Intepretation
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 an Islamic mutual fund but does not include a person who only takes the initiative in forming or organizing the business of the Islamic mutual fund and does not have any ownership in the fund;
“operator”, in respect of an Islamic mutual fund, means—
(a) where the Islamic mutual fund is a corporation, a director of that corporation;
(b) where the Islamic mutual fund is a limited partnership, a general partner in that limited partnership;
(c) where the Islamic mutual fund is a limited liability partnership, the designated partner in that limited liability partnership; or
(d) where the Islamic 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 organizing the business of an Islamic mutual fund, but does not include a custodian or an underwriter who receives underwriting commission without taking part in the founding or organizing of the Islamic mutual fund business;
“registered Islamic public fund” means an Islamic public fund registered under section 38;
“shares” means one or more of the shares in the share capital of an Islamic 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 an Islamic mutual fund partnership and a unit in an Islamic mutual fund unit trust.
Chapter 2 — Islamic private fund
Notification by Islamic private fund
An Islamic private fund shall be entitled to carry on business, arrange or administer its affairs in Labuan by giving notice in writing to the Authority setting out the details of the scope and nature of its business.
Islamic private fund to lodge an information memorandum or such other offering document
(1) An Islamic private fund shall lodge the information memorandum or such other offering document relating to the Islamic private fund purporting to describe the business and affairs of the Islamic private fund with the Authority.
(2) The information memorandum or such other offering document referred to in subsection (1) shall be lodged by an Islamic private fund through any licensed entity which shall be reasonably satisfied that—
(a) the information memorandum or such other offering document being lodged refers to an Islamic private fund as defined under this Act; and
(b) there is no element of fraud involved in the establishment of the Islamic private fund.
(3) An information memorandum or such other offering document lodged by an Islamic private fund shall be deemed to be a prospectus in so far as it relates to the liability of that Islamic 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 Chapter 6 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 Islamic private fund with the Authority under section 34, 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.
Chapter 3 — Islamic public fund
Islamic public fund shall be registered
(1) No Islamic public fund shall carry on business, arrange or administer its affairs in Labuan unless it has been granted registration under paragraph 38(1)(a).
(2) Subject to subsection (3), no proposed Islamic public fund shall carry on business, arrange or administer its affairs unless it has been granted provisional acceptance under paragraph 38(1)
(b).
(3) A proposed Islamic public fund to which a provisional acceptance has been granted under paragraph 38(1)(b) shall not carry on business, arrange or administer its affairs without the prior written consent of the Authority.
Application by Islamic public fund
(1) An application to the Authority under subsection 36(1) or (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 recognized 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 authorized 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 Islamic fund;
(d) a signed declaration by the directors of the applicant Islamic fund on confidentiality and secrecy; and
(e) where available, a copy of the prospectus, either in draft or final form, of the Islamic public fund.
(2) The Islamic public fund or proposed Islamic 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 as specified by the Authority under subsection (1), the applicant, after being granted registration or provisional acceptance, as the case may be, shall, within thirty days after the change has occurred, lodge with the Authority a notice specifying such change.
Power to grant or refuse registration of Islamic public fund
(1) The Authority may grant or refuse to grant—
(a) registration of an Islamic public fund; or
(b) provisional acceptance of a proposed Islamic public fund.
(2) A grant under subsection (1) may be made subject to any terms, conditions, limitations or restrictions by the Authority.
(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 Islamic public fund, the Authority may grant registration to such a proposed Islamic public fund as an Islamic public fund under paragraph (1)(a).
Registration procedure
(1) Where the Authority grants registration of an Islamic public fund under paragraph 38(1)(a), it shall—
(a) register the Islamic public fund in the register maintained under Chapter 6 of this Part; and
(b) issue a certificate of registration to the Islamic public fund.
(2) Where the Authority grants a provisional acceptance under paragraph 38(1)(b), the promoter of the proposed Islamic 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 Islamic public fund is lawfully constituted in Labuan or any recognized country or jurisdiction; and
(c) the information referred to in subsection 37(1).
(3) If the Authority is satisfied that the proposed Islamic public fund referred to in subsection (2) has complied with the requirements of that subsection, it may grant registration to the Islamic public fund.
(4) W h e r e t h e A u t h o r i t y g r a n t s r e g i s t r a t i o n u n d e r subsection (3), it shall register the Islamic public fund in the register maintained under Chapter 6 of this Part and issue a certificate of registration.
Prospectus relating to Islamic public fund
(1) No registered Islamic 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 16.
(2) For the avoidance of doubt, the civil and criminal liabilities for mis-statements in prospectuses provided for under sections 19 and 20 shall equally apply to a prospectus lodged under this section.
Investors’ rights
(1) If a registered Islamic public fund publishes a prospectus or any amendment that contains any misrepresentation relating to any of the matters required to be disclosed under subsection 16(5), a person who purchased any securities pursuant to such prospectus or amendment to the prospectus 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 Islamic public fund and every person who, while aware of the misrepresentation, signed the prospectus or amendment to the prospectus and consented to its publication and lodged 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 under 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 to the prospectus 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 under any written law.
Limitation
Notwithstanding any other written law to the contrary, any action under subsection 41(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 Islamic public fund which carries on business outside Labuan under the laws of any recognized 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 recognized country or jurisdiction.
Foreign Islamic public fund may be managed or administered in Labuan
An Islamic public fund lawfully registered under the laws of any recognized country or jurisdiction need not be registered as an Islamic public fund under section 38 so long as the Islamic
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.
Chapter 4 — Fund managers and fund administrators
Fund manager or fund administrator of an Islamic public fund
(1) No person shall carry on business as a fund manager of an Islamic public fund unless that person is—
(a) a person falling within subsection 40 (1) or (2) of the Labuan Financial Services and Securities Act 2010 and has obtained the prior approval of the Authority; or
(b) an Islamic bank licensee.
(2) No person shall carry on business as a fund administrator of an Islamic public fund unless that person is—
(a) a person falling within subsection 41(1) or (2) of the Labuan Financial Services and Securities Act 2010 and has obtained the prior approval of the Authority;
(b) an Islamic bank licensee; or
(c) an Islamic securities licensee under Part V.
(3) A fund manager or a fund administrator who is carrying on fund management activities or fund administrator activities respectively in relation to an Islamic private fund only is not required to be licensed under this Part.
Duties of a fund manager and fund administrator of an Islamic public fund
A fund manager or fund administrator of an Islamic 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 Islamic 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, fund administrator or its officers to—
(i) gain an improper advantage for themselves or another person; or
(ii) cause detriment to the investors in the Islamic public fund;
(f) ensure that all payments out of the property of the Islamic public fund are made in accordance with the constituent documents of the Islamic 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 Islamic 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 a fund manager and fund administrator under applicable law
The duties of a fund manager and a fund administrator of an Islamic public fund provided for under this Chapter are in addition to and not in derogation from the duties which are otherwise imposed on them by any applicable law.
Specific duties of a fund manager of an Islamic public fund
(1) A fund manager of an Islamic 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, investment restrictions, risk profile and instructions;
(b) notification of any significant change to the investment policy or investment recommendation;
(c) mode and manner of reporting to client;
(d) clear authorization 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 Islamic 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 liabilities 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 liabilities 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.
Chapter 5 — Trustees or custodians
Eligibility of a trustee or custodian of an Islamic public fund
(1) No person shall carry on business as a trustee of an Islamic public fund unless that person is a Labuan trust company.
(2) No person shall carry on business as a custodian of an Islamic public fund unless that person is a bank licensee, an Islamic bank licensee, or a Labuan trust company, provided that the bank licensee shall obtain the prior approval of the Authority.
(3) This section does not apply to a person who is and continues to be a qualified and authorised trustee or custodian of Islamic 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 an Islamic public fund.
Duties of a trustee or custodian and director under applicable law
The duties of a trustee or custodian and their directors provided for under this Chapter are in addition to and not in derogation of the duties which are otherwise imposed on them by any applicable law.
Duty of a fund manager, custodian or trustee to be independent of each other
(1) A fund manager, custodian or trustee, of an Islamic public fund—
(a) shall be different persons and act independently of each other;
(b) shall not be a related corporation of the other; and
(c) shall 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.
Chapter 6 — Registers and accounting
Registers
(1) The Authority may keep separate registers for—
(a) Islamic private funds;
(b) Islamic public funds; and
(c) fund managers and fund administrators of Islamic public funds.
(2) The registers required under subsection (1) may contain—
(a) the information required in respect of each person who has been granted 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 upon which such licence or registration or written permission was revoked.
(3) The registers required to be kept pursuant to 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 Islamic 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 recognized 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 inspections 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 authorized 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 recognized 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 Islamic 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).
