Technical Note No. 1/2022 — Clarification on Licensing Requirements for Persons Offering Digital Investment Advice
The Securities Commission Malaysia (“SC”) on 8 December 2022 issued a technical note to clarify the licensing requirements for persons offering digital investment advice. In the technical note:
- the SC clarifies that provision of digital investment advice is still “investment advice” for purposes of Capital Markets and Services Act 2007 and therefore triggers a licence from the SC
- the SC stated that it is working towards finalising a holistic framework which caters for both digital and traditional investment advice models.
- the SC clarifies that, in the interim, applicants who can satisfy the requirements set out in section B of the technical note may apply to the SC for waiver(s) from the following aspects:
- financial requirements as set out in Table 1 of the SC’s Licensing Handbook provided that the applicant has at all times a minimum paid up capital of RM200,000 and minimum net tangible assets of RM50,000 on admission and throughout the duration of the licence;
- Bumiputera requirement relating to directors, representatives and employees’ composition; and/or
- requirement pertaining to a licensed director provided that the applicant has at least a director who has a minimum of five years of relevant experience in investment advice and holds a Capital Markets Services Representative’s Licence (“CMSRL”) for investment advice.
- however, where the SC grants a waiver, it may also impose other requirements which it deems appropriate.
- existing licence holders which intend to undertake digital investment advisory must seek the SC’s prior approval to do so.
Guidelines on Market Conduct and Business Practices for Investment Analysts and Their Analysts
The SC also issued a Guidelines on Market Conduct and Business Practices for Investment Analysts and Their Analysts which:
- are applicable to holders of Capital Markets Services Licence (“CMSL”) and CMSRL for the regulated activity of investment advice, either as a sole regulated activity or in addition to other regulated activities, who issues or promulgates analyses or reports concerning securities or derivatives, whether electronically, in print or any other form.
- seeks to outline the core principles and minimum standards to be observed to maintain fair, efficient and transparent markets by ensuring objectivity, quality and transparency of a research and recommendation.
Revision to Guidelines on Digital Assets
The SC has made some housekeeping amendments throughout the Guidelines on Digital
Assets, the amendments of which came into effect on 19 December 2022.
One of the changes made by the SC is to the definition set out in limb (a) of “senior
management” by excluding a director.
Exposure Draft on Capital Adequacy Framework (Basel III — Risk-Weighted Assets) — Exposures to Central Counterparties
Bank Negara Malaysia is inviting feedback by 17 February 2023 to its exposure draft on the Basel III capital adequacy framework which is applicable to a financial institution’s exposure to central counterparties.
The “financial institutions” which will be subject to these requirements, when it comes into effect, are:
i. banks licensed under the Financial Services Act 2013;
ii. investment banks licensed under the Financial Services Act 2013;
iii. Islamic banks licensed under the Islamic Financial Services Act 2013;
iv. financial holding companies of the entities listed in i to iii above.
Islamic Financial Services (Minimum Amount of Capital Funds) (Approved Person) (Amendment) Order 2022
This amendment order:
- came into operation on 30 December 2023 and amends the Islamic Financial Services (Minimum Amount of Capital Funds) (Approved Person) Order 2013 [P.U. (A) 210/2013].
- affects only electronic money issuers.
- deletes the old categories of “large electronic money scheme” and “small electronic money scheme”.
- introduces new categories of electronic money issuer, which are “standard electronic money issuer” and “eligible electronic money issuer”, each of which is as defined therein.
- sets out the minimum amount of capital funds required of a standard electronic money issuer and an eligible electronic money issuer respectively
