Conduct of Business, Powers of Authority & Offences
Concept
Once a firm is licensed and an individual is appointed and on the Register, the FAA imposes a code of conduct of business designed to protect clients throughout the advisory relationship. The three pillars are: disclose fully, recommend suitably, and avoid prohibited practices. MAS backs this code with wide investigation and enforcement powers, and breaches expose both the firm and the individual to criminal, civil and administrative consequences. The logic is that advice is an information-asymmetric service — the client relies on the adviser's expertise — so the law forces transparency and a documented basis, then punishes those who exploit the imbalance.
Key rules & facts
- Disclosure duties (verify: relevant FAA Notice, e.g. FAA-N03/N16): the representative must disclose material product information, any remuneration and benefits received, and any conflicts of interest, and must present fees and charges on a dollars-and-cents basis (not just percentages). Specific mandated documents pair with product type — see the table below.
- Reasonable basis for recommendations (verify: FAA-N16): the representative must know the client (financial situation, investment objectives, risk tolerance, particular needs) and have a documented reasonable basis for any recommendation. If the client withholds information or declines advice, the representative must document the limitation and warn the client that the recommendation may be unsuitable or that no suitability assessment could be made.
- Restrictions / prohibited practices: no false or misleading statements to induce a transaction; no advising while unlicensed or unappointed; strict limits on receiving or holding client money or assets; and controls on unsolicited ("cold") calls.
- MAS powers: conduct investigations and inspections; revoke or suspend an FA licence; issue prohibition orders barring an individual from the industry; and impose penalties and other enforcement measures.
- Offences and consequences: fines and/or imprisonment (verify: exact amounts and terms), civil liability to a client who suffers loss caused by a breach, and administrative sanctions (reprimands, conditions, restrictions).
Key data
| Product type | Mandatory disclosure document(s) | Timing |
|---|---|---|
| Life policy | Product Summary + Benefit Illustration | At/before point of sale |
| Investment-linked policy (ILP) / CIS | Product Highlights Sheet (PHS) | At/before point of sale |
| All recommendations | Dollars-and-cents fee/charge disclosure + conflicts | Before the client commits |
| Enforcement measure | Target | Effect |
|---|---|---|
| Licence revocation / suspension | The firm (FA) | Removes/pauses the firm's authority to operate |
| Prohibition order | The individual | Bars the person from the industry |
| Fines / imprisonment | Firm and/or individual | Criminal penalty (verify amounts/terms) |
| Civil liability | Firm and/or individual | Compensate client for loss |
Exam angle
Heavily situational. Typical stems: *was the disclosure adequate?*; *did the recommendation have a reasonable basis?*; *is this a prohibited practice?* Plus recall of which document pairs with which product (PHS vs Product Summary vs Benefit Illustration) and which MAS power applies to a firm versus an individual.
⚠ The trap
"The client agreed and signed, so I'm covered." Consent does not cure an unsuitable recommendation, a non-disclosure, or a false statement — the duty is on the adviser, not the client. A second trap is confusing a prohibition order (which bars the *individual*) with licence revocation (which removes the *firm's* licence).
Takeaway
Disclose in dollars-and-cents, recommend with a documented reasonable basis, and never mislead — or face fines, jail, civil liability, or a prohibition order that ends your career.
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