LABUAN – Money Broking Business

The Labuan Financial Services Authority (“FSA”) has issued new Guidelines for money broking business that is carried on in the Labuan IBFC. This Guidelines comes into effect on 1 January 2018.

 

DEFINITION OF MONEY BROKING BUSINESS

It is the business of arranging transactions between buyers and sellers in the money or foreign exchange markets as an intermediary in consideration for brokerage fees paid or to be paid. This DOES NOT include the buying and selling of Ringgit or foreign currencies as a principal in such markets.

 

PERMISSIBLE MONEY BROKING ACTIVITIES

Labuan money broking business is intended to serve institutional investors and high-net-worth individuals. The licensee is expected to:

  • bring together the counterparties on mutually acceptable terms for the same financial products in money or foreign exchange market to facilitate the conclusion of a transaction;
  • receive payment for its service in the form of brokerage or commission fees; and
  • act as a mediator and is strictly not permitted to act as a principal(1).

(1) Principal will ‘deal for their own account and based on its own risk’. This Guideline restricts position-taking by the money broker.

 

WHO IS ELIGIBLE TO APPLY?

  • An individual or institution with money broking expertise & has good track records, including sufficient number of experience(2); or
  • A regulated money broker or any provider of such services from other jurisdictions with good track records in carrying on such business including sufficient number of experience(2); or
  • Any licensed institutions including approved money broker under the Malaysia Financial Services Act 2013.

(2) Typically, Labuan FSA expects applicants to have a minimum of three years’ experience in money broking business.

 

OPERATIONAL REQUIREMENTS

  • Maintain minimum paid-up capital unimpaired by losses of RM500,000 or its equivalent in any foreign currency(3).
  • Maintain an appropriately furnished operational office in Labuan for business purposes only.
  • Directors, principal officer and persons in control must be ‘fit and proper’ persons.
  • Adequate set of internal policies and controls for its operations, compliance, corporate governance and risk management.
  • Counterparties (e.g. principal broker and liquidity provider) are regulated by a recognised supervisory or regulatory authority.
  • Appointment of a Labuan approved auditor.
  • Internal policies on Anti-Money Laundering and Counter Financing of Terrorism.
  • For business model/customer interface which is exclusively/substantially electronic, proper management of technology risk must be in place.

(3) Labuan FSA may exercise its discretion to require additional capital to commensurate with the business operations in Labuan.

 

REPORTING TO LABUAN FSA

  • Audited financial statements within six months from financial year end.
  • Statistics and other information required by Labuan FSA.

 

LABUAN FSA ANNUAL LICENSE FEE

  • Annual license fee of RM5,000 upon granting of the money broking licence.
  • Subsequent payment of annual license fee is payable by 15 January of each year.

 

Please contact your usual Kensington Trust Group contact or write to  info@kensington-trust.com if you have any questions.