Financial Advisers to Enhance Transaction Safeguards for Vulnerable Retail Clients by 29 December 2025

Introduction

To raise industry standards and enhance consumer trust in the financial advisory (“FA“) industry in Singapore, the Monetary Authority of Singapore (“MAS“) will implement the following key changes with effect from 29 December 2025: 

1. Strengthening selected client (“SC”)-related protections: Strengthening the requirement to identify SCs and requiring checks and documentation of a client’s SC status as well as the making of a formal declaration that this assessment has been duly performed. SCs are retail clients who are older in age and may not have specific academic qualifications. FA firms are required to undertake pre- and post-transaction safeguards for SCs to ensure that they understand the risks of their investments.

2. Introducing trusted individual (“TI”) qualifications and requirements: Requiring a TI, who must fulfil certain criteria to qualify as such, to be present when investment recommendations are made to SCs.

3. Enhancing pre-transaction call-back requirements: Mandating the types of information to be covered during a pre-transaction client call-back and requiring FA firms to audio record pre-transaction call-backs to: (i) SCs; or (ii) clients of Selected Representatives (“SRs“) (i.e. an FA representative who has been assigned a Balanced Scorecard Grade B or worse for two consecutive calendar quarters immediately preceding the measurement quarter).

4. Enhancing post-transaction checks requirements: Updating the: (i) scope of post-transaction checks performed by the Independent Sales Audit (“ISA“) unit, including reviewing the above-mentioned recordings; (ii) guidance on document reviews performed as part of such checks; and (iii) requirements and guidance on the classification of infractions committed by FA representatives.

These changes are set out in the following Notices and Guidelines which will take effect from 29 December 2025:

1. MAS FAA-N16 “Notice on Recommendations on Investment Products”(“FAA-N16“).

2. MAS FAA-N20 “Notice on Requirements for the Remuneration Framework for Representatives and Supervisors (“Balanced Scorecard Framework”) and Independent Sales Audit Unit”(“FAA-N20“).

3. MAS FAA-G14 “Guidelines on the Remuneration Framework for Representatives and Supervisors (“Balanced Scorecard Framework”), and Reference Checks”(“BSC Guidelines“). 

This Update covers the significant changes in the MAS Notices and the BSC Guidelines and their impact on FA firms.

Strengthening SC-Related Protections

SCs are clients who meet at least two of the following criteria: (i) are 62 years of age or older; (ii) are not proficient in spoken or written English or the language used in the sales and advisory process and the documents provided; (iii) have below GCE “O” or “N” level certifications (or the equivalent). The MAS Notices and Guidelines provide protections for SCs because they are considered vulnerable. FA firms may choose not to treat a client as an SC if they have reasons to conclude that the client has adequate knowledge and experience in any class of investment products and that any recommendation made by their representatives is to be limited to such products.

With effect from 29 December 2025, FAA-N16 mandates the following measures to strengthen SC-related protections. This strengthens the force of the requirements as it is an offence to breach a requirement in an MAS Notice.

1. Strengthened requirement for pre-transaction checks, and rectification and record-keeping:

• • FA firms must conduct pre-transaction checks (including documentation reviews and client call-backs) before the effective date of the transaction, by the FA representative’s supervisor or a third-party service provider, when executing a transaction in a recommended investment product for SCs.
  • FA firms must: (i) rectify any failures by their representatives to comply with these pre-transaction checks for such clients before the effective date of the transaction; and (ii) keep records of the processes and methods for such pre-transaction checks and every assessment and determination made in the conduct of the same, for at least five years after the effective date of the transaction.

2. Documenting SC status, formal declaration, and notification:

• • FA representatives must: (i) ascertain and document their determination on a client’s SC status as part of the Know Your Client (“KYC“) process (including if relevant, their reasons for concluding that the client need not be treated as an SC); and (ii) make a formal declaration that this assessment of whether a client is an SC has been duly performed.
  • FA representatives should notify clients of their SC status and the additional safeguards available to them.
  • If FA representatives have assessed that a client has satisfied the Customer Knowledge Assessment (“CKA“) for an investment product, they must still consider all relevant factors specific to the client and the recommended product, rather than relying solely on the CKA outcome, in determining if the client is an SC or has adequate investment experience and knowledge to transact in the recommended product.

Introducing TI Qualifications and Requirements

To address complaints about SCs not always fully understanding the key features and risks of investment products, FAA-N16 mandates the following requirements:

1. TI presence: An FA representative must not proceed with the sales and advisory process for SCs unless the SC: (i) has identified a TI who meets the qualifying criteria (see below); (ii) has consented to permit the TI to be privy to the SC’s personal information and the consent is properly documented; and (iii) is accompanied by the TI during the sales and advisory process. The SC’s consent for the TI to have access to the SC’s personal information need not be in writing but must be properly documented by the FA representative. 

     However, a TI need not be present during the sales and advisory process if an SC provides a written statement
     that the SC: (i) declines to have any TI present; and (ii) is fully able to make decisions in the absence of a TI.

2. TI qualifying criteria: A TI must: (i) be aged 21 or older; (ii) be proficient in spoken and written English or the language used in the sales and advisory process and the documents provided; (iii) have at least GCE “O” or “N” level certifications (or the equivalent); and (iv) be able to communicate effectively with the SC. Further, the TI should not have potential conflicts of interests (e.g. an FA representative’s supervisor, a beneficiary of the SC’s investment decision, etc).

Enhancing Pre-Transaction Call-Back Requirements

The requirements for pre-transaction checks that are mentioned above apply to SCs or clients of SRs. The checks must be completed before the effective date of the transaction (including documentation reviews and client call-backs) by either the FA representative’s supervisor or a third-party service provider. Client call-backs are not required if the supervisor was present with the representative in the entire sales and advisory process.

Minimal Call-Back Information

FAA-N16 provides that pre-transaction client call-backs must cover, minimally, the following types of information:

1. Questions that seek to ensure that the client understands the following:

• • basis of the recommendation of the investment product;
  • main features of the product (e.g. premium payment term, period and structure of payout, whether the product is capital guaranteed / non-guaranteed, etc);
  • key risks (e.g. market risk, capital risk, etc) of the product;
  • key limitations of the product (e.g. early termination of certain policies may result in policyholders receiving a return that is less than the premiums paid);
  • where the product is a life policy, the existence of a free-look period; and
  • where the product is a unit in a unit trust, the existence of a cancellation period.

2. Questions that seek to verify the following:

• • where the client is an SC: (i) that the client was given an opportunity to have a TI present during the sales and advisory process; and (ii) that the TI was present during the process, or, if the SC declined to have a TI present, that the SC is able to make investment decisions without a TI; and
  • that the FA representative had been professional and ethical in his or her dealings with the client (e.g. no offer of unauthorised gifts, premium financing, aggressive selling, etc).

FA firms are expected to design call-back questions that are effective to achieve the objectives, e.g. the questions should neither be leading in nature, nor framed to elicit “yes” or “no” replies. More effective question formats include multiple-choice or open-ended questions. These questions should be framed in a manner easily understood by clients. Where bundled products are involved, the questions should cover the different components of such products.

Recording Requirements 

Pre-transaction client call-backs must fulfil the following requirements:

1. Audio recording: FA firms must audio record the pre-transaction client call-backs to SCs and clients of SRs.

2. Non-recorded call-back: Where audio recording is not possible (such as where the client declines to be recorded), the call-back may be conducted as a non-recorded call-back or meeting if all of the following conditions are satisfied:

• • The key points discussed during the non-recorded call-back or meeting must be documented in writing in a summary document, which must include the prescribed information above and the reasons why the call-back was not audio recorded.
  • If the client is an SC, the client is offered the option of having a TI present during the non-recorded call-back or meeting, and if the SC declines, the reasons for this are documented in the summary document.
  • The summary document must be acknowledged by both the client and the supervisor or third-party service provider conducting the call-back.
  • The FA firm has established and implemented controls and processes to mitigate the risk of its supervisors, non-sales staff or third-party service providers circumventing the audio recording of call-backs.

3. Record-keeping: The audio recordings of the call-backs or the summary documents (as applicable) must be maintained for a period of not less than five years after the date of the call-back or meeting.

4. Provision to clients upon request: Upon their clients’ request, FA firms must provide: (i) a copy of the audio recording or the full transcript of the call-back; or (ii) a copy of the summary document (as applicable) to their clients.

MAS expects FA firms to deal fairly with their clients and not put in place measures or steps that add friction to the process for a client to listen to the recording or obtain a copy of the audio recording or transcript of the call-back (e.g. charging fees to the client or only providing access to listen to the recording at their premises).

These requirements enable FA firms to have better oversight of how their supervisors conduct client call-backs and enhance safeguards for SCs and clients of SRs.

Enhancing Post-Transaction Checks Requirements

FAA-N20 and the BSC Guidelines set out enhanced requirements for post-transaction checks as follows.

1. Updated scope of post-transaction checks:

• • FAA-N20 updates the scope of post-transaction checks performed by the ISA unit. The ISA unit is tasked to conduct post-transaction checks on sampled transactions to review and assess the quality of FA services provided by FA representatives against the non-sales Key Performance Indicators (KPIs) and to determine if infractions have been committed by the representatives.
  • The scope of such post-transaction checks includes: (i) reviewing the audio recordings of the pre-transaction client call-backs or summary documents (as applicable); (ii) reviewing the documentation required under FAA-N16 (such as Needs Analysis and KYC documentation); (iii) reviewing call-logs of sampled transactions of certain investments; and (iv) conducting client surveys on sampled transactions.

2. Updated guidance on documentation reviews:

• • FAA-N20 requires the ISA Unit to refer to the BSC Guidelines for MAS’ expectations on post-transaction checks, which include updated guidance for documentation reviews which are performed as part of post-transaction checks.

3. Updated requirements and guidance on the classification of infractions:

• • FAA-N20 also requires the ISA Unit to classify every infraction committed by an FA representative as: (i) a Category 1 infraction, i.e. one that has a material impact on the interests of the client or impinges on the fitness and propriety of the representative; or (ii) a Category 2 infraction, i.e. any infraction which is not a Category 1 infraction.
  • This should be done by assessing the facts and circumstances of the infraction (including aggravating or mitigating factors), and with regard to the examples for Category 1 infractions in the BSC Guidelines.
  • FAA-N20 also stipulates the circumstances when minor lapses or administrative oversights, subject to certain conditions, may not be considered to be infractions.
  • FA firms must take all reasonable steps to rectify all infractions uncovered by the ISA unit. Key principles of fair dealing should be incorporated into the process, including from the MAS Guidelines on Fair Dealing FSG-G04.

Background

This development follows from two rounds of consultation exercises conducted by MAS in June 2021 and July 2024, respectively. For more information on the proposals raised in these consultation papers, please refer to our 13 July 2021 Legal Update titled “MAS Proposes Enhanced Transaction Safeguards for Retail Clients by Financial Advisers” and our 31 July 2024 Legal Update titled “MAS Consults on Proposed Changes to MAS Notices and Guidelines to Implement Enhanced Transaction Safeguards for Vulnerable Retail Clients”.

For more information on the MAS Notices and the BSC Guidelines, please also see the frequently asked questions (“FAQs“) published by MAS, including: (i) “Notice on Recommendations on Investment Products Frequently Asked Questions” (i.e. FAQs on FAA-N16); and (ii) “Frequently Asked Questions on the Balanced Scorecard (BSC) Framework” (i.e. FAQs on the Balanced Scorecard Framework).

Conclusion

These changes represent welcome protections for SCs and clients of SRs, who are generally considered to be vulnerable retail clients. FA firms are strongly encouraged to consider early implementation of the requirements, ahead of the effective date for the changes of 29 December 2025.

Our team stands ready to assist if you have any questions or clarifications regarding the contents of these changes and/or how best to implement and operationalise the same.