Whole Section

  • Practice Note 4.15.2(d) Understanding a Customer's Risk Appetite and Investment Objectives

    • 1. Introduction

      • 1.1

        Rule 4.15.2(d) states that prior to opening a customer account, a Trading Member shall satisfy itself that it has understood each customer's risk appetite and investment objectives (if applicable).

        Added on 3 June 20193 June 2019.

      • 1.2

        This Practice Note provides guidance on the procedures to understand a customer's risk appetite and investment objectives.

        Added on 3 June 20193 June 2019.

    • 2. Risk Appetite and Investment Objectives

      • 2.1

        Investment objectives of a customer would include:

        (a) the types of securities or futures contract that the customer may want to trade in, such as:
        (i) securities or futures contracts listed or quoted on SGX-ST, and
        (ii) securities offered in reliance on the exemptions under Sections 274 or 275 of the SFA, where the requirement to lodge a prospectus or profile statement with the Authority before making an offer of the securities does not apply;
        (b) such other objectives prescribed by the Relevant Regulatory Authority.

        Added on 3 June 20193 June 2019.

      • 2.2

        Trading Members that hold a Capital Markets Services Licence should bear in mind the effect of Sections 274, 275 and 276 of the SFA. If a customer wants to trade in a security that is offered in reliance on the exemptions under Sections 274 or 275 of the SFA, Trading Members should:

        (a) explain to the customer the effect of Sections 274, 275 and 276 of the SFA, and the definition of "Relevant Person" under Section 275 of the SFA;
        (b) obtain documents to satisfy themselves that the customer is an institutional investor or a Relevant Person; and
        (c) prominently disclose to the customer in writing that:
        (i) the aforesaid security is one that is offered in reliance on the exemptions under Sections 274 or 275 of the SFA,
        (ii) for such a security, the requirement to lodge a prospectus or profile statement with the Authority and SGX-ST does not apply.

        Added on 3 June 20193 June 2019.

      • 2.3

        For the avoidance of doubt, the above requirements are applicable to the trading of global depository receipts ("GDRs") which are offered in reliance on the exemptions under Sections 274 or 275 of the SFA. Trading Members should also observe relevant provisions of the Listing Manual in relation to GDRs.

        Added on 3 June 20193 June 2019.

      • 2.4

        All the documents obtained under paragraph 2.2(b) should form part of the permanent records of the Trading Members. If the customer's account carried on the books of the Trading Member is closed, the documents should be kept for at least the minimum period required by law.

        Added on 3 June 20193 June 2019.