MAS Tightens Reporting of Misconduct of Financial Advisers

 

Background

On 30 December 2025, MAS introduced MAS Notice FAA-N27 (“Notice”), which replaces Notice FAA-N14 and updates the framework for reporting misconduct by representatives of licensed and exempt financial advisers. The Notice introduces structured timelines, broader definitions of reportable acts, and formalized requirements for internal investigations. It affects all financial advisers, including their current and former representatives and supervisors. The Notice comes into effect on 1 January 2027.

 

Key Observations

a) Identified Compliance Gaps & Changes

  • Inconsistent Investigation: MAS identified a need for standardized internal investigations to ensure misconduct is accurately documented or refuted before reporting. This includes a new requirement to assess the necessity of lodging police reports for criminal acts like fraud or bribery.
  • Static Reporting Limitations: Previous frameworks lacked a structured update mechanism for significant developments occurring after an initial filing. This change ensures MAS receives a continuous stream of data regarding police investigation outcomes and updates in internal findings.
  • Ambiguity in “Misconduct”: Definitions are now expanded to explicitly include “gross negligence” and “inadequate disclosure”. This clarifies that even unintentional omissions are reportable if they have a materially adverse impact on client interests.
  • Delayed Representative Notification: Gaps in informing representatives of reports made against them led to the introduction of a mandatory 21-day notification window. To uphold due process, representatives are provided with the specific details of the allegations filed with the authority.

 

b) Regulatory Expectations to Address Gaps

  • Mandated Investigative Standards: Firms must now incorporate client interviews and sales document audits into their internal investigations. These processes must also account for any appeals submitted by the representative to ensure a fair assessment.
  • Update Requirements: Any “significant development,” such as a decision to take corrective action or a change in investigation status, must be reported within 21 calendar days. This forces firms to maintain active oversight of ongoing cases rather than treating reports as one-off filings.
  • Formalized Record Keeping: Financial advisers must maintain detailed records of investigative facts, evidence, and corrective actions for at least five years. This includes documenting the basis for any decision to withhold reports from representatives due to potential prejudice to investigations.
  • Corrective Action Consistency: MAS expects firms to take proportional action not only against representatives but also their supervisors if misconduct stems from improper oversight. This reinforces the “chain of command” responsibility, ensuring that systemic supervisory failures are addressed alongside individual lapses

 

What’s Next?

Management must prepare for a shift from reactive reporting to active compliance monitoring. Future developments will likely pressure financial institutions to:

  • Audit Supervisory Chains: Management must ensure supervisors are held accountable for representative lapses to avoid regulatory penalties for “improper supervision”. This may require redesigning performance metrics to include compliance health.
  • Update Electronic Systems: Firms need to integrate their internal reporting with MAS’s new electronic filing system well before the 2027 effective date. Failing to use the prescribed electronic form could result in non-compliance and subsequent fines.
  • Manage Reputation Risk: Mandatory provision of misconduct reports to representatives may lead to increased internal appeals and potential employment litigation. Firms will need robust legal and HR frameworks to handle these disputes efficiently.

 

How Can We Help?

Capital Governance can:

  • Perform gap analysis against MAS expectations for recruitment, monitoring, training, investigating and outsourcing.
  • Strengthening of policies, and monitoring frameworks for representatives and assistants to meet the latest regulation changes.
  • Assist as an independent party in the investigation of the misconduct by the representatives.

And more…

 

Contact Us Now if you would like to discuss how we can support your compliance with the latest updates by MAS. Find out more here