a switch is appropriate, the supervisor should take into account the following factors as stated in Notice No: FAA-N16:
(a) whether the client suffers any penalty for terminating the original product;
(b) whether the client will incur any transaction cost without gaining any real benefit from the switch;
(c) whether the replacement product confers a lower level of benefit at a higher cost or same cost to the client, or the same level of benefit at a higher cost; and
(d) whether the replacement product is less suitable for the client.

Outcome One: Customers have confidence that they deal with financial institutions where fair dealing is central to the corporate culture.

Outcome Five: Financial institutions handle customer complaints in an independent, effective and prompt manner.

The revised Code on Collective Investment Schemes aims to provide greater clarity and to increase the flexibility for fund managers in managing their funds. The Code also aims to enhance safeguards for retail investors. MAS will only recognise a foreign scheme if it is satisfied that the scheme is subject to investment guidelines which are substantially similar to those as set out in the revised Code. The key changes to the Code include:
(a) Strengthening Core Investment Requirements for Schemes
(b) Introducing New Guidelines for Specialised Fund Categories.
(c) Other Safeguards to Enhance Investor Protection.
(d) Introducing principles on the naming of funds.

The global exposure of a scheme to financial derivatives or embedded financial derivatives should not exceed 100% of the scheme’s NAV (Net Asset Value) at all times. MAS has clarified that, for the purpose of calculating global exposure to financial derivatives, setting arrangements may be taken into account to reduce global exposure.

The manager should inform the MAS and existing participants of any significant change to be made to a scheme not later than one month before the change is to take effect. Significant changes include, but are not limited to, the following:
(a) a change in the investment objective or focus of the scheme.
(b) an increase in the remuneration payable to the manager or trustee.
(c) an increase in any other fees or charges payable by the scheme that are substantial.
(d) an amendment to the trust deed or prospectus to allow a new form of remuneration or expense payable by the scheme.

No payment should be made from the scheme if it is unfair to, or materially prejudices the interests of, any participant or rospective participant. The manager should not pay or cause to be paid any fees from the scheme that has not been provided for in the trust deed. The manager should not pay or cause to be paid any marketing or promotion expenses from the scheme. Such expenses include those for advertisements in the media, mailers, fact sheets, but exclude those for the preparation, printing, lodgement and distribution of prospectuses, profile statements or product highlights sheets.

When performance fees are payable, the prospectus should contain disclosures on:
(a) the fact that a performance fee is payable and to whom it is payable;
(b) the fact, if applicable, that a performance fee can be levied, even if the return of the scheme is negative;
(c) the maximum amount or percentage of the scheme’s NAV that the performance fee may represent in an annual accounting period;
(d) illustrations, such as numerical examples, of how the performance fee is calculated;

In assessing whether a name is undesirable or misleading, the MAS will consider factors, including whether the name:
(i) is substantially similar to the name of another scheme;
(ii) implies that the scheme has merits which are not, or may not be, justified;
(iii) implies that the manager has particular qualities, which may not be justified;
(iv) is inconsistent with the scheme’s investment objective or approach.

The semi-annual report and annual report, based on a scheme’s financial year, should contain the following:
(a) amount and percentage of the scheme’s NAV invested in other schemes as at the end of the period under review;
(b) amount and percentage of borrowings to the scheme’s NAV at the end of the period under review;
(c) amount of redemptions and subscriptions for the period under review;
(d) amount of related-party transactions for the period under review.

When a valuation error represents 0.5% or more of the scheme’s NAV per unit after adjustment for the error, the manager should compensate:
(i) affected participants and notify them of the compensation made;and
(ii) the scheme for any losses incurred as a result of the valuation error.

A scheme’s underlying investments must consist of permissible investments.
These include:
(a) transferable securities;
(b) money market instruments;
(c) eligible deposits;
(d) units in other schemes

The exposure to a counterparty may be construed as being lower if collateral is tendered to the scheme. The collateral should meet the
following requirements:
(a) It is marked-to-market daily;
(b) It is liquid;
(c) It is taken into account, on a portfolio basis, for the purpose of the requirements on spread of investments in the Code;
(d) It is not issued by the counterparty or its related corporations;

A single hedge fund should be offered with a minimum initial subscription of S$100,000 per participant. The minimum holding at any one time should be the lesser of S$100,000, or the number of units purchased for S$100,000 at the time of subscription.

A written agreement should be entered into between the guarantor and the trustee for an unconditional guarantee to be provided by the guarantor. The guarantee should be a first-demand guarantee, and should be legally enforceable in Singapore against the guarantor by the trustee on behalf of the participants. In addition, provision should be made in the agreement for the guarantee, to ensure that the accrued rights of the trustee, on behalf of the participants, are not affected or prejudiced by the termination of such guarantee. Where the agreement is governed by foreign law, the trustee should ensure and be satisfied that the agreement is legally enforceable in Singapore against the guarantor by the trustee on behalf of the participants.

Employers are exempted from making mandatory CPF contributions for the following classes of employees:
(a) Foreigners on Employment Pass, S Pass, Miscellaneous Work Pass or Work Permit;
(b) Persons registered as partners, sole proprietors or self-employed;and
(c) Employees working overseas.

Savings in the Ordinary Account can be used to buy a residential property, pay for certain insurance premiums, invest in certain financial instruments, and provide for education for the CPF member or his children. Savings in the Special Account are primarily reserved for old age and investments that are subject to stringent restrictions.

The CPF member will be placed on CPF LIFE if he is a Singapore Citizen or Permanent Resident born in 1958 or after, and have at least:
1. S$40,000 in his Retirement Account upon reaching the age of 55 years; or
2. S$60,000 in his Retirement Account upon reaching the age of 65 years.

Notification Of Changes To Loan Details
A CPF member who has used his CPF savings for the purchase of a flat, as well as his financier (if any), are required to notify the CPF Board of the following:
i) Full redemption of the housing loan;
ii) Refinancing or re-mortgaging of the flat;
iii) Increase in loan quantum approved by the financier;and
iv) Any change in loan term.

The eligibility criteria of the LBS are as follows:
(a) All owners should be at CPF Payout Eligibility Age (currently set at age 64) or older;
(b) At least one owner must be a Singapore Citizen;
(c) Gross monthly household income of S$12,000 or less;
(d) 4-room or smaller HDB flat

Any CPF member who meets the following requirements is allowed to participate in the CPFIS:
(i) He is at least 18 years old;
(ii) He is not an undischarged bankrupt.

The DPS is an affordable term insurance scheme that provides insured CPF members and their families with some money to get through the first few years, should the insured CPF members die or become permanently incapacitated. Currently, the DPS is administered by two insurers, Great Eastern Life and NTUC Income. This scheme is automatically extended to CPF members who are Singapore Citizens or permanent Residents, between the ages of 21 and 60 years, when they make their first CPF contributions.

The cover will be automatically renewed every year with the
premium automatically deducted from the Ordinary Account of the
CPF member, unless one of the following events occurs to him:
(a) He has reached the age of 60 years (current maximum age for coverage), or has become physically / mentally incapacitated, or has died;
(b) He does not have enough CPF savings to pay the premium for a minimum sum assured of S$5,000;
(c) He has instructed the CPF Board not to renew his coverage; or
(d) He has no contribution paid to his CPF account for a continuous period of three years.

The CPF member has to fully disclose all information regarding his health condition, including the following:
(a) All past and current illnesses;
(b) Any surgery that he had previously undergone or would be undergoing; and
(c) Any physical or mental impairment.

Workfare is paid to older low-wage workers twice a year to encourage them to work and to improve their retirement adequacy. Employees receive their Workfare in the form of cash payments and contributions to their CPF accounts. Self-employed persons have their Workfare credited to their Medisave Accounts.

SRS Participation
To be eligible, a participant must be a Singaporean, Singapore Permanent Resident or foreigner, at least 18 years old, of sound mind, capable of managing his own affairs and not being an undischarged bankrupt. To participate in the SRS, a participant must first open an SRS account with any one of the current SRS Operators, namely DBS, OCBC or UOB.

A 5% penalty for premature withdrawal will also be imposed, unless it is made under exceptional circumstances, such as the following:
(i) Death;
(ii) Medical grounds;
(iii) Bankruptcy; or
(iv) The full withdrawal of the SRS balance by a foreigner who has maintained his SRS account for at least ten years from the date of his first contribution.

A 5% penalty for premature withdrawal will also be imposed, unless it is made under exceptional circumstances, such as the following:
(i) Death;
(ii) Medical grounds;
(iii) Bankruptcy; or
(iv) The full withdrawal of the SRS balance by a foreigner who has maintained his SRS account for at least ten years from the date of his first contribution.

As for life insurance products, the following conditions shall apply:
(i) Only single premium products are allowed (including recurrent single premium products, encompassing both annuity and nonannuity plans);
(ii) Life cover (including total and permanent disability benefits) will be capped at three times the single premium;
(iii) Plans can allow for a contribution continuation feature / benefit upon disability;
(iv) Other types of life insurance e.g. critical illness, health and longterm care are excluded;