(1) This Act may be cited as the Netting of Financial Agreements Act 2015.
(2) This Act comes into operation on a date to be appointed by the Minister by notification in the Gazette.
Act 766
Netting of Financial Agreements Act 2015
Akta penghasilan bersih perjanjian kewangan 2015
An Act to provide for the enforceability of netting provision in financial agreements and to provide for related matters.
Data synced
Part I — PRELIMINARY
In this Act, unless the context otherwise requires—
“financial collateral” means an interest or a right that secures payment or performance of an obligation under a qualified financial agreement;
“Minister” means the Minister charged with the responsibility for finance;
“netting provision” means—
(a) a provision in a qualified financial agreement which provides that upon the occurrence of the events specified by the parties in the agreement, all obligations owed by one party to another party under a qualified financial transaction are reduced to or replaced with a single net amount in accordance with the qualified financial agreement; or
(b) any other mechanism which has the effect of determining a single net amount prescribed by the Minister to be a netting provision under paragraph 6(1)(b);
“prescribed” means prescribed by order published in the Gazette;
“qualified financial agreement” means—
(a) a master agreement, with a netting provision, in respect of one or more qualified financial transactions, and where a master agreement is also in respect of one or more transactions that are not qualified financial transactions, the master agreement shall be a qualified financial agreement only with respect to the transactions that are qualified financial transactions;
(b) any agreement or arrangement prescribed by the Minister to be a qualified financial agreement under paragraph 6(1)(a); or
(c) an agreement relating to financial collateral that secures payment or performance of an obligation, including any agreement under which title to property has been provided for the purpose of such security, with respect to one or more qualified financial transactions under a master agreement referred to in paragraph (a) or an agreement or arrangement referred to in paragraph (b);
“qualified financial transaction” means the transaction referred to in section 5 and includes any other transaction prescribed by the Minister to be a qualified financial transaction under paragraph 6(1)(c);
“securities” includes securities which are in accordance with Shariah.
Part II — NETTING PROVISION
Notwithstanding the provisions specified in Part I of the Schedule, the netting provision in a qualified financial agreement in respect of the qualified financial transactions referred to in section 5 shall be enforceable in accordance with the terms of the qualified financial agreement which may involve the following steps:
(a) termination of qualified financial transactions entered into under the qualified financial agreement;
(b) calculation of termination values owed by the parties to each other in respect of each of the qualified financial transactions under paragraph (a); and
(c) determination of a single net amount of the termination values under paragraph (b) which becomes payable by one party to the other.
The application of this Act in relation to financial collateral shall only extend to financial collateral provided in the form of—
(a) cash or cash equivalents, including negotiable instruments and demand deposits;
(b) securities, a securities account or a right to acquire securities; or
(c) futures agreement or futures account.
(1) For the purposes of this Act, a qualified financial transaction shall involve—
(a) over-the-counter derivatives;
(b) repurchase, reverse repurchase, buy-sell back in respect of securities; or
(c) a lending or borrowing of unlisted debt securities under the Real Time Electronic Transfer of Funds and Securities System established under subsection 44(1) of the Central Bank of Malaysia Act 2009 [Act 701].
(2) In this section, “derivative” means any agreement including an option, a swap, futures or forward contract, whose market price, value, or delivery or payment obligation is derived from, referenced to or based on, but not limited to, securities, commodities, assets, rates (including interest rates, profit rates or exchange rates) or indices and shall include a derivative which is in accordance with Shariah.
s 6Power of Minister to prescribe other qualified financial agreement, netting provision and qualified financial transactionOpen ↗
(1) The Minister may, on the recommendation of the Central Bank of Malaysia, the Securities Commission, the Malaysia Deposit Insurance Corporation and the Pengurusan Danaharta Nasional Berhad, prescribe—
(a) any other agreement or arrangement to be a qualified financial agreement;
(b) any other mechanism which has the effect of determining a single net amount to be a netting provision; or
(c) any other transaction to be a qualified financial transaction.
(2) An order under subsection (1) shall be laid before the Dewan Rakyat as soon as practicable after its publication in the Gazette.
(3) In this section—
“Central Bank of Malaysia” means the Central Bank of Malaysia which continues to exist pursuant to subsection 3(1) of the Central Bank of Malaysia Act 2009;
“Malaysia Deposit Insurance Corporation” means the Malaysia Deposit Insurance Corporation which continues to exist pursuant to subsection 3(1) of the Malaysia Deposit Insurance Corporation Act 2011 [Act 720];
“Pengurusan Danaharta Nasional Berhad” means the Pengurusan Danaharta Nasional Berhad incorporated under the Companies Act 1965 [Act 125] for such purposes provided under the Pengurusan Danaharta Nasional Berhad Act 1998 [Act 587];
“Securities Commission” means the Securities Commission established under section 3 of the Securities Commission Act 1993 [Act 498].
(1) The Minister may, on the recommendation of the relevant authority having the power to enforce the provisions specified in Part II of the Schedule, prescribe any period during which the enforceability of the netting provision under section 3 shall be stayed for the purposes of the provisions specified in Part II of the Schedule.
(2) The Minister shall cause a reasonable notice to be given to persons affected by the period of stay prescribed under subsection (1), unless the circumstances do not permit.
(3) The period prescribed under subsection (1) shall apply notwithstanding that any other period has been provided or prescribed under the provisions specified in Part II of the Schedule.
Except as provided in this Act, nothing in this Act shall affect the continued application of the provisions specified in Part III of the Schedule with respect to qualified financial agreements.
(1) The Minister may, by order published in the Gazette, amend the Schedule upon consultation with the relevant authority having the power to enforce the provisions specified in the Schedule or having the power to enforce the provisions proposed to be added into the Schedule.
(2) An order under subsection (1) shall be laid before the Dewan Rakyat as soon as practicable after its publication in the Gazette.
Schedule
[Sections 3, 7 and 8]
Cite this legislation
- Official citation
- Act 766
- Source
- lom.agc.gov.my
- Data synced
- Licence
- Official text, free to reproduce (Copyright Act 1987 [Act 332] s 3) ↗
Netting of Financial Agreements Act 2015 [Act 766] (Laws of Malaysia, lom.agc.gov.my). Retrieved via LawPlayer, https://lawplayer.com/my/act/act-766
This text is synced from lom.agc.gov.my. In case of any discrepancy, the authoritative text prevails.
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).