You will be able to check a broker on the MAS Financial Institutions Directory and explain how your assets are protected.
Nadia's two candidates are her bank's brokerage and the app from the MRT ads. The app looks polished, its reviews are good and a colleague uses it. None of that tells her whether the company behind it is allowed to hold her money, or what would happen to her ETF if the company shut down next year.
Both questions take about ten minutes to answer, and you only have to answer them once per broker. This lesson shows you how.
A firm that deals in securities for customers in Singapore must be regulated by the Monetary Authority of Singapore. For most brokers, that means a capital markets services licence, issued by MAS for activities such as dealing in capital markets products. Banks are a slightly different case. A bank is licensed as a bank and can deal in securities under that licence, and many bank brokerages are run through a separate company that holds its own capital markets services licence.
Either way, the firm should appear in the MAS Financial Institutions Directory, which is free to search on the MAS website. If a firm offering to trade shares for you is not in the directory, stop there.
The common mistake is to search for the app's name. Apps and brands often have a different name from the legal company that holds the licence. Nadia typed the app's brand name into the directory and got no result. For a moment she thought it was unlicensed.
Then she opened the app's terms and conditions and scrolled to the bottom. The legal entity was listed there, with a name ending in "Pte. Ltd.", along with its company registration number. She searched that name and found it, holding a capital markets services licence with dealing in capital markets products among its activities. Her bank's brokerage showed up under its own company name too.
When you search, check three things on the directory entry. Is the company name exactly the one in the broker's terms? Does the licence or status cover dealing in securities? And does the website address in the directory match the one you're using? Scammers copy real firms' names and logos, so a matching name on a fake website proves nothing.
While you're on the MAS website, search the MAS Investor Alert List as well. It names entities that may have been wrongly taken to be licensed or regulated by MAS. A firm on that list is a firm to walk away from. Scam-proof your money goes further in lesson 4.2, Check a firm with MAS before you invest a dollar.
A licence means the broker is supervised. It doesn't mean the broker can never fail. So it's worth knowing in advance what would happen to your ETF.
If your shares sit in your CDP account, they are registered in your name, as lesson 1.1 explained. They are not the broker's property, so they are not part of what the broker's creditors can claim. You would link your CDP account to another broker and carry on. Any cash owed to you by the failed broker, such as money from a sale that hadn't been paid out yet, is a separate question.
If your shares sit with a custodian, the broker or its nominee is the registered holder. Rules require brokers to keep client assets apart from their own, in separate custody and trust accounts, so your shares should not be mixed into the firm's money. But separation is a rule, and when a firm fails, someone has to check that it was followed. An administrator or liquidator has to match the records to the assets before handing anything back. That can take months, and you may not be able to sell during that time. If the records turn out to be wrong, getting everything back becomes harder.
Cash is a third thing to check. Deposit insurance from SDIC covers eligible deposits at member banks and finance companies. Don't assume it covers cash you leave sitting with a broker. Check the broker's terms and the SDIC website, and keep idle cash in a broker account small if you can.
None of this means a custodian account is unsafe. It means the protection works differently, and the CDP route has fewer steps between a failure and getting your shares back.
Everything above is about Singapore-licensed brokers holding SGX investments. Many app brokers also offer US shares, held through custodians abroad under foreign rules. That adds layers this course doesn't cover. Investing in US and global markets from Singapore handles it in lesson 1.3, What happens to your shares if your broker fails, and lesson 1.4, Check your broker's licence and custody set-up.
For a first ETF bought on SGX, the checks are simple. Find the legal company name, confirm it in the directory, check the Investor Alert List, and know whether your shares will sit in your name or the broker's. Take the two brokers you picked in lesson 1.2 and run the directory search for each one now, starting from the legal name in their terms rather than the brand on the app.
Look up both brokers from lesson 1.2 in the MAS Financial Institutions Directory and note the licence each one holds.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).