Chapter 1 — Payment Systems and Designation of Payment Systems
Operation of payment systems
(1) No person shall operate any payment system unless he has complied with the requirements of subsection (3) and has received a written notification from the Bank that he has so complied.
(2) The written notification under subsection (1) is not an approval or endorsement of the payment system by the Bank.
(3) A person referred to in subsection (1) shall submit to the Bank the documents and information as prescribed by the Bank, together with such fees as may be prescribed by the Bank.
(4) Notwithstanding subsection (1), the Bank may, by written notice, prohibit a person from operating any payment system where—
(a) the payment system is detrimental to the reliable, safe, efficient and smooth operation of the payment systems of Malaysia; or
(b) the prohibition is in the interest of the public.
(5) The Bank shall give the person referred to in subsection (4) a reasonable opportunity to make representations before making a decision to impose the prohibition under that subsection. Designation of payment systems
(1) The Bank may, by order published in the Gazette, designate a payment system as a designated payment system if the Bank is of the opinion that—
(a) the payment system poses systemic risk; or
(b) the designation is necessary to protect the interest of the public.
(2) The Bank may, in considering whether to designate a payment system as a designated payment system under subsection (1), inspect the premises, equipment, machinery, apparatus, books or other documents, or accounts and transactions relating to the payment system, upon giving written notice to the operator. Compliance with Chapter 2
(1) Where a payment system is prescribed as a designated payment system under subsection 6(1), the operator of that designated payment system shall comply with the provisions of Chapter 2.
(2) Ihe Bank may, upon the request of an operator of a designated payment system, allow for an extension of time, with or without conditions, for the compliance with any of the requirements in Chapter 2. Power to revoke designation
(1) The Bank may, by order published in the Gazette, revoke • the designation of a payment system if the Bank is of the opinion that—
(a) the designated payment system no longer poses any systemic risk; or
(b) it is no longer in the interest of the public that the system be designated.
(2) The Bank shall give the operator a reasonable opportunity to make representations before making a decision to revoke the designation.
Chapter 2 — Requirements for Operation of Designated Payment Systems
Disqualification of director
(1) A person is disqualified from being appointed as a director of an operator of a designated payment system if—
(a) that person has been adjudged a bankrupt, or has suspended la omentside halaysia, widhin five years pdito to tihe date of the appointment;
(b) that person has been convicted of an offence under this Act or such an offence has been compounded against him;
(c) that person has been convicted of an offence under the Banking and Financial Institutions Act 1989, Insurance Act 1996 [Act 553], Islamic Banking Act 1983 [Act 276], Takaful Act 1984 [Act 312], Money-Changing Act 1998 [Act 577), Exchange Control Act 1953 [Act 17], Central Bank of Malaysia Act 1958, Development Financial Institutions Act 2002 [Act 618], Anti Money Laundering Act 2001 [Act 613], Securities Industry Act 1983, Futures Industry Act 1993, Companies Act 1965 [Act 125] or under any written law involving fraud or dishonesty which is punishable with, as the case may be-
(i) imprisonment for one year or more, whether by itself, or in lieu of, or in addition to, a fine; or
(ii) a fine of one million ringgit or more, or such offence has been compounded against him;
(d) that person has been a director or chief executive officer of any company which has been convicted of an offence under any written law during his tenure of office unless he proves that such offence was committed without his knowledge or consent and he was not in a position to prevent the offence;
(e) there has been made against that person an order of detention, supervision, restricted residence, banishment or deportation, or if there has been imposed on him any form of restriction or supervision by bond or otherwise, under any law relating to the prevention of crime, or to preventive detention for the prevention of crime or drug trafficking, or to restricted residence, or to banishment or immigration; or
(f) that person has been a director or chief executive officer of a corporation incorporated in or outside Malaysia which is being or has been wound up.
(2) No person shall accept an appointment as a director of an operator of a designated payment system, and no such operator shall appoint a person as a director of such operator, if that person is disqualified under subsection (1).
Appointment of chief executive officer
(1) A person is disqualified from being appointed or remaining as chief executive officer of an operator of a designated payment system it—
(a) that person would be disqualified from being appointed a director under subsection 9(1);
(b) that person is not available for full time employment; or
(c) that person is carrying on any other business or vocation, except as a non-executive director or shareholder of another company.
(2) No person shall accept an appointment as chief executive fficer of an operator of a designated payment system, and no suc perator shall appoint a person as chief executive officer of suc operator, if that person is disqualified under subsection (1).
(3) An operator of a designated payment system shall appoint a chief executive officer who shall be—
(a) an individual; and
(b) resident in Malaysia during the period of his appointment. Exceptions
(1) A person who is disqualified as a director or chief executive officer of an operator of a designated payment system on the ground specified in paragraph 9(1)(f) may, with the written concurrence of the operator in which he is holding office or is to be appointed, apply to the Bank in writing to be exempted from that paragraph and the Bank may grant such exemption, subject to such conditions as it considers fit to impose.
(2) During the pendency of any criminal proceedings in any court for an offence referred to in paragraph 9(1)(b) or (c) against a director or chief executive officer of an operator of a designated payment system, that director or chief executive officer shall not act in that capacity, or hold any other office, or act in any other capacity, in any payment system or in any manner, directly or indirectly, be concerned with any business or affairs of any payment system unless authorized in writing by the Bank to such extent and subject to such conditions as the Bank may impose.
(3) For the purposes of subsection (2), criminal proceedings shall be deemed to be pending from the date that the accused person is first charged in court for the offence until the date of the final conclusion of the proceedings, whether in a court of original jurisdiction or, in the event of an appeal by any party, in a court of final appellate jurisdiction. Effect of disqualification
Where a person becomes disqualified under subsection 9(1) or 10(1) after his appointment—
(a) he shall immediately cease to hold office; and
(b) the operator of the designated payment system shall immediately terminate his appointment, and that person, notwithstanding any contract of service, shall not be entitled to claim any compensation for his loss of office or termination of appointment. Governance arrangements
The operator of a designated payment system shall establish adequate governance arrangements which are effective, accountable and transparent to ensure the continued integrity of such designated Operational arrangements
An operator of a designated payment system shall establish the following operational arrangements:
(a) rules and procedures setting out the rights and liabilities of the operator and the participant and the financial risk. he participant may incur:
(b) procedures, controls and measures for the management of credit, liquidity and settlement risk, including rules determining the time when a payment instruction and a settlement is final;
(c) criteria for participation in the designated payment system;
(d) measures to ensure the safety, security and operational reliability of the designated payment system including contingency arrangements. Changes to designated payment systems
(1) Where the Bank has prescribed documents and information under subsection (2), an operator of a designated payment system shall submit to the Bank particulars of any proposed change to the documents or information within thirty days prior to the making of such change.
(2) The Bank, in prescribing the documents and information to be submitted under subsection 5(3), may also prescribe the documents and information to which subsection (1) shall apply.
(3) Where it appears to the Bank that such change is inappropriate, the Bank may, before the expiry of the thirty days referred to in subsection (1)-
(a) prohibit the operator from making such change; or
(b) require the operator to make any other changes as the Bank may specify.
Chapter 3 — Finality of Payment and Netting Arrangement
For the purposes of this Chapter— "bilateral netting" means a netting arrangement between two parties; "multilateral netting" means a netting arrangement that has more than two parties; "payments netting" means a netting arrangement where on any day on which amounts are due between the parties in respect of one or more transactions, the party with the higher gross payment obe gatios paymeint ted toations othehe her pasty the net amount of
"close out netting" means a netting arrangement under which, following the occurrence of certain events specified by the parties to the arrangement, all or any of the transactions referred to in the netting arrangement may be terminated, and where so terminated the termination value becomes due and payable; "netting by novation" means a netting arrangement between the parties to a series of transactions where an account of amounts due is kept and the rights and obligations of the parties in respect of the account are continuously extinguished and replaced by a new single amount payable by one party to the other; "netting arrangement" means an arrangement in writing to convert several claims or obligations into one net claim or one net obligation and includes bilateral netting, multilateral netting, netting by novation, close out netting, payments netting or a combination thereof; "insolvency administrator" includes a receiver, manager, receiver and manager, liquidator, provisional liquidator, judicial manager, curator, special administrator or any other person, by whatever name called, authorized under any law in or outside Malaysia to take control of a person's property for the benefit of that person's creditors in the event that the person is, or is likely to become, insolvent; "designated payment system" includes a payment system operated by the Bank under the Central Bank of Malaysia Act 1958. Application
(1) The provisions of this Chapter shall apply to-
(a) any payment or settlement instruction sent through a designated payment system; and
(b) any netting arrangement, in respect of claims or obligations arising from a payment or settlement instruction that is final under subsection 19(1), entered into between an operator and a participant or between participants only in respect of a designated payment system.
(2) Any written law relating to bankruptcy and insolvency shall continue to apply, but where there is any conflict or inconsistency between the provisions of this Chapter and the written law relating to bankruptcy and insolvency, the provisions of this Chapter shall prevail.
Payment or settlement instruction made after appointment of insolvency administrator
This Chapter shall not apply in relation to any payment or settiement instruction which is sent through a designated payment system after the expiry of the day on which an insolvency administrator is appointed in respect of an operator or participant of a designated payment system. Finality of payment and netting arrangement
(1) A payment instruction or settlement shall be valid and enforceable by and against an operator or participant of a designated payment system and shall be final and shall not be revoked, reversed or set aside by any person from the time the payment instruction or settlement is determined to be final under the rules of the designated payment system required to be established under paragraph 14(b) and no order shall be made by any court for the rectification or stay of such payment instruction or settlement.
(2) A netting arrangement shall be valid and enforceable and an operator or participant of a designated payment system shall do whatever is permitted or required under the netting arrangement in order to give effect to the netting arrangement.
(3) Any payment or settlement obligations owed to an operator or participant of a designated payment system under the netting arrangement that has not been discharged—
(a) is provable in insolvency proceedings; and
(b) may be recovered for the benefit of the creditors.
(4) Without limiting the generality of subsection 17(2), any payment instruction or settlement that is final and irrevocable under subsection (1) and any netting arrangement that is valid and enforceable under subsections (2) and (3) shall be given effect notwithstanding anything to the contrary contained in—
(a) sections 223 and 224 of the Companies Act 1965 in relation to avoidance of dispositions of property;
(b) section 296 of the Companies Act 1965, section 59 of the Bankruptcy Act 1967 [Act 360] or subsection 40(1) of the Pengurusan Danaharta Nasional Berhad Act 1998 [Act 587] in relation to the disclaiming of onerous property;
(c) section 219 of the Companies Act 1965 and section 47 of the Bankruptcy Act 1967 in relation to the time of commencement of insolvency;
(d) section 293 of the Companies Act 1965 and section 53 of the Bankruptcy Act 1967 in relation to undue preference; and
(e) section 222 of the Companies Act 1965 and section 10 of the Bankruptcy Act 1967 in relation to the power to stay or restrain proceedings. Preservation of rights
For the avoidance of doubt, it is declared that the provisions of this Chapter shall not restrict or preclude any person from enforcing his rights under the law in so far as it does not affect the finality of payment instruction or settlement or the validity and enforceability of a netting arrangement under this Chapter. Non-recognition of insolvency order by foreign court
Notwithstanding any other written law or rule of law, a court shall not recognize or give effect to an order of a court exercising jurisdiction under the law of insolvency outside Malaysia in so far as the making of that order would be inconsistent with or contrary to the provisions of this Chapter. Requirement to notify in the event of insolvency, etc.
(1) Where an operator of a designated payment system—
(a) is insolvent or is likely to become insolvent;
(b) has become or is likely to become unable to meet any or all of his obligations; or
(c) has suspended payments or compounded with his creditors, such operator shall immediately notify the participants of the designated payment system.
(2) Where a participant of a designated payment system—
(a) is insolvent or is likely to become insolvent;
(b) has become or is likely to become unable to meet any or all of his obligations; or
(c) has suspended payments or compounded with his creditors, such participant shall immediately notify the operator who shall notify the other participants of the designated payment system.
Source: Laws of Malaysia, Attorney General's Chambers of Malaysia (lom.agc.gov.my). Not a copy of the Gazette printed by the Government Printer (Interpretation Acts 1948 and 1967, s 61).
