RES 2B Chapter 6 (and RES 2A Chapter 6) walks the dealing process from market analysis to risk control: how to analyse market information (6.2), formulate a trading strategy (6.3), implement and monitor it under the execution-related advice guidelines (6.4), run know-your-customer checks (6.5), open a Specified Investment Product trading account through the CAR or CKA (6.6), and manage the firm-level and dealer-level risks (6.7). The exam tests the sequence of steps, the CAR versus CKA criteria and validity periods, and the definitions of each risk type.
7 sections·~7 min read
✓Checked against the IBF RES 2B Study Guide v1.0 (6 Jun 2024) ch.6 and appendices A-D, 2026-09-12. Unofficial prep, not endorsed by MAS or SCI.
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Must-know for the exam
✓Reasonable basis: FAA s.36 and FAA-G08 para 5 require a reasonable basis for any recommendation. Exceptions: pure execution of the client's instruction, and execution-related advice on a listed EIP under FAR reg 33A (rationale given plus a notice that the advice ignores the client's objectives; no discrete fee).
✓Analysis methods (6.2): fundamental (intrinsic value from ratios and valuation models, long horizon, usually equities); technical (historical price charts, short horizon); global macro (rates, government policy, politics). Third-party research still needs regular due diligence for objectivity.
✓Strategy formulation (6.3): restate the objective (alpha or hedge); set return and risk objectives (performance target against a risk-adjusted benchmark; costs = fees, taxes, inflation, anticipated spending; asset allocation targets with ranges; risk tolerance reassessed continually); constraints = time horizon, liquidity maintenance, legal, foreign-investment limits.
✓Risk management framework, in order: Risk Identification, Risk Assessment (qualitative), Risk Evaluation (quantitative), Risk Response (consider links between risks), Risk Reporting (did the response work, then feed back).
✓FAA-G08 in implementation (6.4): update profile and needs analysis at least once a year for ongoing execution-related advice; client rejects advice = proceed, document, warn; records by file note or tape, MAS recommends at least 5 years; conflicts disclosed orally or in writing and not repeated while still accurate and known to the client; execution-only disclaimers never remove SFA or FAA liability.
✓Dealer risk tools (6.4.6): stop-loss (most basic and most important; liquidates at the level, but gap risk can take the fill far lower); daily loss limit (hit it and either liquidate everything or take no new positions); VaR (statistical measure of possible loss over a time frame; position, portfolio or firm-wide).
✓CAR before opening a listed SIP account; CKA before transacting in an unlisted SIP. Both are for retail customers. Inputs: education, investment experience, work experience. No adequate information = deemed no knowledge.
✓Knowledge criteria (Appendices A and B): diploma or higher in a listed finance-related field; professional qualification (CFA, ACCA, CFP or AWP, FRM, CAIA, ChFC); 6 transactions in the preceding 3 years (CAR: listed SIPs; CKA: CIS/ILPs for CIS/ILPs, other unlisted SIPs for other unlisted SIPs); or 3 consecutive years in the past 10 in investment-product work, accountancy, actuarial, treasury or financial risk management.
✓Failed CAR: customer may still open the listed SIP account after four written steps (outcome in writing; written confirmation to proceed; explanation of derivatives' features and risks with a written statement; written notice that understanding the products is the customer's responsibility). Or he completes the SGX online education programme or passes CM-SIP, M8A or M9A.
✓Failed CKA: firm must say in writing that it cannot deal in that unlisted SIP for him unless it is an exempt financial adviser giving advice under FAA-N16. The ABS-SAS learning module for that product or CM-SIP, M8A, M9A can deem knowledge. When relying on a module, obtain the customer's acknowledgement he personally passed, every previous score, and the number of times other firms refused him.
✓Validity: CAR 3 years (extend only if the customer transacted more than once in the preceding 3-year period and each subsequent 3-year period, or run a new CAR); CKA 1 year, then a new CKA. Approval to open the SIP account: senior management not involved in that account opening and not a connected person of the customer.
✓Overseas-listed products (6.6.7 to 6.6.8): give the Annex 4 risk warning statement and obtain acknowledgement before the first 'transaction' (purchase, or sale that creates a short); keep the acknowledgement at least 5 years (SFA s.102(3)); no EIP classification system means the product is a SIP and CAR applies; outsourcing classification keeps responsibility with the firm.
✓Risk types (6.7): operational (internal processes, systems, people; Barings); market (price moves; sub-types correlation, political/legal, gap); capital (loss of principal, more than principal on margin); technology (4 hours unscheduled downtime in any 12 months; notify MAS within 1 hour of a severe incident; cyber hygiene list); credit (obligor default; cut exposure); liquidity (cannot meet short-term obligations; wider spreads in thin markets); regulatory (rule changes, Volcker Rule); interconnected (systemic, 2008); MAS CRAFT supervision; AML/CFT governance at board level.
6.1 Why this chapter matters
•A CMS licence holder and its representatives who recommend a capital markets product must have a reasonable basis for the recommendation (FAA s.36; FAA-G08 para 5). The duty does not apply when the firm merely executes the client's instruction, and a dealer giving execution-related advice on a listed excluded investment product is exempt under FAR reg 33A if it gives the rationale for the advice and tells the client the advice ignores his objectives and needs, so he must judge suitability himself.
•Execution-related advice (FAR reg 33A(8)) is advice on a listed EIP that is solely incidental to the dealer's execution activities with no discrete fee. Charge a separate fee and it is no longer execution-related.
•Trap: the exemption is for listed EIPs. Advice on SIPs is never execution-related advice.
6.2 Analysis of market information
•Three methods. Fundamental analysis studies the financials of a company or industry through ratios and valuation models to find intrinsic value, and is usually applied to equities with a long horizon. Technical analysis reads historical price movements on charts and suits short horizons where fluctuations matter more. Global macro analysis interprets large-scale events: interest rate trends, government policy, political change, international relations.
•Market intelligence now floods in from news media, broker subscriptions and third-party research. The firm must still conduct due diligence on a regular basis to ensure the information is objective and has a reasonable basis. The guide's example: a negative research report was tested by analysing its data, checking the research firm's track record (six months old) and the writer's background and motivation (a recently dismissed ex-employee) before it was set aside.
•Takeaway: long term means fundamentals, short term means technicals, and every outside report gets a credibility check.
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