Interpretation
(1) In this Part, unless the context otherwise requires—
“investor” means a person, including a custodian and an underwriter, who is the owner of securities issued by a mutual
fund but does not include a person who only takes the initiative in forming or organising the business of the mutual fund and does not have any ownership in the fund;
“operator”, in respect of a mutual fund, means—
(a) where the mutual fund is a corporation, a director of that corporation;
(b) where the mutual fund is a limited partnership, a general partner in that limited partnership;
(c) where the mutual fund is a limited liability partnership, the designated partner in that limited liability partnership; or
(d) where the mutual fund is a unit trust, a trustee of that trust;
“promoter” means a person acting alone or in conjunction with others directly or indirectly who takes the initiative in forming or organising the business of a mutual fund, but does not include a custodian or an underwriter who receives underwriting commission without taking part in the founding or organising of the mutual fund business;
“registered public fund” means a public fund registered under section 33;
“shares” means one or more of the shares in the share capital of a mutual fund company including, in the case of a company limited by guarantee, the interest of a member of such company and includes an interest in a mutual fund partnership and a unit in a mutual fund unit trust.
DIVISION 2 — MUTUAL FUNDS
SUBDIVISION 1 — PRIVATE FUNDS
Notification by private funds
A private fund shall be entitled to carry on business or arrange or administer its affairs by giving notice in writing to
the Authority setting out the details of the scope and nature of its business.
Private fund to lodge an information memorandum or such other offering document
(1) A private fund shall lodge the information memorandum or such other offering document relating to the private fund purporting to describe the business and affairs of the private fund with the Authority.
(2) The information memorandum or such other offering document referred to in subsection (1) shall be lodged by a private fund through a licensed entity which shall be reasonably satisfied that—
(a) the information memorandum or such other offering document being lodged refers to a private fund as defined under this Part; and
(b) there is no element of fraud involved in the establishment of the private fund.
(3) An information memorandum or such other offering document lodged by a private fund shall be deemed to be a prospectus in so far as it relates to the liability of that private fund for any statement or information that is false or misleading or from which there is a material omission.
(4) Upon receipt of the information memorandum or such other offering document under subsection (1), the Authority shall enter the particulars of the same in the registers maintained pursuant to Division 5 of this Part.
Exclusion of liability for errors or omission in the information memorandum or such other offering document
Where an information memorandum or such other offering document is lodged by the private fund with the Authority under section 29, neither the Authority nor any of its officers
or employees shall be liable for any loss or damage suffered by any person or persons by reason of any error, mis-statement or omission of whatever nature appearing therein.
SUBDIVISION 2 — PUBLIC FUNDS
Public funds shall be registered
(1) No public fund shall carry on business or arrange or administer its affairs unless it has been granted registration under paragraph 33(1)(a).
(2) Subject to subsection (3), no proposed public fund shall carry on business or arrange or administer its affairs unless it has been granted provisional acceptance under paragraph 33(1)(b).
(3) A proposed public fund to which a provisional acceptance has been granted under paragraph 33(1)(b) shall not carry on business or arrange or administer its affairs without the prior written consent of the Authority.
Application by public funds
(1) An application to the Authority under subsection 31(1) or subsection 31(2) shall be accompanied by the following:
(a) a statement setting out the scope and nature of the business to be carried on by the applicant in or from within Labuan;
(b) the instrument by which the applicant is constituted or such other proof as the Authority may require to be satisfied that the applicant is lawfully constituted under the laws of Malaysia relating to Labuan or under the laws of any recognised country or jurisdiction;
(c) a statement on the following:
(i) the address of the applicant’s place of business and its address for service relating to Labuan;
(ii) the name and address of a person in Labuan who is authorised to represent the applicant and to accept service on its behalf;
(iii) the address of the applicant’s place of business outside Labuan; and
(iv) the names, addresses and relevant experience of the directors of the fund;
(d) a signed declaration by the directors of the applicant fund on confidentiality and secrecy; and
(e) where available, a copy of the prospectus, either in draft or final form, of the public fund.
(2) The public fund or proposed public fund shall submit such other information as may be specified by the Authority from time to time.
(3) If any change is made or occurs in respect of any information under subsection (1) as specified by the Authority, the applicant, after being granted registration or provisional acceptance as the case may be, shall within thirty days after the change occurs lodge with the Authority a notice specifying the change.
Power to grant or refuse registration of public funds
(1) The Authority may grant or refuse to grant—
(a) registration of a public fund; or
(b) provisional acceptance of a proposed public fund.
(2) A grant under subsection (1) may be made subject to any terms, conditions, limitations or restrictions.
(3) A provisional acceptance granted under paragraph (1)(b) shall be valid and effective for a period not exceeding six months from the date on which it is granted.
(4) A provisional acceptance may be renewed for a period not exceeding three months upon application being made to the
Authority and accompanied by such documents or information as the Authority may require.
(5) Notwithstanding the grant of a provisional acceptance under paragraph (1)(b) to a proposed public fund, the Authority may grant registration to such a proposed public fund as a public fund under paragraph (1)(a).
Registration procedure
(1) Where the Authority grants registration of a public fund under paragraph 33(1)(a), it shall—
(a) register the public fund in the register maintained under Division 5 of this Part; and
(b) issue a certificate of registration to the public fund.
(2) Where the Authority grants a provisional acceptance under paragraph 33(1)(b), the promoter of the proposed public fund shall, before the expiry of the provisional acceptance period or renewed provisional acceptance period deliver to the Authority—
(a) the provisional acceptance of the Authority;
(b) proof satisfactory to the Authority that the proposed public fund is lawfully constituted in Labuan or any recognised country or jurisdiction; and
(c) the information referred to in subsection 32(1).
(3) If the Authority is satisfied that the proposed public fund referred to in subsection (2) has complied with the requirements of that subsection it may grant registration to the public fund .
(4) Where the Authority grants registration under subsection (3), it shall register the public fund in the register maintained under Division 5 of this Part and issue a certificate of registration.
Prospectus relating to public fund
(1) No registered public fund shall, in or outside Labuan, make an offer of securities unless prior to such offer it has lodged
a prospectus with the Authority in accordance with the prospectus requirements under section 11.
(2) For the avoidance of doubt, the civil and criminal liabilities for mis-statements in prospectuses provided for under Part II shall equally apply to a prospectus lodged under this section.
Investors’ rights
(1) If a registered public fund publishes a prospectus or any amendment thereto that contains any misrepresentation relating to any of the matters required to be disclosed under subsection 11(5), a person who purchased any securities pursuant to such prospectus or amendment thereto is deemed to have relied upon the misrepresentation and shall have the rights provided in subsection (2).
(2) A person referred to in subsection (1) may elect to exercise a right of action—
(a) for the rescission of the purchase; or
(b) for damages,
jointly and severally against the fund and every person who, while aware of the misrepresentation, signed the prospectus or amendment thereto and consented to its publication and lodgement or caused it to be signed or published and filed.
(3) For the purposes of this section, “misrepresentation” means—
(a) any untrue or misleading statement of any of the matters required to be disclosed referred to subsection (1); or
(b) an omission to disclose any of such matters.
(4) No person shall be liable under this section if he proves that the purchaser purchased the shares offered by the prospectus or amendment thereto with knowledge of the misrepresentation.
(5) The right of action for rescission or damages conferred by subsection (2) is in addition to any other right which the aggrieved party may have at law.
Limitation
Notwithstanding any other written law to the contrary, an action under subsection 36(2) may not be commenced after—
(a) one hundred and eighty days from the day on which the aggrieved party first had knowledge of the misrepresentation; or
(b) one year from the date of the purchase transaction that gave rise to the cause of action,
whichever is earlier.
Certificate of compliance
Every registered public fund which carries on business outside Labuan under the laws of any recognised country or jurisdiction shall, every year, within ninety days of the end of its financial year, lodge with the Authority a certificate of compliance or an equivalent document by whatever named called from the competent authority that is responsible for the regulation and supervision of the conduct of its business in that recognised country or jurisdiction.
Foreign public fund may be managed or administered in Labuan
A public fund lawfully registered under the laws of any recognised country or jurisdiction need not be registered as a public fund under section 33 so long as the public fund is administered or managed in Labuan by a fund administrator, a custodian, a trustee or a fund manager, who is licensed, registered or eligible under this Part.
SUBDIVISION 1 — FUND MANAGERS AND FUND ADMINISTRATORS
Licensing of fund managers
(1) No person shall carry on business as a fund manager of a public fund unless that person is a Labuan company who has been granted a licence to act as a fund manager under this section.
(2) Notwithstanding subsection (1), the following persons may carry on business as a fund manager of a public fund:
(a) a person who is and continues to be a qualified and authorised manager of mutual funds under the laws of any recognised country or jurisdiction and has received written permission from the Authority to carry on business as manager of public funds; or
(b) a bank licensee.
(3) A fund manager who is carrying on fund management activities in relation to a private fund only is not required to be licensed under this Part.
Licensing of fund administrators
(1) No person shall carry on business as a fund administrator of a public fund unless that person is a Labuan company or Labuan trust company and has been granted a licence to act as a fund administrator under this Act.
(2) Notwithstanding subsection (1), the following persons may carry on business as a fund administrator of a public fund:
(a) a bank licensee;
(b) a Labuan trust company;
(c) a securities licensee under Part IV;
(d) a management company licensed under Part VIII; or
(e) a person who is and continues to be a qualified and authorised fund administrator of mutual funds under the laws of any recognised country or jurisdiction and has received written permission from the Authority to carry on business as a fund administrator of public funds.
(3) A fund administrator who is carrying on fund administration activities in relation to a private fund only is not required to be licensed under this Part.
Application for fund manager’s licence
An application for a licence to carry on business as a fund manager of a public fund shall be—
(a) made in such form as may be specified by the Authority; and
(b) accompanied by—
(i) particulars of the financial and human resources and administrative facilities available to the applicant for the competent and efficient conduct of its business;
(ii) a statement on the following:
(aa) the address of the applicant’s place of business and its address for service relating to Labuan;
(bb) the name and address of a person in Labuan who is authorised to represent the applicant and to accept service on its behalf; and
(cc) the address of the applicant’s place of business outside Labuan; and
(iii) such information or documents as the Authority may require for the purpose of determining the application.
Application for fund administrator’s licence
An application for a licence to carry on business as a fund administrator of public funds shall be—
(a) made in such form as may be specified by the Authority; and
(b) accompanied by such information or documents as the Authority may require for the purpose of determining the application.
Power to grant or refuse licence
(1) Upon receiving an application, the Authority may grant or refuse to grant a licence.
(2) The grant of a licence may be made subject to any terms, conditions, limitations or restrictions.
(3) Except with the written consent of the Authority no change shall be made in respect of the identity, residence, domicile, ownership or shareholding of the fund manager or fund administrator during the period of operation of the licence.
(4) The Authority shall not grant—
(a) a licence to a fund manager of a public fund; or
(b) a licence to a fund administrator of a public fund,
unless it is satisfied that the applicant is a fit and proper person to engage in the business of fund management or fund administration of mutual funds.
SUBDIVISION 2 — TRUSTEES OR CUSTODIANS
Eligibility of trustees or custodians of public funds
(1) No person shall carry on business as a trustee of a public fund unless that person is a Labuan trust company.
(2) No person shall carry on business as a custodian of a public fund unless it is a bank licensee or a Labuan trust company.
(3) This section does not apply to a person who is and continues to be a qualified and authorised trustee or custodian of public funds under the laws of any recognised country or jurisdiction and has received written permission from the Authority to carry on business as a trustee or custodian of a public fund.
SUBDIVISION 3 — GRANT OF LICENCE OR REGISTRATION
Licence or registration
A licence or registration granted under this Part shall—
(a) be in such form as may be specified;
(b) remain in force until it is revoked; and
(c) be admissible in all courts as prima facie evidence of the facts stated in it.
Duties of fund managers and fund administrators of public funds
The fund manager or the fund administrator of a public fund and its officers shall, in exercising their powers and duties—
(a) act honestly;
(b) exercise the degree of care and diligence that would be reasonably expected of a person in that position;
(c) act in the best interests of the investors in the public fund and, where there is a conflict between the interest of the investors and their own interests, give priority to the investors’ interests;
(d) treat the investors who hold interests of the same class equally and participants who hold interests of different classes fairly;
(e) not make use of information acquired through being a fund manager or fund administrator or its officer to—
(i) gain an improper advantage for themselves or another person; or
(ii) cause detriment to the investors in the public fund;
(f) ensure that all payments out of the property of the public fund are made in accordance with the constituent documents of the public fund, this Act and any regulations;
(g) report to the Authority, as soon as practicable after it becomes aware of any breach of—
(i) this Act and any regulations; or
(ii) the public fund’s constituent documents that has had, or is likely to have, a materially adverse effect on the interests of the investors; and
(h) take reasonable care to make and retain adequate records of all matters, transactions and dealings, including accounting records.
Duties of fund managers, fund administrators, trustees or custodians and directors under applicable law
The duties of the fund manager, fund administrator, trustee or custodian and their directors imposed on them under this Division are in addition to and not in derogation from the duties which are otherwise imposed on them by any applicable law.
Specific duties of fund managers of public funds
(1) The fund manager of a public fund shall—
(a) ensure that a written agreement is entered into with each client before transactions are carried out on behalf of a client;
(b) understand each client’s investment objectives, instructions, risk profile and investment restrictions, where applicable, which shall be reassessed and updated at least annually;
(c) exercise diligence and thoroughness in, and have reasonable and adequate basis for, preparing the investment policy or investment recommendation;
(d) obtain each client’s approval for the investment policy or investment recommendation prior to its implementation;
(e) provide each client with full and accurate information in order to make an informed investment decision when approving the investment policy or investment recommendation;
(f) avoid any misrepresentation in any investment policy or investment recommendation; and
(g) ensure that sufficient monies and properties are available in the client’s account to carry out transactions.
(2) A written agreement referred to in paragraph (1)(a) shall cover amongst others, the following areas:
(a) the client’s investment objectives, instructions, risk profile and investment restrictions;
(b) notification of any significant change to the investment policy or investment recommendation;
(c) mode and manner of reporting to client;
(d) clear authorisation of discretionary management;
(e) frequency of written report for the performance and review of the client’s monies or properties against an appropriate benchmark;
(f) amount of fees and charges to be paid by the client;
(g) the fund manager’s intention to receive, or practice of receiving, soft commission;
(h) details of the custodian arrangement; and
(i) such other matters as may be specified by the Authority from time to time.
(3) A fund manager who contravenes subsection (1) commits an offence and shall, on conviction, be liable to a fine not exceeding one million ringgit or to imprisonment for a term not exceeding three years or to both.
Duty to segregate client’s assets
(1) A fund manager of public funds shall ensure that each client’s assets are deposited into a trust account and maintained by a custodian or a trustee or any other person as may be permitted by the Authority, as the case may be, not later than the next bank business day or such other day as may be specified by the Authority, following the day on which the fund manager receives the client’s assets.
(2) Where client’s assets that are required by this section to be deposited into a trust account are received by a fund manager in a place outside Malaysia, the fund manager may deposit such assets into a trust account maintained by it in that place.
(3) The trust account referred to in subsections (1) and (2) shall always be kept separate from those of the fund manager, and shall be so marked in the books of the fund manager relating to each client’s account, so that at no time shall such monies, property or other valuable consideration form part of or be mixed with the general assets of the fund manager, and all investments made by the company as trustee shall be so designated that the trusts to which the investments belong can be readily identified at any time.
(4) Client’s assets held in a trust account shall not be available for the payment of the debts of a fund manager or liable to be paid or taken in execution under an order or process of court for the payment of the debt of a fund manager.
(5) Nothing in this section shall be construed as taking away or affecting any lawful claim or lien which any person has against or upon any client’s assets held in a trust account or against or upon any client’s assets received for the purchase or from the sale of securities before such assets are deposited into the trust account.
(6) Any person who contravenes this section commits an offence and shall, on conviction, be liable to a fine not exceeding three million ringgit or to imprisonment for a term not exceeding five years or to both.
Duty of fund manager and custodian or trustee to be independent of each other
(1) The fund manager and the custodian or trustee of a public fund shall—
(a) be different persons and act independently of each other;
(b) not be a related corporation of the other; and
(c) not have executive directors or other officers in common.
(2) Any person who contravenes this section commits an offence and shall, on conviction, be liable to a fine not exceeding three million ringgit or to imprisonment for a term not exceeding five years or to both.
DIVISION 5 — REGISTERS AND ACCOUNTING
Registers
(1) The Authority may keep separate registers for—
(a) private funds;
(b) public funds; and
(c) fund managers and fund administrators of public funds.
(2) The registers referred to in subsection (1) may contain—
(a) the information required under sections 29, 32, 42 and 43 in respect of each person who has been granted a licence or registration or who has received written permission under this Act;
(b) the date of such licence, registration or written permission, as the case may be; and
(c) the date on which such licence or registration or written permission was revoked.
(3) The registers kept under this section shall be in such form as the Authority may determine.
(4) The Authority may issue to any person, upon request by the person, a certificate of compliance in such form, upon payment of such fee, as may be prescribed.
(5) No person exercising any power or discharging any duty under this Part shall, knowingly, have any financial interest in any person who has been licensed, registered or given written permission under this Part.
Accounts and audit
(1) Every registered public fund shall—
(a) keep or cause to be kept accounts and records and shall, after the end of each financial year cause to be prepared a statement of accounts for that financial year which shall include a balance sheet and an account of income and expenditure in accordance with generally accepted accounting principles applicable in Malaysia or in any recognised country or jurisdiction;
(b) keep such accounting records and financial statements or true copies thereof at its place of business in Labuan and make them available for inspection by the Authority or any person authorised in writing by the Authority;
(c) keep at its place of business in Labuan and make available to the Authority or any person authorised in writing by the Authority such other records, statements, documents or information as the Authority may prescribe in writing;
(d) within three months of the end of each financial year present to an auditor the financial statements referred to in paragraph (a) and such other records and information
as may be required for audit in accordance with generally accepted auditing principles applicable in Malaysia or any recognised country or jurisdiction; and
(e) provide to or make available for inspection by all the investors of the fund the financial statements referred to in paragraph (a) together with the report of the auditor thereon.
(2) The accounting records and financial statements required to be kept in accordance with subsection (1) may be kept in any currency and in any language, but if they are kept in a language other than the national language or English language, a translation into the national language or English language, verified in a manner satisfactory to the Authority, shall be kept by the public fund together with such accounting records and financial statements.
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).
