Customer Knowledge Assessment

Kim Heng

Monetary Authority of Singapore requires every consumer to complete a customer knowledge assessment (CKA)  in order to assess whether the consumer has the relevant knowledge or experience to understand the risks and features of the product they are buying. This new measures will take effect  1 January 2012.

You will pass the CKA if you answer “YES” to at least 1 of the following 3 questions.

  1. Have at least 6 transactions in unit trusts or investment linked products in the last 3 years;
  2. Have a diploma or higher qualification in relevant courses like accountancy, actuarial science, business, capital markets, commerce, economics finance, financial engineering, financial planning, computational finance, insurance and any professional finance-related qualifications;
  3. Have a minimum of 3 consecutive years of working experience in the past 10 years in the development, structuring, management, sale, trading, or research and analysis and provision of training on investment products. (Work experience in accountancy, actuarial science, treasury, financial risk management and legal work in financial areas is also considered relevant experience). *Support functions in the above mentioned areas and general support functions such as operations, HR, corporate services and IT will not be considered as relevant experience.

There will be a handful who may not pass this test and they are mainly the so-called less educated and vulnerable groups of consumers. It does not mean that the consumer cannot buy if they did not pass the test but rather its meant to remind the financial adviser that extra care and dilligence should be exercise when dealing with this group of consumers. As a company, an officer who is independent of the financial adviser is require to conduct some checks with this group of consumer to ensure that they are clear about the investment risk and understand what they are buying before allowing the trade to proceed.

 There are also some investment products are excluded from CKA, such as:

  1. Shares
  2. Fully-paid depository receipts representing shares
  3. Subscription rights pursuant to rights issues
  4. Company warrants
  5. Units in business trusts
  6. Units in real estate investment trusts
  7. Debentures (other than asset-backed securities & structured notes)
  8. Life insurance policies (other than investment-linked life insurance policies)
  9. Contracts or arrangements for the purpose of foreign exchange trading (other than derivatives of foreign exchange contracts and leveraged foreign exchange trading)
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