Chapter 6 puts chapters 1 to 5 to work on real client and fund situations. Each case gives you a person, a goal, a time horizon and a product, then asks one thing: which product fits, what the client gets under a market path, which risk matters most, which hedge suits a firm, what a fund manager may do under the Code on CIS, or what the adviser must do or say. The exam rewards candidates who read the facts closely, run the payoff arithmetic step by step, and match the product's term, liquidity and risks to the client. Expect scenario and calculation items on barriers, autocalls, CPPI, covered calls, daily leveraged products, guarantees and counterparty limits.
8 sections·~5 min read
✓Checked against the SCI M8A syllabus chapter 6 (checked 13 Sep 2026); MAS Code on Collective Investment Schemes, last revised and effective 2 July 2026 (Appendix 1, Appendices 4 and 5); Securities and Futures Act 2001 ss.2(1), 240AA, 296A, 309B, 309C (current version as at 13 Sep 2026); Securities and Futures (Capital Markets Products) Regulations 2018; MAS Notice SFA 04-N12 (last updated 4 Jan 2019); Financial Advisers Act 2001 s.36; MAS Guidelines on Structured Deposits FAA-G09 (last revised 28 Jun 2021); MoneySense structured deposits and structured notes pages (last updated 2 Jul 2026); MAS Investigation Report on Lehman-linked structured notes (7 Jul 2009); SGX Daily Leverage Certificates guide (Nov 2020). Unofficial prep, not endorsed by MAS or SCI.
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Must-know for the exam
✓Structured deposits are NOT covered by deposit insurance; SGD fixed deposits are insured up to S$100,000 per depositor per Scheme member (as at 13 Sep 2026).
✓A structured deposit repays principal only if held to maturity and the bank stays solvent; early withdrawal can lose principal (FAA-G09, MoneySense).
✓Most structured notes are not principal-guaranteed and you can lose all of your money; the note is the issuer's debt (MoneySense).
✓A structured note offered with a prospectus needs a Product Highlights Sheet lodged with MAS (SFA s.240AA); the PHS does not replace the prospectus.
✓SFA s.309C bans 'capital protected' and 'principal protected' for offered capital markets products; say 'designed to repay principal at maturity'.
✓SFA s.309B: a distributor must not offer a product until the issuer has notified it of the classification in writing.
✓Structured notes and CIS that use derivatives beyond hedging or efficient portfolio management are Specified Investment Products: CKA if unlisted, CAR if listed (MAS Notice SFA 04-N12).
✓A CAR outcome lapses after 3 years unless the customer has transacted in listed SIPs more than once in that period.
✓Code on CIS App 1: global exposure at most 100% of NAV; OTC counterparty 10% of NAV if rated at least A, otherwise 5%; collateral topped up by the next business day (T+1).
✓Eligible collateral: cash, money market instruments, or AAA/Aaa bonds of governments, government agencies or supranationals; securitised debt is not eligible.
✓Borrowing: temporary, for redemptions or bridging, from licensed banks, finance companies or merchant banks, at most one month and 10% of NAV.
✓Appendix 4 guarantee: unconditional, first-demand, at least 100% of capital (or less initial sales charges if prominently disclosed); may apply only on stated dates.
✓CPPI: risky exposure = multiplier x (fund value - floor). A gap fall larger than 1 / multiplier breaches the floor.
✓Daily leveraged and inverse products compound daily, so multi-day returns differ from leverage x period return; they suit short-term trading (SGX DLC guide).
How to work a case study
•Case items bundle several facts, but usually only one or two of them decide the answer. Train yourself to pull out the same five facts every time before reading the options.
•Objective: income, growth, capital repayment, hedging, or a short-term trade.
•Time horizon against the product's term: does the client need money before maturity?
•Risk capacity and experience: savings buffer, age, investment history.
•Who carries the credit: a bank (deposit or note), a special purpose vehicle, a swap counterparty, or a trustee-held fund.
•For calculation items, write down the formula from the stem, apply it to each date that the terms say is observed, and only then compare with the options. Most wrong options come from one skipped step: a coupon ignored, a cap forgotten, a barrier checked on the wrong date.
•Trap: answering from the product's headline feature (a high coupon, the word 'guaranteed') instead of the client's horizon and liquidity need.
•Takeaway: Extract objective, horizon, risk capacity, mechanics and credit exposure first; then run the formula on the observed dates only.
Choosing between deposits, notes and funds, and the documents
•A structured deposit is a deposit under the Banking Act with a variable return linked to an underlying (equity, bond, interest rate, credit or FX). It repays principal at maturity if you hold it and the bank stays solvent, but it is not insured and early withdrawal can lose principal (FAA-G09, MoneySense). Bank-callable, step-up versions carry reinvestment risk and a capped maximum return: the bank typically calls when rates fall.
•A structured note is a debt of its issuer, with interest and/or principal set by a formula. Types include equity-linked (which may deliver shares instead of cash), interest-rate-linked, credit-linked, currency-linked and commodity-linked. Most are not principal-guaranteed. An exchange-traded note can be sold on the exchange but still carries the issuer's credit risk plus trading fees and commissions.
•A structured fund is a CIS: its assets sit with a trustee, its OTC counterparty exposure is capped by the Code on CIS, and it is priced at NAV.
•Offer documents: structured notes offered with a prospectus need a PHS lodged with MAS (SFA s.240AA); CIS offers likewise (s.296A). The PHS summarises; it never replaces the prospectus.
•Classification: the issuer decides whether a product is a prescribed capital markets product and notifies distributors in writing; the distributor may not offer before that notice (SFA s.309B). A change in classification is notified within 21 days.
•Naming: 'capital protected' and 'principal protected' are banned (SFA s.309C). A fund may call itself capital guaranteed only if it meets Code on CIS Appendix 4.
•FAA-G09 for structured deposits: best- AND worst-case illustrations, realistic headline rates, all fees, early termination terms, a statement that it is not insured, and segregation from fixed deposits. Calling a product a deposit when it lacks deposit characteristics is misleading.
•Trap: treating a bank-issued note, or anything called a 'deposit', as insured.
•Takeaway: Deposit = bank solvency plus hold to maturity, uninsured. Note = issuer's debt, principal at risk. Fund = trustee-held, Code on CIS limits.
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