Overview
Irish investment funds may be sold in Malaysia in compliance with the provisions of Part VI of the Capital Markets and Services Act 2007 ("CMSA"), which is administered by the Securities Commission of Malaysia ("SC") and the Guidelines for the Offering, Marketing and Distribution of Foreign Funds issued by the SC. ("Foreign Funds Guidelines").
Under the Foreign Funds Guidelines, the SC only permits foreign funds that are recognized funds to be offered, marketed and distributed in Malaysia in accordance with its terms. Presently, the recognized funds under the Foreign Funds Guidelines are limited to –
- Islamic funds which are constituted and domiciled in the Dubai International Financial centre, and notified or registered with the Dubai Financial Services Authority; and
- Islamic funds (excluding hedge funds and leveraged funds) which are authorized and primarily regulated by the Securities and Futures Commission Hong Kong ("SFC"), managed by SFC licensed managers, comply with the requirements set out in Appendix 2 to the Foreign Funds Guidelines, and domiciled in Hong Kong or jurisdictions that have broadly implemented International Organisation of Securities Commissions (IOSCO) Principles relating to collective investment schemes and are signatories to IOSCO Multilateral Memorandum of Understanding concerning consultation and cooperation and the exchange of information.
So only Irish investment funds that fall within the definition of recognized funds in the Foreign Funds Guidelines may be offered, marketed or distributed in Malaysia.
As detailed below the prospectus of any Irish domiciled fund being sold in Malaysia may need to comply with certain requirements. It should be noted that if any supplement or addendum to the Irish prospectus specific to investors domiciled in Malaysia is prepared, such document will need to be submitted to the Central Bank of Ireland in advance to ensure that there are no inconsistencies with the Irish prospectus.
Regulation of securities
The CMSA regulates securities offerings at two levels:
(1) licensing of regulated activities as defined in Schedule 2 to the CMSA, and
(2) the requirements for issuing or offering of securities set out in Part VI of the CMSA (the "Part VI Provisions").
The definition of "securities" is broadly defined in the CMSA to include shares in or debentures of, a body corporate or an unincorporated body and unit trusts as defined in the CMSA, and includes any right, option or interest in respect thereof".
Part VI Requirements
The Part VI Provisions sets out the regulatory framework for marketing and offering of securities in Malaysia, the main requirements of which are referred to below.
Securities Commission's Approval
A person proposing to offer any Irish investment fund in Malaysia has to apply through a local licensed intermediary (referred to as a principal advisor) to the SC for approval to make available or offer, or make an invitation for purchase or subscription of, the Irish investment fund ("s212 Approval"), unless any express exception in Schedule 5 to the CMSA applies. The exceptions from the need for SC approval are very limited. The SC has a discretion whether to grant a s212 Approval.
The Foreign Funds Guidelines set out the requirements that must be complied with by any person who intends to offer, market, or distribute in Malaysia a collective investment scheme that is incorporated, constituted or domiciled in a jurisdiction other than Malaysia and reflect SC's current policy on offering of foreign funds.
S212 Approval is still required when the Foreign Funds Guidelines apply. Where an Irish investment fund is not a recognised fund under the Foreign Funds Guidelines, an application must first be made to the SC for a waiver from the Foreign Funds Guidelines. If the waiver is granted, then a submission for s212 Approval may be made.
Submission for s212 Approval for a retail fund (that is, a fund that is open for subscription to the general public) and a private fund includes-
- a cover letter, specifying the approval/registration sought;
- the fund's deed or constitution, certified by a notary public;
- the applicable fee of RM2,000; and
- In addition for a retail fund, the prospectus of the fund.
Prospectus
A person may not issue, offer for subscription or purchase, make an invitation to subscribe for or purchase securities unless a prospectus has been registered with the SC and the prospectus complies with the provisions of the CMSA. Unless authorised in writing by the SC, a person may not issue, circulate or distribute any form of application for securities unless the form is accompanied by a copy of a prospectus which has been registered by the SC.
The SC requires, under the Foreign Funds Guidelines, the registration of a prospectus that complies with the prospectus requirements thereunder in relation to a retail fund. The fee for registration of a prospectus of a unit trust scheme is RM1,500.00 and RM100.00 per fund established under the unit trust scheme.
Under the Foreign Fund Guidelines, no prospectus need be issued in respect of a private fund (which is one that is open for subscription only to qualified investors) but the offering document will have to be deposited with the SC within seven days after it is issued in Malaysia with a fee of RM500 per information memorandum. Qualified investors for this purpose are-
- an individual whose total net personal assets exceed RM3 million or its equivalent in foreign currencies;
- a corporation with total net assets exceeding RM10 million or its equivalent in foreign currencies based on the last audited accounts;
- a unit trust scheme or prescribed investment scheme under the CMSA;
- a company registered as a trust company under the Trust Companies Act 1949 or a corporation that is a public company under the Companies Act 1965 or under the laws of any other country which has been allowed by the SC to be a trustee for the purposes of the CMSA and has absolute discretion in the investment of the truste assets of a trust with total net assets exceeding RM10 million or its equivalent in foreign currencies; or
- a pension fund approved by the Director General of Inland Revenue under section 150 of the Income Tax Act 1967.
Division 5 Part VI provisions relating to unit trusts
A person issuing, offering for subscription or purchase, or making an invitation to subscribe for or purchase any unit of a unit trust scheme in Malaysia must enter into a trust deed that has been registered by the SC and satisfies the requirements of section 294 of the CMSA, appoint a trustee approved by the SC (all local trust companies) and comply with the provisions of Division 5 of Part VI of the CMSA (which includes without limitation, the prospectus requirements and specific statutory duties on the management company and the trustee of the unit trust scheme) (collectively the UT Provisions) unless the UT Provisions have been disapplied by a Ministerial order. The UT Provisions do not apply to a unit trust scheme that is permitted to be offered in Malaysia under the Foreign Fund Guidelines.
Subsection 288(2) of the CMSA provides that "no person except a management company approved by the SC or a person authorised to act on behalf of a management company approved by the SC may issue, offer for subscription or purchase, or invite any person to subscribe for or purchase, any unit."
Where an Irish investment fund is structured as a unit trust scheme, units in such Irish investment fund may not be offered to persons in Malaysia except in compliance with Division 5 of Part VI of the CMSA and the SC's applicable guidelines.
Unsolicited Invitation/Call
No unsolicited invitation to subscribe for or purchase, offer for subscription or purchase, or recommendation relating to, any Irish investment fund shall be made except with permission of the SC or as provided in section 255(2) of the CMSA which amongst other permits:
- invitation, offer or recommendation which is made in relation to an excluded invitation or excluded offer;
- issuing notices or recommendations relating to units in a unit trust scheme or prescribed investment scheme containing such information as may be allowed by the SC.
Restrictions in Advertising
Section 241 of the CMSA prohibits a person from issuing or publishing a notice (defined to include "any notice published in a document, newspaper or periodical or on any medium or in any manner capable of suggesting words and ideas") that offers or invites for subscription or purchase, securities or refers inter alia to a prospectus issued in respect of the securities of a corporation (including a foreign company incorporated outside Malaysia, and corporations which have not been formed) or unit trust scheme, an issue intended issue, offer, intended offer, invitation or intended invitation in respect of securities; or another notice that refers to a prospectus in relation to an issue, intended issue, offer, intended offer, invitation or intended invitation in respect of securities subject to the express exceptions provided therein.
Hence, no notice or reference to the prospectus of Irish investment fund should be published or issued in Malaysia unless an exception applies. The limited exceptions relate to:
(i) a notice issued or published before the registration of a prospectus with the consent of the SC containing limited information set out in subsection 241(4) which includes, without limitation, that a prospectus will be issued,
(ii) a notice which complies with subsection 241(5) issued after the registration of a prospectus,
(iii) a preliminary prospectus when the requirements of subsection 241(6) are met,
(iv) specific reports (which relate to those sent by listed corporations to stock exchange, meetings of corporations or unitholders, or news).
Licensing for Regulated Activities
Under the CMSA, any person who carry on a business in any regulated activity or holds himself out as carrying on such business would require a Capital Markets and Services Licence ("CMSL") where it is a corporation unless exempted under Schedule 3 to the CMSA. Only locally incorporated companies are eligible to hold a CMSL for dealing in securities, or any other regulated activity which permits dealing in securities as an incidental activity to that other regulated activity.
"Dealing in securities" means, whether as principal or agent –
- acquiring, disposing of, subscribing for or underwriting securities; or
- making or offering to make with any person, or inducing or attempting to induce any person to enter into or to offer to enter into –
- any agreement for or with a view to acquiring, disposing of, subscribing for or underwriting securities; or
- any agreement, other than a derivative, the purpose or avowed purpose of which is to secure a profit to any of the parties from the yield of securities or by reference to fluctuations in the value of securities.
One exception in Schedule 3 to the CMSA that may apply to a foreign entity is where it carries on the regulated activity of dealing in securities for its own account or for its related corporation through a holder of a CMSL who carries on the business of dealing in securities.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
