title: CMI 01/2011: Due Diligence Checks and Documentation in Respect of Appointment of Representatives¶
CMI 01/2011: Due Diligence Checks and Documentation in Respect of Appointment of Representatives¶
Overview¶
Circular Reference: CMI 01/2011 Issued by: Monetary Authority of Singapore (MAS) Applicable to: All holders of a capital markets services (CMS) licence and licensed financial advisers (LFAs) Effective Date: 1 January 2012 Legislation: Securities and Futures Act (SFA) and Financial Advisers Act (FAA)
This circular sets out MAS expectations for due diligence checks that financial institutions must conduct before appointing any individual as a representative under the SFA or FAA. The objective is to ensure that only fit and proper individuals are appointed to serve clients in financial advisory and capital markets activities.
1. Scope of Application¶
1.1 Covered Appointments¶
This circular applies to the appointment of:
- Appointed Representatives (under Section 99A SFA / Section 23 FAA)
- Provisional Representatives (under Regulation 10B, Securities and Futures (Licensing and Conduct of Business) Regulations)
- Temporary Representatives (under Regulation 10C, Securities and Futures (Licensing and Conduct of Business) Regulations)
1.2 Principal Obligation¶
The principal (CMS licence holder or LFA) bears primary responsibility for ensuring the fitness and propriety of all individuals it appoints as representatives. MAS expects principals to exercise due diligence commensurate with the nature and risk of activities the representative will conduct.
2. Pre-Appointment Due Diligence Checks¶
2.1 Mandatory Background Checks¶
Before appointing any individual as a representative, the principal must conduct the following checks:
2.1.1 MAS Representative Register Check¶
- Search the MAS Representative Notification System (RNS) and public register
- Verify the individual's current and past appointment history
- Identify any regulatory actions, suspensions, or revocations
- Check for outstanding notifications or pending disciplinary matters
2.1.2 Criminal Record Checks¶
- Obtain a declaration from the individual on any criminal convictions (Singapore and overseas)
- Verify against available criminal record databases
- Assess relevance of any disclosed convictions to the representative role
- Document the assessment rationale for borderline cases
2.1.3 Bankruptcy and Financial Status Checks¶
- Search the Insolvency Office records (IPTO)
- Obtain credit bureau reports from Credit Bureau (Singapore) Pte Ltd (CBS) or similar agencies
- Verify that the individual is not an undischarged bankrupt
- Assess any adverse credit history for suitability concerns
2.1.4 Qualification and Examination Verification¶
- Verify CMFAS examination results through the Institute of Banking and Finance (IBF)
- Confirm relevant modules passed correspond to the activities the representative will carry out
- Verify educational qualifications claimed by the individual
- For provisional representatives: confirm eligibility for the 3-month examination grace period
2.2 Reference Checks¶
2.2.1 Employment Reference Requirements¶
The principal must obtain references from:
- Current or most recent employer (mandatory)
- Previous employers in the financial industry for the past 5 years (mandatory where the individual was engaged in regulated activities)
- Character references where employment references are not obtainable (with documented justification)
2.2.2 Content of Reference Checks¶
References must cover, at minimum:
| Area | Details Required |
|---|---|
| Employment history | Dates of employment, roles held, reasons for leaving |
| Conduct record | Any disciplinary actions, warnings, or compliance breaches |
| Regulatory issues | Any involvement in regulatory investigations or proceedings |
| Client complaints | History and nature of client complaints received |
| Financial standing | Any known concerns about financial soundness |
| Character assessment | Overall assessment of integrity and professional conduct |
2.2.3 Handling Incomplete References¶
- If a previous employer fails to respond within 30 days, the principal must document the attempts made
- At least 3 documented follow-up attempts are expected
- The principal must assess whether the appointment should proceed despite incomplete references
- Any decision to proceed must be documented with risk mitigation measures
2.3 Credit Bureau Checks¶
2.3.1 Scope of Credit Checks¶
- Full credit report from CBS or equivalent bureau
- Assessment of overall credit standing and any defaults
- Review of any County Court Judgments (CCJs) or equivalent orders
- Identification of any outstanding debts that may create conflicts of interest
2.3.2 Assessment Criteria¶
Principals should consider:
- Default history: Any loan defaults within the past 7 years
- Litigation records: Outstanding or recent civil litigation involving financial disputes
- Debt-to-income ratio: Whether the individual's financial position could create vulnerability to misconduct
- Undischarged liabilities: Any undischarged arrangements with creditors
3. Record Keeping Requirements¶
3.1 Documentation Standards¶
Principals must maintain comprehensive records of all due diligence conducted, including:
3.1.1 Mandatory Records¶
| Document | Retention Period |
|---|---|
| Completed due diligence checklist | Duration of appointment + 5 years |
| MAS register search results | Duration of appointment + 5 years |
| Criminal record declarations | Duration of appointment + 5 years |
| Credit bureau reports | Duration of appointment + 5 years |
| Reference check correspondence and responses | Duration of appointment + 5 years |
| Qualification verification documents | Duration of appointment + 5 years |
| Assessment and decision records | Duration of appointment + 5 years |
| Ongoing monitoring records | Duration of appointment + 5 years |
3.1.2 Assessment Documentation¶
For each appointment decision, the principal must record:
- Summary of due diligence findings
- Assessment of any adverse findings and mitigating factors
- Decision rationale (approval, conditional approval, or rejection)
- Approving officer's identity and sign-off date
- Any conditions or restrictions placed on the appointment
3.2 Filing and Retrieval¶
- Records must be maintained in an organized, retrievable manner
- MAS must be able to access records within a reasonable timeframe upon request
- Electronic records are acceptable provided they meet MAS Technology Risk Management Guidelines
- Records must be protected against unauthorized access, modification, or destruction
4. Ongoing Monitoring Requirements¶
4.1 Continuous Obligations¶
After appointment, the principal must:
- Conduct periodic reviews of representative fitness (recommended annually)
- Monitor for any changes in financial standing, criminal record, or regulatory status
- Require representatives to self-report any material changes to their fitness and propriety
- Re-conduct credit bureau checks at periodic intervals (recommended every 2-3 years)
4.2 Trigger Events for Enhanced Review¶
Enhanced due diligence review must be conducted when:
- A client complaint of a serious nature is received
- Regulatory inquiry or investigation is initiated
- The representative is subject to criminal proceedings
- The representative's financial circumstances deteriorate materially
- The representative is transferring to a higher-risk activity
5. Reporting Requirements¶
5.1 Notification to MAS¶
Principals must notify MAS in the following circumstances:
| Event | Notification Timeline |
|---|---|
| Appointment of representative | Before commencement of activities (via RNS Form 3A/3B/3C) |
| Cessation of representative | By the next business day after cessation, per MAS Form 8 (SFA reps) / Form 10 (FA reps) — see https://www.mas.gov.sg/regulation/forms-and-templates/form-8---notification-for-the-cessation-of-a-representative-in-any-or-all-of-the-regulated-activities. |
| Discovery of material adverse information | As soon as practicable |
| Regulatory breach by representative | As soon as practicable |
| Criminal conviction of representative | As soon as practicable |
5.2 Content of Adverse Notifications¶
When reporting adverse information, the principal must provide:
- Full details of the adverse finding or event
- Impact assessment on clients and business
- Remedial measures taken or planned
- Whether the representative's appointment has been suspended or revoked
6. Enhanced Due Diligence Scenarios¶
6.1 Representatives from Overseas¶
For individuals who have been based overseas for the preceding 5 years:
- Obtain references from overseas employers
- Conduct background checks in the relevant jurisdictions where practicable
- Assess any regulatory history with overseas financial regulators
- Consider engaging third-party due diligence providers for overseas checks
6.2 Representatives with Adverse History¶
If due diligence reveals adverse information:
- Conduct a thorough risk assessment
- Consider the nature, severity, and recency of the adverse matter
- Assess the individual's explanation and any rehabilitation evidence
- Document the decision rationale with enhanced detail
- Consider placing activity restrictions or enhanced supervision
6.3 Transfer Between Principals¶
When a representative transfers from another principal:
- Obtain a release letter or transfer reference from the outgoing principal
- Verify the reasons for cessation at the prior principal
- Check for any outstanding complaints or investigations
- Conduct fresh due diligence checks as for a new appointment
7. Consequences of Non-Compliance¶
7.1 Regulatory Actions¶
Failure to conduct adequate due diligence may result in:
- Supervisory warnings or reprimands
- Conditions imposed on the principal's licence
- Civil penalties under the SFA or FAA
- Public censure
- Revocation or suspension of the principal's licence in serious cases
7.2 Liability¶
The principal may be held responsible for:
- Losses suffered by clients due to the misconduct of an inadequately vetted representative
- Costs of regulatory investigations and remediation
- Reputational damage to the financial services industry
8. Relevance to Regnify Platform¶
8.1 Form 3A Processing¶
The Regnify platform supports the due diligence workflow by:
- Collecting and validating representative personal information
- Facilitating the attachment of supporting documents (references, credit reports, qualification certificates)
- Tracking the status of due diligence checks through the approval workflow
- Maintaining an audit trail of all checks performed and approvals granted
8.2 Compliance Checks¶
The platform's Fit and Proper assessment module aligns with CMI 01/2011 requirements:
- Criminal record declaration review
- Bankruptcy status verification
- Qualification and examination validation
- Reference check tracking
- Overall fitness assessment scoring
8.3 Document Retention¶
The platform provides document storage and retention management to meet the 5-year post-cessation retention requirements specified in this circular.
References¶
- Securities and Futures Act 2001 (SFA), Sections 95-101
- Financial Advisers Act 2001 (FAA), Sections 23-25
- MAS Guidelines on Fit and Proper Criteria (FSG-G01)
- MAS Notice on Minimum Entry and Examination Requirements for Representatives: SFA 04-N22 (superseded SFA 04-N09 on 1 April 2024) / FAA-N26 (superseded FAA-N13 on 1 April 2024)
- Securities and Futures (Licensing and Conduct of Business) Regulations