E-Alert March 2014

LABUAN SECURITIES LICENSEE

New guidelines on the establishment of Labuan Securities Licensee including Islamic Securities Licensee in Labuan International Business and Financial Centre (IBFC) was issued by the Labuan Financial Services Authority (Labuan FSA) on 11 December 2013 and took effect on 1 January 2014.

Labuan securities licensee under this guidelines refers to a person who provides investment advice or administrative services in respect of securities for the purpose of investment and dealing in securities. For a Labuan Islamic securities licensee, its operation shall comply with Shariah principles.

The Labuan fund manager is differentiated with Labuan securities licensee, through the provision of management services, which is its principal activity. In addition, Labuan securities licensee is not allowed to hold clients’ monies or assets.

The permitted activities of a licensed Labuan securities licensee may include:

  • Investment advices
  • Administrative services
  • Dealing in securities
  • Any other activity which may be permitted by Labuan FSA from time to time

Application for Labuan securities licensee must be submitted to Labuan FSA prior to carrying out such activities under a Labuan company incorporated or registered under the Labuan Companies Act 1990 (LCA). Eligible applicant to carry on business as a Labuan securities licensee in Labuan IBFC include:

  1. An individual who holds a relevant degree or professional qualification to carry on activities of a securities licensee. Labuan FSA may also consider an applicant with at least minimum qualification of diploma holder and 3 years’ relevant experience in capital market or direct experience in the permitted activities of a securities licensee as specified in the guidelines; OR
  2. A licensed/approved individual who undertakes such permitted services as specified in the guidelines, from relevant regulatory and supervisory Authority or a jurisdiction who is a member of the International Organization of Securities Commission (IOSCO).
  3. A person who does not fulfill (i) and (ii) above may also be considered, provided that the securities licensee business is run and managed by suitably qualified and experienced individuals.


Labuan FSA would also consider other factors in assessing the application for Labuan securities licensee.

The minimum Operational Requirements of Labuan securities licensee includes among others:

  • Maintain a minimum paid-up capital unimpaired by losses of MYR150,000 equivalent in any foreign currency throughout its operations. In addition, based on the securities licensee’s risk management assessment, additional capital may need to be injected to commensurate its risk profile as well as the nature and complexity of its business.
  • Maintain a professional indemnity insurance policy with coverage of not less than RM1,000,000 or its equivalent in any foreign currency throughout its operations.
  • Dealing in securities.
  • Maintain a registered office in Labuan and ensure that the business be carried on in, from or through Labuan. Labuan securities licensee may also apply to establish a marketing office at Kuala Lumpur and/or Iskandar Malaysia.
  • Director(s) and principal officer including any other relevant person must meet the requirements of the Guidelines on Fit and Proper Person issued by Labuan FSA.
  • Conduct its business in any foreign currency other than Ringgit Malaysia unless permitted under Section 7(4) of LCA.
  • Appoint an approved auditor to carry out an annual audit of its accounts in respect of the business operations.


Annual fee of MYR5,000 is payable to Labuan FSA upon the grant of license. Subsequent payment of annual fee is payable not later than 15 January of each calendar year.

 

LABUAN MUTUAL FUND

The revised guidelines on the establishment of Labuan Mutual Funds in Labuan International Business and Financial Centre (IBFC) issued by the Labuan Financial Services Authority (Labuan FSA) took effect on 1 January 2014.

Labuan mutual funds, either be in the form of public fund or private fund, can be structured as a Labuan company, a corporation incorporated under the laws of any recognised country or jurisdiction, who is a member of the International Organization of Securities Commissions (IOSCO), a partnership, a protected cell company, a foundation or a unit trust.

LABUAN PRIVATE FUND

Labuan private funds are mutual funds whose securities are not offered to the general public and are owned or held by:

  • Not more than 50 investors where the first time investment of each of such investors is not less than MYR250,000 equivalent in any foreign currency; or
  • Any number of investors where the first time investment of each such investors is not less than MYR500,000 equivalent in any foreign currency.

No approval is required for the setting up of Labuan private funds, however, prior to its launching shall submit a written notification to Labuan FSA and to lodge an Information Memorandum (IM). The IM shall contain at least the following disclosures:

  • General description of the fund
  • Investment strategy
  • Financial projections, minimum subscription proceeds and fund policy on submission of financial results to its subscribers
  • Redemption policy
  • Material changes


LABUAN PUBLIC FUND

Labuan public funds are those whose securities are offered for subscription to any member of the general public. An application for registration of Labuan Public Fund must be submitted to Labuan FSA and only until being granted registration it may commence business.

A copy of the prospectus of the Labuan public funds, either in draft or final form, must be submitted to Labuan FSA in its application and shall contain at least the following disclosures:

  • General description of the fund
  • Investment strategy
  • Financial projections, minimum subscription proceeds and fund policy on submission of financial results to its subscribers
  • Asset valuation policy
  • Investor care framework
  • Related party transaction
  • Redemption policy
  • Material changes


Some of the Operational Requirements for Labuan public funds include:

  • Must appoint fund manager, trustee, administrator and custodian (service provider) that are approved by Labuan FSA.
  • Duties of fund manager and custodian or trustee of Labuan public fund must be independent from each other.
  • Maintain a registered office in Labuan. For a Labuan public fund which is permitted to be managed by a non-Labuan licensed fund manager, at least one of the service providers must be approved by Labuan FSA.
  • All subscriptions shall be repaid immediately if the minimum level of subscription required is not met within the stipulated time.
  • Conduct its business with due diligence and sound principles.
  • Appoint an approved auditor to carry out an annual audit of the accounts in respect of the business operations and submit the audit report to the investors and Labuan FSA within six months after the close of each financial year.
  • Provide half yearly reporting to the investors.

The Labuan public fund is required to pay a lodgment fee of MYR2,000 for each prospectus registered with Labuan FSA and an annual fee of MYR2,000. The subsequent payment of annual fee to Labuan FSA is payable not later than 15 January of each year during which the registration is valid.

 

LABUAN FUND MANAGER

The revised guidelines on the establishment of Labuan Fund Manager in Labuan International Business and Financial Centre (IBFC) issued by the Labuan Financial Services Authority (Labuan FSA) took effect on 1 January 2014.

A Labuan fund manager is defined as a person, for valuable consideration, provides management services which may include investment advice or administrative services in respect of securities for the purposes of investment, including dealing in securities. For a Labuan fund manager undertaking Islamic fund management activities, its operation shall also comply with Shariah principles.

The permitted activities for a licensed Labuan fund manager may include:

  • Management services
  • Investment advices
  • Administrative services
  • Dealing in securities
  • Any other activity which may be permitted by Labuan FSA from time to time
  1. An individual who holds a relevant degree or professional qualification to carry on fund management activities. Labuan FSA may also consider an applicant with at least minimum qualification of diploma holder and 3 years’ relevant experience in capital market or direct experience in fund management activities;
  2. An approved fund manager or other provider of such services from a country or jurisdiction who is a member of the International Organization of the International Organization of Securities Commission (IOSCO); OR
  3. A person who does not fulfill (1) and (2) above may also be considered, provided that the fund management activities are run and managed by suitably qualified and experienced individuals.

Labuan FSA would also consider other factors in assessing the application for Labuan fund manager.

The minimum operational requirements of Labuan fund manager includes among others:

  • Maintain a minimum paid-up capital unimpaired by losses of MYR300,000 equivalent in any foreign currency throughout its operations. Where the Labuan fund manager has Asset Under Management (AUM) of more than MYR150 million, it must maintain additional capital equivalent to 0.2% of the AUM in excess of MYR150 million.
  • Maintain a professional indemnity insurance policy with coverage of not less than RM1,000,000 or its equivalent in any foreign currency throughout its operations.
  • Maintain a registered office in Labuan and ensure that the business be carried on in, from or through Labuan. Labuan fund manager may also apply to establish a marketing office at Kuala Lumpur and/or Iskandar Malaysia.
  • Director(s), shareholder(s), principal officer, representative including any other relevant person must meet the requirements of the Guidelines on Fit and Proper Person issued by Labuan FSA.
  • Conduct its business in any foreign currency other than Ringgit Malaysia unless permitted under Section 7(4) of LCA.
  • Appoint an approved auditor to carry out an annual audit of its accounts in respect of the business operations.

Annual fee of MYR5,000 is payable to Labuan FSA upon the grant of license. Subsequent payment of annual fee is payable not later than 15 January of each calendar year.

The information in this document is not advice of any kind but general information only and should not be relied on as legal advice. Kensington Trust Group recommends seeking professional advice on legal or tax issues affecting you before relying on it. While Kensington Trust Group tries to ensure that the content of this document is accurate, adequate or complete, it does not represent or warrant, express or implied, its accuracy, correctness, completeness or use of any of the information. Kensington Trust Group does not assume legal liability for any loss suffered as a result of or in relation to the use of this document. To the extent permitted by law, Kensington Trust Group excludes any liability for negligence, for any loss, including indirect or consequential damages arising from or in relation to the use of this document.