/akn/my/act/act/2010/704

AKTA PERKHIDMATAN KEWANGAN DAN SEKURITI LABUAN 2010

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Labuan Financial Services and Securities 1 REPRINT Act 704 LABUAN FINANCIAL SERVICES AND SECURITIES ACT 2010 As at 15 October 2022 PUBLISHED BY THE COMMISSIONER OF LAW REVISION, MALAYSIA UNDER THE AUTHORITY OF THE REVISION OF LAWS ACT 1968 2022 Laws of Malaysia 2 Act 704 Date of Royal Assent … … … 31 January 2010 Date of publication in the Gazette … … 11 February 2010 Latest amendment made by Act A1654 which came into operation on … … … … 1 January 2019 Labuan Financial Services and Securities 3 Act 704 ARRANGEMENT OF SECTIONS

Part

Part I

Content

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Section

Section

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Section

1. Short title and commencement

Section

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Section

2. Interpretation

Section

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Section

3. Administration of the Act

Section

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Section

4. Fit and proper person

Section

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Section

5. Business in, from or through Labuan

Section

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Section

6. Syariah matters

Part

Part II

Content

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SECURITIES

Division

Division 1

Section

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Section

7. Interpretation

Division

Division 2

Content

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OFFERS

Section

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Section

8. Offers or invitations which require the approval of the Authority

Section

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9. False or misleading statements Laws of Malaysia 4 Act 704

Section

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Section

10. Advertisements

Section

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Section

11. Registration of prospectus

Section

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Section

12. Document containing offer of securities to be made via Labuan trust company or bank licensee and to be deemed prospectus

Section

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Section

13. Expert’s consent to issue of prospectus containing statement by him

Section

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Section

14. Civil liability for misstatement in prospectus

Section

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Section

15. Criminal liability for misstatement in prospectus

Section

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Section

16. Labuan trust company or bank licensee as agent in offer

Section

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Section

17. Prohibition of allotment unless minimum subscription received

Section

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Section

18. Application monies to be held in trust until issuance or allotment

Division

Division 3

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DEBENTURES

Section

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19. Power to issue debentures

Section

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Section

20. Trustee for debenture holders

Section

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21. Exemptions and indemnifications of trustee from liability

Section

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Section

22. Duties of trustee

Section

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Section

23. Obligations of directors of borrowing company

Section

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Section

24. Obligation of guarantor company to furnish information

Section

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Section

25. Loan and deposits to be immediately repayable on certain events

Section

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26. Retention of over-subscriptions in debenture issues

Part

Part III

Division

Division 1

Section

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Section

27. Interpretation Section Labuan Financial Services and Securities 5

Division

Division 2

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Subdivision 1 PRIVATE FUNDS Section

Section

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28. Notification by private funds

Section

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29. Private fund to lodge an information memorandum or such other offering document

Section

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30. Exclusion of liability for errors or omission in the information memorandum or such other offering document Subdivision 2 PUBLIC FUNDS

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31. Public funds shall be registered

Section

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32. Application by public funds

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33. Power to grant or refuse registration of public funds

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34. Registration procedure

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35. Prospectus relating to public fund

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36. Investors’ rights

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37. Limitation

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38. Certificate of compliance

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39. Foreign public fund may be managed or administered in Labuan

Division

Division 3

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Subdivision 1 FUND MANAGERS AND FUND ADMINISTRATORS

Section

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Section

40. Licensing of fund managers

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41. Licensing of fund administrators

Section

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Section

42. Application for fund manager’s licence Laws of Malaysia 6 Act 704

Section

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43. Application for fund administrator’s licence

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44. Power to grant or refuse licence Subdivision 2 TRUSTEES OR CUSTODIANS

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45. Eligibility of trustees or custodians of public funds Subdivision 3 GRANT OF LICENCE OR REGISTRATION

Section

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46. Licence or registration

Division

Division 4

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DUTIES

Section

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47. Duties of fund managers and fund administrators of public funds

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48. Duties of fund managers, fund administrators, trustees or custodians and directors under applicable law

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49. Specific duties of fund managers of public funds

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50. Duty to segregate client’s assets

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51. Duty of fund manager and custodian or trustee to be independent of each other

Division

Division 5

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REGISTERS AND ACCOUNTING

Section

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52. Registers

Section

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53. Accounts and audit

Part

Part IV

Content

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MARKET INTERMEDIARIES

Division

Division 1

Section

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Section

54. Interpretation Section Labuan Financial Services and Securities 7

Division

Division 2

Content

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SECURITIES LICENSEE Section

Section

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Section

55. Securities licensee

Section

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56. Application for licence

Section

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57. Power to grant or refuse licence

Division

Division 3

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GRANT OF LICENCE

Section

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Section

58. Licence

Part

Part V

Content

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LABUAN TRUST COMPANIES

Division

Division 1

Section

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59. Interpretation

Section

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60. Licence required to carry on trust company business in Labuan

Section

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61. Licensing of trust companies

Section

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62. Terms and conditions of licence

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63. Temporary continuation for winding-up

Division

Division 2

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POWERS OF LABUAN TRUST COMPANIES

Section

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64. Disclosure of interests in relation to Labuan trust company

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65. Labuan trust company’s power to act as executor

Section

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66. Labuan trust company’s power to act as administrator

Section

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67. Additional powers of a Labuan trust company

Section

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68. Labuan trust company’s power to act as sole trustee

Section

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69. Labuan trust company’s power to act as joint trustee with another

Section

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70. Delegation to Labuan trust company Laws of Malaysia 8 Act 704

Division

Division 3

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LABUAN MANAGED TRUST COMPANIES Section

Section

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71. Licensing of Labuan managed trust companies

Section

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72. Terms and conditions of licence as Labuan managed trust company

Division

Division 4

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LABUAN PRIVATE TRUST COMPANIES

Section

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73. Meaning of “connected persons”

Section

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74. Registration as Labuan private trust company

Section

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75. Terms and conditions of registration as a Labuan private trust company

Section

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76. Duties of agent of Labuan private trust company

Section

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77. Powers of the Authority

Section

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78. Non-application of the provisions of this Part

Division

Division 5

Section

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79. Labuan trust company subject to same control as any other executor

Section

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80. Affidavit of officer

Section

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81. Examination of books and accounts of a Labuan trust company

Section

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82. Retention of records

Section

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83. Money paid to a Labuan trust company to be held in trust

Section

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84. Commission, fees, charges and expenses levied by a Labuan trust company

Section

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85. Translation of accounts and records

Part

Part VI

Content

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LABUAN BANKING

Division

Division 1

Section

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Section

86. Interpretation Labuan Financial Services and Securities 9

Division

Division 2

Content

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Content

Section

Section

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Section

87. Labuan banking business, Labuan investment banking business and Labuan financial business to be carried on only under licence

Section

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Section

88. Application for licence to carry on Labuan banking business

Section

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Section

89. Application for licence to carry on Labuan investment banking business

Section

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90. Application for licence to carry on Labuan financial business

Section

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Section

91. Additional information

Section

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Section

92. Grant of licence by the Authority

Section

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Section

93. Requirement to use, and restriction on use of, the words “licensed Labuan bank”, etc.

Section

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94. Maintenance of capital adequacy ratio

Section

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95. Amendment or alteration of constituent documents of bank licensees

Section

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Section

96. Authority to publish list of Labuan banks and Labuan investment banks

Division

Division 3

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DUTIES OF BANK LICENSEES

Section

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97. Offices and subsidiaries

Section

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98. Prohibition of certain accounts

Section

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99. Financial statements, statistics and information to be submitted to the Authority

Division

Division 4

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GENERAL PROVISION

Section

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100. Payment from a deceased person’s account

Part

Part VII

Content

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LABUAN INSURANCE

Division

Division 1

Section

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Section

101. Interpretation Laws of Malaysia 10 Act 704

Division

Division 2

Content

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LICENSING OF LABUAN INSURANCE BUSINESS AND LABUAN INSURANCE-RELATED ACTIVITIES Section 102. Licensing of Labuan insurance business and Labuan insurance-related activities 103. Application for insurance licence to carry on Labuan insurance business 104. Application for insurance licence to carry on Labuan insurance-related activities 105. Grant of insurance licence 106. Publication of list of all insurance licensees 107. Continuing licensing requirements

Division

Division 3

Content

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FINANCIAL REQUIREMENTS AND DUTIES OF AND RESTRICTIONS ON INSURANCE LICENSEES

Section

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Section

108. Appointment of actuary 109. Margin of solvency 110. Separate accounts to be kept by Labuan insurer 111. Submission of financial statements 112. Subsidiaries and offices of insurance licensee 113. Restriction on business by Labuan insurer 114. Restrictions on and duties of Labuan insurance manager, Labuan underwriting manager and Labuan insurance broker 115. List of Labuan insurers to be supplied by Labuan insurance manager and Labuan underwriting manager 116. Conduct of business

Division

Division 4

Content

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PAYMENT OF POLICY MONIES UNDER A LIFE POLICY AND PERSONAL ACCIDENT POLICY

Section

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117. Application of this Division 118. Power to make nomination 119. Revocation of nomination 120. Payment of policy monies Labuan Financial Services and Securities 11 121. Trustee of policy monies 122. Nominee other than a nominee under section 121 123. Assigned or pledged policy monies 124. Payment of policy monies where there is no nomination 125. Payment to person incompetent to contract 126. Distribution of policy monies in due course of administration 127. This Division to prevail over policy and any other written law

Division

Division 5

Content

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WINDING-UP

Section

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Section

128. Winding-up of Labuan insurer

Part

Part VIII

Content

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Content

COMPANY MANAGEMENT

Section

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Section

129. Interpretation 130. Register of management companies 131. Application for licence 132. Grant of licence

Part

Part IX

Division

Division 1

Section

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Section

133. Interpretation

Division

Division 2

Section

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Section

134. Establishment of exchanges 135. By-laws of exchanges 136. Rules of exchanges Section Laws of Malaysia 12 Act 704 Section 137. Regulatory functions of exchanges 138. Powers of the committee 139. Dealing in securities 140. Register of trading agents and listing sponsors 141. Financial statements of an exchange 142. Persons not deemed to be carrying on business in Malaysia 143. Suspension of trading on exchanges 144. Minister’s power to suspend trading 145. Powers of the Authority

Division

Division 3

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FALSE OR MISLEADING MARKET AND INSIDER DEALING

Section

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Section

146. Creation of false or misleading market 147. Insider dealing 148. Defences 149. Dealing in securities 150. Procuring the acquisition or disposal of securities 151. Inside information 152. “Price-affected securities” and “price-sensitive information”

Section

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Section

153. Information as an insider 154. Definition of “made public”

Section

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155. Exceptions

Part

Part X

Content

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SELF-REGULATORY ORGANIZATIONS

Section

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Section

156. Declaration or recognition of a self-regulatory organization 157. Rules of a self-regulatory organization 158. Restriction on decision-making 159. Obligations of and in relation to officers of a self-regulatory organization 160. Powers to direct a self-regulatory organization 161. Termination of arrangements and revocation of declaration or recognition 162. Amendments to the constitution of a self-regulatory organization Labuan Financial Services and Securities 13 163. Protection for a self-regulatory organization 164. Financial statements of the self-regulatory organization 165. Powers of Authority with respect to self-regulatory organizations

Part

Part XI

Division

Division 1

Content

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APPEALS

Section

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Section

166. Appeals

Division

Division 2

Content

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REVOCATION AND SURRENDER

Section

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167. Revocation of consent, licence or registration 168. Revocation procedure 169. Surrender of licence or registration 170. Consequences of revocation or surrender of licence

Division

Division 3

Content

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GENERAL

Section

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Section

171. Payment systems 172. Transfer of business 173. Internal audit 174. External auditor 175. Accounts and records 176. Money or other property from illegal activities 177. Examination and inspection of books and documents of licensed entities 178. Secrecy 179. Translation 180. Application of Labuan Financial Services Authority Act 1996 181. Application of Labuan Islamic Financial Services and Securities Act 2010 Section Laws of Malaysia 14 Act 704 182. Application of Exchange Control Act 1953 183. Application of Capital Markets and Services Act 2007 184. Application of Labuan Companies Act 1990 and Companies Act 1965 185. Non-application of certain laws 186. Immunity 187. General penalty 188. Offences by body corporate 189. Annual and licence fees 190. Fees and penalties to be paid into Fund 191. Procedure where none laid down 192. Misrepresentation 193. Enforcement 194. Power to compound 195. Service of documents 196. Power of the Minister to make regulations 197. Power of the Minister to issue directions 198. Power of the Minister to amend schedules 199. Power of the Minister to grant exemptions 200. Publication of notification, Gazette 201. Repeal, savings and transitional 202. Continuance of other rights, liabilities, etc., under the repealed Acts First Schedule Second Schedule Third Schedule Section Labuan Financial Services and Securities 15 Act 704

Preamble

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Preamble

An Act to provide for the licensing and regulation of financial services and securities in Labuan, the establishment of an exchange and for other matters related thereto. [11 February 2010, P.U. (B) 58/2010] ENACTED by the Parliament of Malaysia as follows:

Part

Part I

Content

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Content

Short title and commencement

Section

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Section

1. (1) This Act may be cited as the Labuan Financial Services and Securities Act 2010.

Subsection

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Subsection

(2) This Act comes into operation on a date to be appointed by the Minister by notification in the Gazette. Interpretation

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Section

2. (1) In this Act, unless the context otherwise requires— “actuary” means a person, being a Fellow of any of the professional associations listed in the Second Schedule or a person recognized by the Authority as an actuary for the purposes of this Act, who appears on the list of actuaries maintained by the Authority; Laws of Malaysia 16 Act 704 “approved auditor” means an approved auditor under section 10 of the Labuan Companies Act 1990 [Act 441]; “Authority” means the Labuan Financial Services Authority established under section 3 of the Labuan Financial Services Authority Act 1996 [Act 545]; “authorized officer” means an officer duly authorized by the Authority under subsection 3(2); “bank licensee” means a Labuan bank or a Labuan investment bank licensed under Part VI; “by-laws” means the written terms by reference to which the committee regulates its own procedures and includes such terms applicable thereto as contained in the memorandum and articles of association of an exchange established under this Act; “constituent documents” means the statute, charter, memorandum of association and articles of association, rules, by-laws, partnership agreement, or other instrument, under or by which a person is established and the scope of that person’s functions, business, powers and duties are set out, whether contained in one or more documents; “corporation” means any body corporate formed or incorporated or existing within Malaysia or outside Malaysia and includes a foreign Labuan company but does not include—

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(a) a corporation sole;

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(b) a trade union registered under any written law as a trade union; and

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(c) a society registered under any written law relating to co-operative societies; “court” means a court of competent jurisdiction; “Court” means the High Court or a judge thereof; “custodian” means the person who is entrusted by a mutual fund with custody of the property of the fund pursuant to an agreement to that effect; Labuan Financial Services and Securities 17 “dealing in securities” means, whether as principal or agent, 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—

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(a) any agreement for, or with a view to, acquiring, disposing of, subscribing for, or underwriting securities; or

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(b) any agreement 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; “debenture” includes debenture stocks, bonds, notes and any other evidence of indebtedness of a corporation for borrowed monies, whether or not constituting a charge on the assets of the corporation, but shall not be construed as applying to any of the following:

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(a) any instrument acknowledging or creating indebtedness for, or for money borrowed to defray the consideration payable under, a contract for sale or supply of goods, property or services or any contract of hire in the ordinary course of business;

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(b) a cheque, banker’s draft or any other bill of exchange or a letter of credit;

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(c) a banknote, guarantee or an insurance policy;

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(d) a statement, passbook or other document showing any balance in a current, deposit or savings account;

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(e) any agreement for a loan where the lender and borrower are signatories to the agreement and where the lending of money is in the ordinary course of business of the lender, and any promissory note issued under the terms of such an agreement;

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(f) any instrument or product or class of instruments or products as the Authority may prescribe; Laws of Malaysia 18 Act 704 “declaration” means a written statement of facts which the person making it signs and solemnly declares to be true before a commissioner or magisterial officer or notary public; “director”, in relation to a person specified in the first column of the First Schedule, has the meaning set out in the second column of the First Schedule as against such person; “domestic company” means a company incorporated under the *Companies Act 1965 [Act 125]; “established”, in relation to a person specified in the first column of the First Schedule, has the meaning set out in the third column of the First Schedule as against such person; “establishment”, in relation to—

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(a) a company, means incorporation;

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(b) a statutory body, means coming into existence under the law establishing, appointing or constituting it;

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(c) a co-operative society, means registration, incorporation or otherwise coming into legal existence as a co-operative society;

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(d) a partnership, including a limited partnership and a limited liability partnership, means formation;

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(e) a sole proprietorship, means registration of its business; and

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(f) any other body, association or group of persons, whether corporate or unincorporated, which requires registration or any other form of recording or recognition under any written law before it can lawfully commence its activities, means registration, recording or recognition under such written law; “expert” includes any engineer, accountant, solicitor, valuer, auditor or any other person whose profession or reputation gives authority to a statement made by him; *NOTE—The Companies Act 1965 [Act 125] has since been repealed by the Companies Act 2016 [Act 777] which comes into operation on 31 January 2017—see subsection 620(1) of Act 777 and P.U. (B) 50/2017. Labuan Financial Services and Securities 19 “financial year” means the period not exceeding fifty-three weeks at the end of which the balance of the fund’s accounts is struck or, if no such balance is struck or if the period of fifty-three weeks for so doing is exceeded, the calendar year; “foreign company” means—

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(a) a company, a corporation, a society, association or other body incorporated outside Malaysia; or

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(b) an unincorporated society, association or other body which under the law of its place of origin may sue or be sued, or hold property in the name of the secretary or other officer of the society, association or body duly appointed for that purpose, and which does not have its head office or principal place of business in Malaysia; “foreign currency” means any currency other than ringgit; “foreign Labuan company” means a foreign company registered under Part VIII of the Labuan Companies Act 1990; “foundation” means a foundation established under the Labuan Foundations Act 2009 [Act 706], Part XI of the Labuan Islamic Financial Services and Securities Act 2010 [Act 705] or such similar entity established under the laws of any recognized country or jurisdiction notwithstanding any statutory definition to the contrary; “fund administrator” means a person who, for valuable consideration, provides a mutual fund with administrative services or facilities alone or with accounting services; “fund manager” means a person who, for valuable consideration, provides management services alone or with investment advice or administrative services in respect of securities for the purposes of investment, including dealing in securities or such other activity as may be specified by the Authority; “holding company” has the meaning assigned to it in the Labuan Companies Act 1990; Laws of Malaysia 20 Act 704 “home supervisory authority” means any relevant authority or body in Malaysia or of any other country which exercises supervisory functions over the operations of any licensed entity; “insurance licensee” means a person licensed under Part VII; “Labuan” means the Federal Territory of Labuan; “Labuan bank” means a person who is licensed to carry on Labuan banking business under Part VI; “Labuan company” has the meaning assigned to it in the Labuan Companies Act 1990; “Labuan investment bank” means a person who is licensed to carry on Labuan investment banking business under Part VI; “Labuan licensed institution” means a person who is licensed to carry on Labuan financial business under Part VI; “Labuan private trust company” means a Labuan company or foreign Labuan company carrying on trust company business for a private trust and registered with the Authority under Division 4 of Part V; “Labuan trust company” means a person licensed to carry on trust company business under sections 61 and 71; “liabilities” includes debts, duties and obligations of every kind, whether present or future, or whether vested or contingent; “licence” means a licence granted or renewed under this Act; “licensed entity” means a person licensed or registered to carry on any activity under any Part; “limited liability partnership” means a limited liability partnership formed under the Labuan Limited Partnerships and Limited Liability Partnerships Act 2010 [Act 707], Part X of the Labuan Islamic Financial Services and Securities Act 2010, or under the laws of any recognized country or jurisdiction notwithstanding any statutory definition to the contrary; Labuan Financial Services and Securities 21 “limited partnership” means a limited partnership formed under the Labuan Limited Partnerships and Limited Liability Partnerships Act 2010, Part X of the Labuan Islamic Financial Services and Securities Act 2010, or under the laws of any recognized country or jurisdiction notwithstanding any statutory definition to the contrary; “Malaysian bank licensee” means a bank licensee which is an office or a subsidiary of a Malaysian bank; “Minister” means the Minister charged with the responsibility for finance; “mutual fund” or “fund” means a Labuan company, a corporation incorporated under the laws of any recognized country or jurisdiction, a partnership, a protected cell company, a foundation, or a unit trust which—

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(a) collects and pools funds for the purpose of collective investment with the aim of spreading investment risk; and

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(b) issues interests in a mutual fund which entitles the holder to redeem his investments that is agreed upon by the parties and receive an amount computed by reference to the value of a proportionate interest in the whole or part of the net assets of the aforesaid types of entities, as the case may be, and includes an umbrella fund whose interests in a mutual fund or units are split into a number of different class funds or sub-funds and whose participants are entitled to exchange rights in one part for rights in another; “national language” means the national language of Malaysia as defined in the National Language Act 1963/67 [Act 32]; “office” includes the principal place of business, a branch, an agency, a mobile place of business, a place of business set up and maintained for a limited period only, an electronic terminal and any other place of business; Laws of Malaysia 22 Act 704 “officer”, in relation to a corporation, includes—

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(a) a director, secretary or employee of the corporation including the principal officer;

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(b) a receiver and manager of any part of the undertaking of the corporation appointed under a power contained in any instrument; and

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(c) a liquidator of the corporation appointed in a voluntary winding-up; but does not include—

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(A) a receiver who is also not a manager;

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(B) a receiver and manager appointed by the Court; and

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(C) a liquidator appointed by the Court or by the creditors; “participant”, in relation to a person specified in the first column of the First Schedule, has the meaning set out in the fourth column of the First Schedule as against such person; “partnership” means a limited partnership or a limited liability partnership; “person” includes a corporation, partnership, a body of persons, corporate or unincorporated and a corporation sole; “person in control”, in relation to an applicant for a licence or a licensed entity under this Act, means a person who—

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(a) is entitled to exercise, or control the exercise of, not less than one-third of the votes attached to the voting shares in such applicant or licensed entity;

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(b) has the power to appoint, or cause to be appointed, a majority of the directors of such applicant or licensed entity; or

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(c) has the power to make, or cause to be made, decisions in respect of the business or administration of such applicant or licensed entity, and to give effect to such decisions or cause them to be given effect to; Labuan Financial Services and Securities 23 “prescribe”, where no mode is mentioned, means prescribe from time to time by order published in the Gazette, and a power to prescribe includes the power to make different provisions in the order for different persons, classes, categories or descriptions of persons; “principal officer”, in relation to a licensed entity, means a person, by whatever name called, who is responsible, subject to the authority of the directors, for the conduct of the business and the administration of the licensed entity; “private fund” means a mutual fund—

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(a) whose securities are owned or held by—

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(i) not more than fifty investors where the first time investment of each of such investors is not less than two hundred and fifty thousand ringgit or such other sum as may be prescribed by the Authority or the equivalent in any foreign currency; or

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(ii) any number of investors where the first-time investment of each of such investors is not less than five hundred thousand ringgit or such other sum as may be prescribed by the Authority or the equivalent in any foreign currency; or

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(b) which is designated as a private fund under regulations made under this Act; “prospectus” means any prospectus, notice, circular, advertisement or invitation inviting applications or offers to subscribe for or purchase securities, or offering any securities for subscription or purchase; “protected cell company” means a company incorporated, or converted into, a protected cell company in accordance with the provisions of Part VIIIb of the Labuan Companies Act 1990 or such similar entity established under the laws of any recognized country or jurisdiction notwithstanding any statutory definition to the contrary; Laws of Malaysia 24 Act 704 “public fund” means a mutual fund other than a private fund; “recognized country or jurisdiction” means a country or jurisdiction as may be specified by the Authority; “record” means a facility for storing information which can be subsequently retrieved or reproduced; “regulations” means regulations made under this Act; “related”, in relation to a corporation, means related within the meaning of section 4 of the Labuan Companies Act 1990; “resident” means any person who is—

Paragraph

paragraph_227

Paragraph

(a) in relation to a natural person, a citizen or permanent resident of Malaysia; and

Paragraph

paragraph_228

Paragraph

(b) in relation to any other person, a person who has established a place of business, and is operating, in Malaysia, and includes a person who is declared to be a resident pursuant to section 43 of the *Exchange Control Act 1953 [Act 17]; “ringgit” means a ringgit in the currency of Malaysia; “rules”, in relation to an exchange established under Part IX, means the rules governing the conduct of the exchange or its members; “securities” means any investments commonly known or capable of being described as securities, and includes—

Paragraph

paragraph_229

Paragraph

(a) shares, debentures, funds, units, interests in a limited partnership or limited liability partnership or unit trust or foundation or protected cell company or corporation;

Paragraph

paragraph_230

Paragraph

(b) debentures, bonds or notes of or issued by any body (incorporated or unincorporated), government, local government or public authority; *NOTE—The Exchange Control Act 1953 [Act 17] has since been repealed by the Financial Services Act 2013 [Act 758] which comes into operation on 30 June 2013—see sections 271 and 272 of Act 758. Labuan Financial Services and Securities 25

Paragraph

paragraph_231

Paragraph

(c) certificates of interest or participation in, temporary or interim certificates for, receipts for or warrants to subscribe to or purchase any of the investments described in paragraphs (a) and (b); and

Paragraph

paragraph_232

Paragraph

(d) securities as defined in the Labuan Islamic Financial Services and Securities Act 2010; “specify”, where no mode is mentioned, means specify from time to time in writing, and a power to specify includes the power to specify differently for different persons or different classes, categories or descriptions of persons; “subsidiary” shall have the meaning assigned to it under the Labuan Companies Act 1990; “trust officer” means an officer of a Labuan trust company approved and designated as a trust officer by the Authority; “unit trust” means a trust established under the laws of Malaysia relating to Labuan or the laws of any recognized country or jurisdiction for the purpose, or having the effect, of providing facilities for the participation by persons as beneficiaries under the trust in any profits or income arising from the acquisition, holding, management or disposal of any property.

Subsection

subsection_233

Subsection

(2) Any reference in this Act to “this Act” shall, unless otherwise expressly stated, be deemed to include a reference to any regulation, rule, order, notification or other subsidiary legislation made under this Act.

Subsection

subsection_234

Subsection

(3) Notwithstanding the definition of “securities” under this Act and “interest” as defined in section 66 of the Labuan Companies Act 1990, the Minister may, on the recommendation of the Authority, prescribe any instrument or product or class of instruments or products to be securities for the purposes of this Act and the Labuan Financial Services Authority Act 1996. Administration of the Act

Section

section_235

Section

3. (1) The Authority is responsible for the due administration of this Act, subject to the general directions and control of the Minister. Laws of Malaysia 26 Act 704

Subsection

subsection_236

Subsection

(2) The Authority may authorize any of its members or officers to perform any of its functions, exercise any of its powers or discharge any of its duties under this Act.

Subsection

subsection_237

Subsection

(3) Subject to such limitations, if any, as may be prescribed, an authorized officer shall perform all the functions, exercise all the powers and discharge all the duties of the Authority as authorized and every function so performed, power so exercised and duty so discharged shall be deemed to have been duly performed, exercised and discharged for the purposes of this Act.

Subsection

subsection_238

Subsection

(4) All courts, judges and persons acting judicially shall take judicial notice of the seal and signature of the Authority. Fit and proper person

Section

section_239

Section

4. (1) Every licensed entity shall ensure that its directors, principal officers and trust officers, where applicable, remain as fit and proper persons throughout their appointment with the licensed entity.

Subsection

subsection_240

Subsection

(2) If a director, principal officer or trust officer, where applicable, ceases to be a fit and proper person, the licensed entity and such director, principal officer or trust officer, where applicable, shall as soon as reasonably practicable, notify the Authority in writing of the same, together with details of the change.

Subsection

subsection_241

Subsection

(3) In determining whether a person is a fit and proper person under this Act, the Authority may take into consideration the following:

Paragraph

paragraph_242

Paragraph

(a) integrity, competence, soundness of judgment and financial standing of the person;

Paragraph

paragraph_243

Paragraph

(b) whether the person has been adjudged a bankrupt, in Malaysia or elsewhere;

Paragraph

paragraph_244

Paragraph

(c) whether the person has been convicted of a criminal offence in Malaysia or elsewhere and where the penalty imposed is imprisonment of one year or more, whether in itself or in addition to a fine; and

Paragraph

paragraph_245

Paragraph

(d) such other criteria as may be specified in guidelines issued by the Authority. Labuan Financial Services and Securities 27

Subsection

subsection_246

Subsection

(4) A person shall be under a duty to give notice in writing to the Authority, as soon as practicable, of any material event that could reasonably be expected to affect his status as a fit and proper person.

Subsection

subsection_247

Subsection

(5) Where the Authority is satisfied that a person is not fit and proper, the Authority may disqualify the person from acting in his capacity as a director, principal officer or trust officer, as the case may be, of a licensed entity. Business in, from or through Labuan

Section

section_248

Section

5. (1) A person licensed to carry on any of the activities under this Act shall carry on such activities only in, from or through Labuan except that a licensed entity may carry on such business in Malaysia outside Labuan as may be permitted by the Authority from time to time: Provided that nothing in this section permits a licensed entity from carrying on any regulated activities under the Capital Markets and Services Act 2007 [Act 671], where such regulated activities are carried on in Malaysia other than Labuan.

Subsection

subsection_249

Subsection

(2) Notwithstanding subsection (1), a mutual fund, a fund manager and a fund administrator established, licensed or registered, as the case may be, under Part III shall be deemed to be carrying on business in Labuan notwithstanding that the business is carried on wholly outside Labuan or outside Labuan from a place of business or registered office within Labuan and the expression “carrying on business from Labuan” includes carrying on business outside Labuan from a place of business or a registered office within Labuan. Syariah matters

Section

section_250

Section

6. Any person—

Paragraph

paragraph_251

Paragraph

(a) proposing to make an offer of subscription or purchase, or issue an invitation to subscribe for or purchase, securities in or from within Labuan; or Laws of Malaysia 28 Act 704

Paragraph

paragraph_252

Paragraph

(b) carrying on any business regulated under Parts III, IV, VI, VII and X, which is expressly in conformity with Syariah principles shall comply with the relevant provisions of the Labuan Islamic Financial Services and Securities Act 2010 and in so doing, shall be deemed to have complied with all relevant laws in Labuan relating to such matters.

Part

Part II

Content

content_254

Content

SECURITIES

Division

Division 1

Content

content_256

Content

Interpretation

Section

section_257

Section

7. (1) In this Part, unless the context otherwise requires— “borrowing company” means a Labuan company that is or will be under a liability, whether or not such liability is present or future, to repay any money received or to be received by it in response to an offer made under section 8 to subscribe for or purchase debentures of the Labuan company; “guarantor company”, in relation to a borrowing company, means a corporation that has guaranteed, or has agreed to guarantee, the repayment of any money received or to be received by the borrowing company in response to an offer made under section 8 to subscribe for or purchase debentures of the borrowing company; “promoter”, in relation to a prospectus issued by or in connection with a Labuan company, means a promoter of the company who was a party to the preparation of the prospectus or any relevant portion thereof, but does not include any person by reason only of his acting in a professional or advisory capacity; and “secured debenture” means—

Paragraph

paragraph_258

Paragraph

(a) any debenture which is stated on its face to be a secured debenture; and Labuan Financial Services and Securities 29

Paragraph

paragraph_259

Paragraph

(b) any debenture which is issued on terms affording the holder of the debenture rights and powers to vote and demand a poll in respect of the business and undertaking of the company, whether in addition to the rights of members of the company or in substitution for those rights.

Division

Division 2

Content

content_261

Content

OFFERS Offers or invitations which require the approval of the Authority

Section

section_262

Section

8. (1) Subject to subsections (3) to (6), a person, its officers, directors, agent or any other person on its behalf, shall not make an offer for subscription or purchase, or issue an invitation to subscribe for or purchase securities in or from within Labuan without the prior written approval of the Authority.

Subsection

subsection_263

Subsection

(2) (Deleted by Act A1654).

Subsection

subsection_264

Subsection

(3) An applicant shall submit to the Authority such documents and such other information in relation to the offer or invitation in such form and manner and at such times as the Authority may require.

Subsection

subsection_265

Subsection

(4) Where an application has been submitted to the Authority under this section, the Authority may—

Paragraph

paragraph_266

Paragraph

(a) approve an offer or invitation with or without revisions and subject to such terms and conditions as it thinks fit; or

Paragraph

paragraph_267

Paragraph

(b) reject an offer or invitation. Laws of Malaysia 30 Act 704

Subsection

subsection_268

Subsection

(5) The following offers or invitations of securities are excluded from the requirement to obtain the approval of the Authority under subsection (1):

Paragraph

paragraph_269

Paragraph

(a) an offer or invitation of securities, where—

Paragraph

paragraph_270

Paragraph

(i) the offer or invitation is addressed to an identifiable category of persons to whom it is directly communicated by the person making the offer or invitation or by his appointed agent; or

Subparagraph

subparagraph_271

Subparagraph

(ii) the members of that category to which the offer or invitation is made are the only persons who may accept the offer or invitation and they are in possession of sufficient information to be able to make a reasonable evaluation of the offer or invitation, and the number of persons to whom the offer or invitation is communicated does not exceed fifty;

Paragraph

paragraph_272

Paragraph

(b) an offer or invitation of debentures, where—

Paragraph

paragraph_273

Paragraph

(i) the first-time investment of each of the initial debenture holders is not less than two hundred and fifty thousand ringgit or the equivalent in any other currency and they are in possession of sufficient information to be able to make a reasonable evaluation of the offer or invitation; or

Subparagraph

subparagraph_274

Subparagraph

(ii) the first-time investment of each of the initial debenture holders is less than two hundred and fifty thousand ringgit or the equivalent in any other currency and the number of persons to whom the offer or invitation is communicated does not exceed fifty and they are in possession of sufficient information to be able to make a reasonable evaluation of the offer or invitation;

Paragraph

paragraph_275

Paragraph

(c) an offer or invitation of securities in a mutual fund which satisfies the mutual fund requirements under Part III; Labuan Financial Services and Securities 31

Paragraph

paragraph_276

Paragraph

(d) an offer or invitation of securities pursuant to a take-over offer which complies with the relevant law applicable to such offer; and

Paragraph

paragraph_277

Paragraph

(e) an offer or invitation of securities or such classes or categories of securities as may be specified by the Authority.

Subsection

subsection_278

Subsection

(6) Any specification or specifications made under paragraph (5)(e) shall be subject to any condition, restriction or limitation as the Authority may impose.

Subsection

subsection_279

Subsection

(7) Any person who makes an offer or invitation of securities in contravention of subsection (1) commits an offence and shall, on conviction, be liable to a fine not exceeding one million ringgit or to imprisonment for a term not exceeding three years or to both.

Subsection

subsection_280

Subsection

(8) (Deleted by Act A1654). False or misleading statements

Section

section_281

Section

9. (1) Where any statement or information is required to be submitted to the Authority in relation to any offer or invitation of securities submitted pursuant to subsection 8(3), an applicant and any of its officers shall not—

Paragraph

paragraph_282

Paragraph

(a) submit or cause to be submitted any statement or information that is false or misleading;

Paragraph

paragraph_283

Paragraph

(b) submit or cause to be submitted any statement or information from which there is a material omission; or

Paragraph

paragraph_284

Paragraph

(c) engage in or aid or abet conduct that he knows to be misleading or deceptive or is likely to mislead or deceive the Authority. Laws of Malaysia 32 Act 704

Subsection

subsection_285

Subsection

(2) It shall be a defence to a prosecution or any proceedings for contravention of subsection (1) if it is proved that the defendant, after making enquiries as were reasonable in the circumstances, had reasonable grounds to believe, and did until the time of the making of the statement or provision of the information or engaging in the conduct was of the belief that—

Paragraph

paragraph_286

Paragraph

(a) the statement or information was true and not misleading;

Paragraph

paragraph_287

Paragraph

(b) the omission was not material;

Paragraph

paragraph_288

Paragraph

(c) there was no material omission; or

Paragraph

paragraph_289

Paragraph

(d) the conduct in question was not misleading or deceptive.

Subsection

subsection_290

Subsection

(3) Any person who contravenes subsection (1) commits an offence and shall, on conviction, be liable to a fine not exceeding one million ringgit or to imprisonment for a term not exceeding three years or to both. Advertisements

Section

section_291

Section

10. (1) No advertisement offering, or calling attention to an offer or intended offer of, securities under subsection 8(1), being an offer of securities not excluded under subsection 8(5), shall be published in Labuan until it has been approved by the Authority.

Subsection

subsection_292

Subsection

(2) An application for approval of an advertisement shall be lodged with the Authority together with a copy of the advertisement verified in such manner as the Authority directs.

Subsection

subsection_293

Subsection

(3) Any person who publishes or causes to be published in Labuan an advertisement without the prior approval of the Authority commits an offence and shall, on conviction, be liable to a fine not exceeding ten thousand ringgit. Registration of prospectus

Section

section_294

Section

11. (1) Subject to subsection (2), a person shall not issue, offer for subscription or purchase, make an invitation to subscribe for or purchase, securities in or from within Labuan unless a prospectus in relation to such offer or invitation has been registered with the Authority. Labuan Financial Services and Securities 33

Subsection

subsection_295

Subsection

(2) The requirement under subsection (1) shall not apply if the offer or invitation is made pursuant to or in connection with an offer or invitation excluded under subsection 8(5).

Subsection

subsection_296

Subsection

(3) The Authority shall not register a copy of any prospectus—

Paragraph

paragraph_297

Paragraph

(a) if it contains any statement or matter which is in its opinion misleading in the form and context in which it is included; and

Paragraph

paragraph_298

Paragraph

(b) unless—

Paragraph

paragraph_299

Paragraph

(i) a copy signed by every director and by every person who is named therein as a proposed director of the corporation or operator in the case of a public fund applying for registration under section 31 or by their agents authorized in writing is lodged with the Authority on or before the date of its issue;

Subparagraph

subparagraph_300

Subparagraph

(ii) the prospectus appears to comply with the requirements of this Act and the regulations or the Authority is satisfied that any departure from the requirements of this Act or the regulations by such prospectus is justified and is unlikely to mislead a person investing on the faith of its content; and

Subparagraph

subparagraph_301

Subparagraph

(iii) there is also lodged with the Authority— (aa) in the case of a prospectus relating to a public fund—

Paragraph

paragraph_302

Paragraph

(i) a certificate from an expert certifying that it complies with the requirements of Part III; and

Subparagraph

subparagraph_303

Subparagraph

(ii) where all or any part of the prospectus is not in the national language or English language, a translation into the national language or English language of the prospectus or that part of the prospectus, verified in a manner satisfactory to the Authority; Laws of Malaysia 34 Act 704 (bb) in the case of any other prospectus, a copy, verified as specified, of any consent required by section 13 to the issue of the prospectus and any material contract referred to in the prospectus or, in the case of such a contract not reduced into writing, a memorandum giving full particulars thereof, verified as specified.

Subsection

subsection_304

Subsection

(4) If a prospectus is issued without a copy thereof having been so registered, the corporation and every person who is knowingly a party to the issue of the prospectus commits an offence and shall, on conviction, be liable to a fine not exceeding one million ringgit or to imprisonment for a term not exceeding three years or to both.

Subsection

subsection_305

Subsection

(5) In relation to a prospectus relating to a public fund, such prospectus shall, in addition—

Paragraph

paragraph_306

Paragraph

(a) provide full, true and plain disclosure of all facts and circumstances that would facilitate a reasonable assessment by a prospective investor in determining whether to purchase or subscribe to shares of a public fund;

Paragraph

paragraph_307

Paragraph

(b) contain a statement summarizing the rights of investors under section 36; and

Paragraph

paragraph_308

Paragraph

(c) where the public fund has completed a financial year in operation, be accompanied by or contain reference to the availability of the financial statements of the financial year of the public fund immediately preceding the date of such offer and the auditor’s report thereon.

Subsection

subsection_309

Subsection

(6) Where—

Paragraph

paragraph_310

Paragraph

(a) any change occurs which materially affects any of the matters required to be disclosed under subsection (5); or

Paragraph

paragraph_311

Paragraph

(b) there has been a material change affecting the matters disclosed in the prospectus, then the fund manager of the public fund or the promoter, as the case may be, shall within thirty days of such occurrence incorporate such change to the prospectus relating to such public fund or offer pursuant to subsection 8(1) and provide a copy thereof to each of its investors and the Authority. Labuan Financial Services and Securities 35 Document containing offer of securities to be made via Labuan trust company or bank licensee and to be deemed prospectus

Section

section_312

Section

12. (1) Where a corporation allots or issues or agrees to allot or issue to a person any securities under subsection 8(1), and where such an offer is not excluded under subsection 8(5), the offer or invitation of securities shall be made through its agent which shall be a Labuan trust company or a bank licensee.

Subsection

subsection_313

Subsection

(2) Any document by which the offer under subsection 8(1) is made shall for all purposes be deemed to be a prospectus issued by the corporation, and all written laws and rules of law as to the contents of prospectuses and as to liability in respect of advertisements and statements and non-disclosures in prospectuses, or otherwise relating to prospectuses, shall apply and have effect accordingly as if the securities had been offered under subsection 8(1) and as if persons accepting the offer in respect of any securities were subscribers therefor but without prejudice to the liability, if any, of the persons by whom the offer is made in respect of statements or non-disclosures in the document or otherwise.

Subsection

subsection_314

Subsection

(3) For the purposes of this Act, it shall, unless the contrary is proved, be evidence that an allotment of, or an agreement to allot, securities was made by a corporation with a view to the securities being offered under subsection 8(1) if it is shown—

Paragraph

paragraph_315

Paragraph

(a) that an offer of securities under subsection 8(1) was made within six months after the allotment or agreement to allot; or

Paragraph

paragraph_316

Paragraph

(b) that at the date when the offer of the securities under subsection 8(1) was made, the whole consideration to be received by the corporation in respect of such securities had not been so received.

Subsection

subsection_317

Subsection

(4) The requirements of this Part as to prospectuses shall have effect as though the persons making an offer to which this section relates were persons named in a prospectus as directors of a corporation. Laws of Malaysia 36 Act 704

Subsection

subsection_318

Subsection

(5) In addition to complying with the other requirements of this Part, the document making the offer shall state—

Paragraph

paragraph_319

Paragraph

(a) the net amount of the consideration received or to be received by the corporation making the offer in respect of the securities to which the offer relates; and

Paragraph

paragraph_320

Paragraph

(b) the place and time at which the contract under which the securities have been or are to be allotted may be inspected.

Subsection

subsection_321

Subsection

(6) Where an offer to which this section relates is made by a corporation, it shall be sufficient if the document referred to in subsection (1) is signed on behalf of the corporation by two directors of the corporation and any such director may authorize his agent in writing to sign on his behalf. Expert’s consent to issue of prospectus containing statement by him

Section

section_322

Section

13. (1) A prospectus inviting subscription for or purchase of securities of a corporation and including a statement purporting to be made by an expert or to be based on a statement made by an expert shall not be issued unless there appears in the prospectus a statement that he has given and has not withdrawn his consent.

Subsection

subsection_323

Subsection

(2) If any prospectus is issued by a corporation in contravention of this section, the corporation and every person who is knowingly a party to the issue thereof commits an offence and shall, on conviction, be liable to a fine not exceeding one million ringgit or to imprisonment for a term not exceeding three years or to both. Civil liability for misstatement in prospectus

Section

section_324

Section

14. (1) Subject to this section, each of the following persons shall be liable to pay compensation to all persons who subscribe for or purchase any securities on the faith of a prospectus for any loss or damage sustained by reason of an untrue statement therein, or by reason of the willful non-disclosure therein of any matter of which he had knowledge and which he knew to be material, that is to say every person who—

Paragraph

paragraph_325

Paragraph

(a) is a director at the time of issue of the prospectus; Labuan Financial Services and Securities 37

Paragraph

paragraph_326

Paragraph

(b) authorized or caused himself to be named and is named in the prospectus as a director or as having agreed to become a director either immediately or after an interval of time;

Paragraph

paragraph_327

Paragraph

(c) is a promoter of the corporation; or

Paragraph

paragraph_328

Paragraph

(d) authorized or caused the issue of the prospectus.

Subsection

subsection_329

Subsection

(2) Notwithstanding anything in subsection (1), where the consent of an expert is required to the issue of a prospectus and he has given that consent, he shall not by reason only thereof be liable as a person who has authorized or caused the issue of the prospectus except in respect of an untrue statement purporting to be made by him as an expert, and the inclusion in the prospectus of a name of a person as a trustee for debenture-holders, auditor, banker, barrister, advocate or solicitor or stock or share broker shall not for that reason alone be construed as an authorization by such person for the issue of the prospectus.

Subsection

subsection_330

Subsection

(3) No person shall be liable under subsection (1) if he proves—

Paragraph

paragraph_331

Paragraph

(a) that, having consented to become a director of the corporation, he withdrew his consent before the issue of the prospectus, and that it was issued without his authority or consent;

Paragraph

paragraph_332

Paragraph

(b) that the prospectus was issued without his knowledge or consent and he gave reasonable public notice thereof forthwith after he became aware of its issue;

Paragraph

paragraph_333

Paragraph

(c) that after the issue of the prospectus and before allotment or sale thereunder he, on becoming aware of any untrue statement therein, withdrew his consent and gave reasonable public notice of the withdrawal and of the reason therefor; or

Paragraph

paragraph_334

Paragraph

(d) that—

Paragraph

paragraph_335

Paragraph

(i) as regards every untrue statement not purporting to be made on the authority of an expert or of a public official document or statement, he had reasonable ground to believe, and did up to the time of the allotment, issue or sale of the securities believe, that the statement was true; Laws of Malaysia 38 Act 704

Subparagraph

subparagraph_336

Subparagraph

(ii) as regards every untrue statement purporting to be a statement made by an expert or to be based on a statement made by an expert or contained in what purports to be a copy of or extract from a report or valuation of an expert, it fairly represented the statement, or was a correct and fair copy of an extract from the report or valuation, and he had reasonable ground to believe and did up to the time of the issue of the prospectus believe, that the expert making the statement was competent to make it and that that expert had given the consent required by section 13 to the issue of the prospectus and had not withdrawn that consent before delivery of a copy of the prospectus for registration or, to the person’s knowledge, before any allotment, issue or sale thereunder; and

Subparagraph

subparagraph_337

Subparagraph

(iii) as regards every untrue statement purporting to be a statement made by an official person or contained in what purports to be a copy of or extract from a public official document, it was a correct and fair representation of the statement or copy of or extract from the document.

Subsection

subsection_338

Subsection

(4) Subsection (3) shall not apply in the case of a person liable, by reason of his having given a consent required of him by section 13 as a person who has authorized or caused the issue of the prospectus in respect of an untrue statement purporting to have been made by him as an expert.

Subsection

subsection_339

Subsection

(5) A person who apart from this subsection would under subsection (1) be liable, by reason of his having given a consent required of him by section 13, as a person who has authorized the issue of a prospectus in respect of an untrue statement purporting to be made by him as an expert shall not be so liable if he proves—

Paragraph

paragraph_340

Paragraph

(a) that, having given his consent under section 13 to the issue of the prospectus, he withdrew it in writing before a copy of the prospectus was lodged with the Authority; Labuan Financial Services and Securities 39

Paragraph

paragraph_341

Paragraph

(b) that, after a copy of the prospectus was lodged with the Authority and before issue or sale thereunder, he on becoming aware of the untrue statement, withdrew his consent in writing and gave reasonable public notice of the withdrawal and the reasons therefor; or

Paragraph

paragraph_342

Paragraph

(c) that he was competent to make the statement and that he had reasonable ground to believe and did up to the time of the issue or sale of the securities believe that the statement was true.

Subsection

subsection_343

Subsection

(6) Where—

Paragraph

paragraph_344

Paragraph

(a) a prospectus contains the name of a person as a director of a corporation, or as having agreed to become a director, and he has not consented to become a director, or has withdrawn his consent before the issue of the prospectus, and has not authorized or consented to the issue thereof; or

Paragraph

paragraph_345

Paragraph

(b) the consent of a person is required under section 13 to the issue of the prospectus and he either has not given that consent or has withdrawn it before the issue of the prospectus, the directors of the company except any without whose knowledge or consent the prospectus was issued, and any other person who authorized or caused the issue of the prospectus, shall be liable to indemnify the person so named or whose consent was so required against all damages, costs and expenses to which he may be made liable by reason of his name having been inserted in the prospectus or of the inclusion therein of a statement purporting to be made by him as an expert, or in defending himself against any action or legal proceedings brought against him in respect thereof. Criminal liability for misstatement in prospectus

Section

section_346

Section

15. (1) Where in any prospectus, or in any advertisement of the kind referred to in section 10, there is an untrue statement or willful non-disclosure, any person who authorized or caused the issue of the prospectus or advertisement commits an offence and shall, on conviction, be liable to a fine not exceeding one million Laws of Malaysia 40 Act 704 ringgit or to imprisonment for a term not exceeding three years or to both unless he proves that the statement or non-disclosure was immaterial or that he had reasonable ground for believing and did, up to the time of the issue of the prospectus, believe that the statement was true or that the non-disclosure was immaterial.

Subsection

subsection_347

Subsection

(2) A person shall not be deemed to have authorized or caused the issue of a prospectus by reason only of his having given the consent required by this Division to the inclusion therein of a statement purporting to be made by him as an expert. Labuan trust company or bank licensee as agent in offer

Section

section_348

Section

16. (1) No allotment or issue shall be made of any securities of a corporation offered under subsection 8(1), being an offer of securities not excluded under subsection 8(5), unless the securities have been offered through a Labuan trust company or a bank licensee.

Subsection

subsection_349

Subsection

(2) For the avoidance of doubt, a Labuan trust company or a bank licensee shall be the agent of a corporation which has offered securities under subsection 8(1) through the Labuan trust company or bank licensee to receive applications for the issue of securities and shall be so described in the prospectus.

Subsection

subsection_350

Subsection

(3) All monies payable on application for the securities in a corporation shall be paid to the Labuan trust company or bank licensee acting as an agent for the corporation, and pending receipt by the Labuan trust company or bank licensee of the amount of the minimum subscription, it shall hold all monies received by it upon trust for the applicant, and if the amount of the minimum subscription is not received by the Labuan trust company or bank licensee within the time stated in the prospectus, the Labuan trust company or bank licensee shall, subject to any right under the terms of the prospectus to deduct any costs and charges owing to it or to the Authority in connection with the prospectus or the offer or his acting as a broker in the matter, return the application monies or such proportion thereof as remains after making deductions, if any, in accordance with the terms of the prospectus to the applicants pro rata based on the respective amounts paid by them. Labuan Financial Services and Securities 41

Subsection

subsection_351

Subsection

(4) Upon receipt by a Labuan trust company or a bank licensee acting as agent for a corporation of the amount of the minimum subscription on behalf of the corporation, the Labuan trust company or bank licensee shall, subject to its right to deduct from such monies its proper remuneration and disbursement, hold such monies and any further application monies as agent for the corporation. Prohibition of allotment unless minimum subscription received

Section

section_352

Section

17. (1) No allotment or issue shall be made of any securities of a corporation offered under subsection 8(1), being an offer of securities not excluded under subsection 8(5), unless—

Paragraph

paragraph_353

Paragraph

(a) the minimum subscription has been subscribed; and

Paragraph

paragraph_354

Paragraph

(b) the sum payable on application for the securities so subscribed has been received by the corporation, but if a cheque for the sum payable has been received by the corporation, the sum shall be deemed not to have been received by the corporation until the cheque is paid by the bank on which it is drawn.

Subsection

subsection_355

Subsection

(2) The minimum subscription shall be—

Paragraph

paragraph_356

Paragraph

(a) calculated based on the price at which the security is or will be offered; and

Paragraph

paragraph_357

Paragraph

(b) reckoned exclusively of any amount payable otherwise than in cash.

Subsection

subsection_358

Subsection

(3) The amount payable on application on each security offered shall not be less than five per centum of the price at which the security is or will be offered.

Subsection

subsection_359

Subsection

(4) Any condition requiring or binding any applicant for securities to waive compliance with any requirement of this section shall be void. Laws of Malaysia 42 Act 704

Subsection

subsection_360

Subsection

(5) No corporation shall issue or allot, and no officer or promoter of a corporation shall authorize or permit to be issued or allotted, securities under subsection 8(1) on the basis of a prospectus after the expiration of six months from the issue of the prospectus.

Subsection

subsection_361

Subsection

(6) Any person who contravenes this section commits an offence and shall, on conviction, be liable to a fine not exceeding one million ringgit or to imprisonment for a term not exceeding three years or to both. Application monies to be held in trust until issuance or allotment

Section

section_362

Section

18. (1) Subject to subsections 16(3) and (4) and subsection 17(1), all applications and other monies paid prior to issuance or allotment by any applicant on account of securities offered under subsection 8(1) by a corporation shall, until the issuance or allotment of such securities, be held upon trust for the applicant and such monies shall be paid into and kept in a separate trust account, pending issuance or allotment.

Subsection

subsection_363

Subsection

(2) If there is non-compliance with this section, every officer of the corporation who is in default and who knowingly and wilfully authorizes or permits the default commits an offence and shall, on conviction, be liable to a fine not exceeding one million ringgit or to imprisonment for a term not exceeding three years or to both.

Division

Division 3

Content

content_365

Content

DEBENTURES Power to issue debentures

Section

section_366

Section

19. (1) Subject to this Division and to the terms and conditions of its memorandum and articles, a Labuan company shall have the power to issue debentures on such terms and conditions as it thinks fit and in particular, but without limiting the generality of the foregoing, may issue debentures—

Paragraph

paragraph_367

Paragraph

(a) constituting a charge on any or all of the assets of the company; Labuan Financial Services and Securities 43

Paragraph

paragraph_368

Paragraph

(b) convertible from debentures into shares in the company; or

Paragraph

paragraph_369

Paragraph

(c) as secured debentures.

Subsection

subsection_370

Subsection

(2) The debt payable under any debenture, whether sealed or signed on behalf of the company, shall be a specialty debt of the company, and where the debenture is issued by a branch of a company, shall be located at that branch.

Subsection

subsection_371

Subsection

(3) The Minister may make regulations—

Paragraph

paragraph_372

Paragraph

(a) restricting the right of a Labuan company or any particular class of Labuan companies to issue debentures which may be converted into shares; and

Paragraph

paragraph_373

Paragraph

(b) prescribing the terms and conditions or the event or events upon which conversion shall or may take place. Trustee for debenture holders

Section

section_374

Section

20. (1) Every Labuan company which offers debentures under subsection 8(1), being an offer of debentures not excluded under subsection 8(5), shall make provision in those debentures, or in a trust deed relating to those debentures, for the appointment of a Labuan trust company as a trustee for the holders of the debentures.

Subsection

subsection_375

Subsection

(2) A borrowing company shall not allot any debentures until such time as a Labuan trust company has been appointed as a trustee for the holders of those debentures.

Subsection

subsection_376

Subsection

(3) The Authority may approve any other person to act as a trustee together with the Labuan trust company for the holders of the debentures.

Subsection

subsection_377

Subsection

(4) If default is made by a borrowing company in complying with this section, the borrowing company and every officer of the borrowing company who is in default commits an offence and shall, on conviction, be liable to a fine not exceeding one million ringgit or to imprisonment for a term not exceeding three years or to both. Laws of Malaysia 44 Act 704 Exemptions and indemnifications of trustee from liability

Section

section_378

Section

21. (1) Subject to this section, a term, provision or covenant of a debenture or a trust deed of a term of contract with holders of debentures secured by a trust deed shall be void insofar as the term, provision or covenant, as the case may be, would have the effect of—

Paragraph

paragraph_379

Paragraph

(a) exempting a trustee from liability for contravention of any provision of this Part or for breach of trust or failure to show the degree of care and diligence required of it as a trustee;

Paragraph

paragraph_380

Paragraph

(b) indemnifying a trustee against liability for contravention of any provision of this Part or for breach of trust or for failure to show the degree of care and diligence required of it as a trustee, unless the term, provision or covenant—

Paragraph

paragraph_381

Paragraph

(A) releases the trustee from liability for anything done or omitted to be done before the release is given; or

Paragraph

paragraph_382

Paragraph

(B) enables a meeting of debenture holders to approve the release of a trustee from liability for anything done or omitted to be done before the release is given.

Subsection

subsection_383

Subsection

(2) For the purpose of paragraph (1)(B)—

Paragraph

paragraph_384

Paragraph

(a) a release is approved if the debenture holders who vote for the resolution hold seventy-five per centum of the nominal value of the debentures held by all the debenture holders who attend the meeting and vote on the resolution; and

Paragraph

paragraph_385

Paragraph

(b) a debenture holder attends the meeting and votes on the resolution if—

Paragraph

paragraph_386

Paragraph

(i) such debenture holder attends the meeting in person and votes on the resolution; or

Subparagraph

subparagraph_387

Subparagraph

(ii) if proxies are permitted, the debenture holder is represented at the meeting by a proxy and the proxy votes on the resolution. Labuan Financial Services and Securities 45 Duties of trustee

Section

section_388

Section

22. (1) A trustee for the holders of debentures—

Paragraph

paragraph_389

Paragraph

(a) shall exercise reasonable diligence to ascertain whether or not the assets of the borrowing company and each of its guarantor companies, which are or may be available by way of securities or otherwise, are sufficient, or are likely to be or become sufficient, to discharge the principal debt as and when it becomes due;

Paragraph

paragraph_390

Paragraph

(b) shall satisfy itself that each prospectus relating to the debentures does not contain any matter which is inconsistent with the terms of the debentures or with the relevant trust deed;

Paragraph

paragraph_391

Paragraph

(c) shall exercise reasonable diligence to ascertain whether or not the borrowing company and each of its guarantor companies have committed any breach of the terms, provisions or covenants of the debentures or the trust deed;

Paragraph

paragraph_392

Paragraph

(d) except where it is satisfied that a breach of the terms, provisions or covenants of the debentures or the trust deed would not materially prejudice the security, if any, for the debentures or the interests of the holders of the debentures, shall take all steps and do all such things as it is empowered to do to cause the borrowing company and any of its guarantor companies to remedy any breach of those terms, provisions or covenants;

Paragraph

paragraph_393

Paragraph

(e) where the borrowing company or any of its guarantor companies fails, when so required by the trustee, to remedy any breach of the terms, provisions or covenants of the debentures or the trust deed, shall place the matter before a meeting of holders of the debentures, submit such proposal for the protection of their investment as the trustee considers necessary and appropriate and obtain the directions of the holders in relation thereto; and

Paragraph

paragraph_394

Paragraph

(f) where the borrowing company submits to those holders a compromise or arrangement, shall give them a statement explaining the effect of the compromise or arrangement and, if it thinks fit, recommend to them an appropriate course of action to be taken by them in relation thereto. Laws of Malaysia 46 Act 704

Subsection

subsection_395

Subsection

(2) Where, after due enquiry, a trustee for the holders of debentures at any time is of the opinion that the assets of a borrowing company and of any of its guarantor companies which are or should be available, whether by way of security or otherwise, are insufficient or likely to become insufficient to discharge the principal debt as and when it becomes due, the trustee may lodge an application in the specified form with the Authority for a direction under this subsection and the Authority may, on such application, after giving the borrowing company an opportunity for making representations in relation to the application, by direction in writing served on the borrowing company at its registered office in Labuan, impose such restrictions on the activities of the borrowing company, including restrictions on advertising for deposit or loans and on borrowing by the borrowing company, as the Authority thinks necessary for the protection of the interests of the holders of the debentures, or the Authority may, and if the borrowing company so requires shall, direct the trustee to lodge an application with the Court for an order under subsection (4) and the trustee shall apply accordingly.

Subsection

subsection_396

Subsection

(3) Where—

Paragraph

paragraph_397

Paragraph

(a) after due enquiry, a trustee for the holders of debentures at any time is of the opinion that the assets of the borrowing company and of any of its guarantor companies which are or should be available are insufficient, or likely to become insufficient, to discharge the principal debt as and when it becomes due; or

Paragraph

paragraph_398

Paragraph

(b) the borrowing company has contravened or failed to comply with a direction by the Authority under subsection (2), the trustee may, and where the borrowing company has requested the trustee to do so, the trustee shall, apply to the Court for an order under subsection (4).

Subsection

subsection_399

Subsection

(4) Where an application is lodged by a trustee with the Court under subsection (2) or (3), the Court, after giving the borrowing company an opportunity of being heard, may, by order, do all or any of the following things, namely—

Paragraph

paragraph_400

Paragraph

(a) direct the trustee to convene a meeting of the holders of the debentures for the purpose of placing before them such information relating to their interests as the trustee Labuan Financial Services and Securities 47 considers necessary or appropriate and for the purpose of obtaining their directions in relation thereto, and give such directions in relation to the conduct of the meeting as the Court thinks fit;

Paragraph

paragraph_401

Paragraph

(b) stay all or any actions or proceedings before any Court by or against the borrowing company;

Paragraph

paragraph_402

Paragraph

(c) restrain the payment of any monies by the borrowing company to the holders of debentures of the borrowing company or to any class of such holders;

Paragraph

paragraph_403

Paragraph

(d) appoint a receiver of such of the property as constitutes the security, if any, for debentures or any part thereof; or

Paragraph

paragraph_404

Paragraph

(e) give such further directions from time to time as may be necessary to protect the interests of the holders of debentures, the members of the borrowing company or any of its guarantor companies or the public, but in making any such order the Court shall have regard to the rights of all creditors of the borrowing company.

Subsection

subsection_405

Subsection

(5) The Court may vary or rescind any order made under subsection (4) as it thinks fit.

Subsection

subsection_406

Subsection

(6) A trustee in making any application to the Authority or the Court shall have regard to the nature and kind of the security given when the debentures were offered under subsection 8(1), and, if no security was given, shall have regard to the position of the holders of the debentures as unsecured creditors of the borrowing company.

Subsection

subsection_407

Subsection

(7) A trustee may rely upon any certificate or report given or statement made by any advocate, auditor or officer of the borrowing company or guarantor company if it has reasonable grounds for believing that such advocate, auditor or officer was competent to give or make the certificate, report or statement.

Subsection

subsection_408

Subsection

(8) This section shall not apply to an offer or invitation of securities under subsection 8(5). Laws of Malaysia 48 Act 704 Obligations of directors of borrowing company

Section

section_409

Section

23. (1) The directors of the borrowing company shall—

Paragraph

paragraph_410

Paragraph

(a) at the end of a period not exceeding three months ending on a day, such day being the later of the date of the relevant prospectus, if applicable, or the date on which the debenture is issued pursuant to the trust deed, which the trustee for the holders of debentures of the borrowing company is required to notify to the borrowing company in writing; and

Paragraph

paragraph_411

Paragraph

(b) at the end of each succeeding period thereafter, being a period of three months or such shorter time as the trustee may, in any special circumstances, allow, prepare a report that relates to that period and complies with the requirements of subsection (2) and, within thirty days after the end of each such period, lodge a copy of the report relating to that period with the Authority and with the trustee.

Subsection

subsection_412

Subsection

(2) The report referred to in subsection (1) shall be signed by not less than two of the directors on behalf of all of them and shall set out in detail any matter adversely affecting the security or the interests of the holders of the debentures and, without affecting the generality of the foregoing, shall state—

Paragraph

paragraph_413

Paragraph

(a) whether or not the limitations on the amount that the borrowing company may borrow have been exceeded;

Paragraph

paragraph_414

Paragraph

(b) whether or not the borrowing company and each of its guarantor companies have observed and performed all the provisions and covenants binding upon them respectively by or pursuant to the debentures or any trust deed;

Paragraph

paragraph_415

Paragraph

(c) whether or not any event has happened which has caused or could cause the debentures or any provisions of the relevant trust deed to become enforceable and, if so, particulars of that event;

Paragraph

paragraph_416

Paragraph

(d) whether or not any circumstances affecting the borrowing company, its subsidiaries or its guarantor companies or any of them have occurred which materially affect any security or charge created by the debentures or any trust deed and, if so, particulars of those circumstances; Labuan Financial Services and Securities 49

Paragraph

paragraph_417

Paragraph

(e) whether or not there has been any substantial change in the nature of the business of the borrowing company or any of its subsidiaries or any of its guarantor companies since the debentures were first issued under subsection 8(1) which has not previously been reported upon as required by this section and, if so, particulars of that change; and

Paragraph

paragraph_418

Paragraph

(f) where the borrowing company has deposited money with, or lent money to, or assumed any liability of, a corporation which pursuant to section 4 of the Labuan Companies 1990 is deemed to be related to the borrowing company, particulars of—

Paragraph

paragraph_419

Paragraph

(i) the total amount so deposited or lent and the extent of any liabilities so assumed during the period covered by the report; and

Subparagraph

subparagraph_420

Subparagraph

(ii) the total amount owing to the borrowing company in respect of money so deposited or lent and the extent of any liabilities so assumed as at the end of the period covered by the report, distinguishing between deposits, loans and assumptions of liability which are secured and those which are unsecured, but not including any deposit with or loan to or any liability assumed on behalf of a corporation if that corporation has guaranteed the re payment of the debentures of the borrowing company and has secured the guarantee by a charge over its assets in favour of the trustee for the holders of the debentures of the borrowing company.

Subsection

subsection_421

Subsection

(3) Where there is a trustee for the holders of any debentures issued by a borrowing company, the borrowing company and each guarantor company which has guaranteed the repayment of the monies raised by the issue of those debentures shall, within twenty-one days after the creation of the charge, furnish the trustee on behalf of the holders of the debentures, whether or not any demand therefor by it has been made, with particulars in writing of any charge created by the corporation or the guarantor company, as the case may require, and when the amount to be Laws of Malaysia 50 Act 704 advanced upon the security of the charge is indeterminate within seven days after the advance with particulars of the amount or amounts in fact advanced, but where any such advances are merged in a current account with bankers or trade creditors, it shall be sufficient for particulars of the net amount outstanding in respect of any such advances to be furnished every three months.

Subsection

subsection_422

Subsection

(4) The directors of every borrowing company which has issued debentures under subsection 8(1), not including those excluded under subsection 8(5), and of every guarantor company which has guaranteed the repayment of the monies raised by the issue of such debentures shall, at some date not later than nine months after the expiration of each financial year of the borrowing company or the guarantor company, cause to be made out and lodged with the Authority and with the trustee a profit and loss account together with a detailed statement of outstanding liability under such debentures for the period from the end of that financial year until the expiration of six months after the end of that financial year and a balance sheet as at the end of the period to which the profit and loss account relates.

Subsection

subsection_423

Subsection

(5) Where any guarantor company, being a company which is incorporated in any state or territory nominated for the purposes of this section by the Minister, has lodged with the appropriate authority in any such nominated state or territory a profit and loss account and balance sheet for the relevant period, that shall be sufficient compliance with the requirements of subsection (4) if, with the consent of the trustee, there is lodged with the Authority and the trustee certified copies of the profit and loss account and balance sheet so lodged.

Subsection

subsection_424

Subsection

(6) Where the directors of a borrowing company do not lodge with the trustee a report as required under subsection (1), or where the directors of a borrowing company or of its guarantor companies do not lodge with the Authority and the trustee the profit and loss account, detailed statement and balance sheet as required under subsection (4) within the time specified, the trustee shall, as soon as possible, lodge notice of that fact with the Authority.

Subsection

subsection_425

Subsection

(7) Any person who contravenes subsection (1) or (4) commits an offence and shall, on conviction, be liable to a fine not exceeding ten thousand ringgit.

Subsection

subsection_426

Subsection

(8) This section shall not apply to an offer or invitation of securities under subsection 8(5). Labuan Financial Services and Securities 51 Obligation of guarantor company to furnish information

Section

section_427

Section

24. (1) For the purpose of the preparation of a report which, by this Act, is required to be signed by or on behalf of the directors of a borrowing company or any of them, that borrowing company may, by notice in writing, require any of its guarantor companies to furnish it with any information relating to that guarantor company which, by this Act, is required to be contained in that report, and that guarantor company shall furnish the borrowing company with that information before such date, being a date not later than fourteen days after the notice is given, as may be specified in that behalf in the notice.

Subsection

subsection_428

Subsection

(2) A guarantor company which fails to comply with the requirement contained in a notice given under subsection (1) and every officer of that company who is in default commits an offence and shall, on conviction, be liable to a fine not exceeding ten thousand ringgit.

Subsection

subsection_429

Subsection

(3) This section shall not apply to an offer or invitation of securities under subsection 8(5). Loan and deposits to be immediately repayable on certain events

Section

section_430

Section

25. (1) Where in any prospectus issued in connection with an offer or invitation under subsection 8(1) to subscribe for or to purchase debentures of a Labuan company there is a statement as to any particular purpose or project for which the monies received by the borrowing company in response to the offer or invitation are to be applied, the borrowing company shall from time to time make reports to the trustee for the holders of debentures of the borrowing company as to the progress that has been made towards achieving such purpose or completing such project.

Subsection

subsection_431

Subsection

(2) Where it appears to a trustee to which a report is furnished by a borrowing company that such purpose or project has not been achieved or completed within the time stated in the prospectus within which the purpose or project is to be achieved or completed or, where no such time was stated, then within a reasonable time, the trustee may, and, if in its opinion it is necessary for the protection of the interests of the holders of the debentures, the trustee shall give notice in writing to the borrowing company requiring it to repay the monies so received and, within one month after such notice is given, lodge with the Authority a copy of such notice. Laws of Malaysia 52 Act 704

Subsection

subsection_432

Subsection

(3) A trustee shall not give a notice under subsection (2) if it is satisfied—

Paragraph

paragraph_433

Paragraph

(a) that the purpose or project has been substantially achieved or completed;

Paragraph

paragraph_434

Paragraph

(b) that the interests of the holders of the debentures have not been materially prejudiced by the failure to achieve or complete the purpose or project within the time stated in the prospectus or within a reasonable time; or

Paragraph

paragraph_435

Paragraph

(c) that the failure to achieve or complete the purpose or project was due to circumstances, other than shortage of funds, beyond the control of the borrowing company that could not reasonably have been foreseen by that borrowing company at the time that the prospectus was issued.

Subsection

subsection_436

Subsection

(4) This section shall not apply to an offer or invitation of securities under subsection 8(5). Retention of over-subscriptions in debenture issues

Section

section_437

Section

26. (1) A borrowing company shall not accept or retain subscriptions to a debenture issue in excess of the amount of the issue as disclosed in the prospectus unless the borrowing company has specified in the prospectus—

Paragraph

paragraph_438

Paragraph

(a) that it expressly reserves the right to accept or retain over-subscriptions; and

Paragraph

paragraph_439

Paragraph

(b) a limit on the amount of the over-subscription that may be accepted or retained.

Subsection

subsection_440

Subsection

(2) Subject to any regulations, where a borrowing company specifies in a prospectus relating to a debenture issue that it expressly reserves the right to accept or retain over-subscriptions—

Paragraph

paragraph_441

Paragraph

(a) the borrowing company shall not make, authorize or permit any statement or reference as to the asset-backing for the issue to be made or contained in any prospectus relating to the issue, other than a statement or reference to the total assets and the total liabilities of the borrowing company and of its guarantor company, if any; and Labuan Financial Services and Securities 53

Paragraph

paragraph_442

Paragraph

(b) the prospectus shall contain a statement or reference as to what the total assets and total liabilities of the borrowing company would be if over-subscriptions to the limit specified in the prospectus were accepted or retained.

Subsection

subsection_443

Subsection

(3) Any borrowing company who contravenes this section commits an offence and shall, on conviction, be liable to a fine not exceeding ten thousand ringgit.

Part

Part III

Division

Division 1

Content

content_446

Content

Interpretation

Section

section_447

Section

27. (1) In this Part, unless the context otherwise requires— “investor” means a person, including a custodian and an underwriter, who is the owner of securities issued by a mutual fund but does not include a person who only takes the initiative in forming or organizing the business of the mutual fund and does not have any ownership in the fund; “operator”, in respect of a mutual fund, means—

Paragraph

paragraph_448

Paragraph

(a) where the mutual fund is a corporation, a director of that corporation;

Paragraph

paragraph_449

Paragraph

(b) where the mutual fund is a limited partnership, a general partner in that limited partnership;

Paragraph

paragraph_450

Paragraph

(c) where the mutual fund is a limited liability partnership, the designated partner in that limited liability partnership; or

Paragraph

paragraph_451

Paragraph

(d) where the mutual fund is a unit trust, a trustee of that trust; Laws of Malaysia 54 Act 704 “promoter” means a person acting alone or in conjunction with others directly or indirectly who takes the initiative in forming or organizing the business of a mutual fund, but does not include a custodian or an underwriter who receives underwriting commission without taking part in the founding or organizing of the mutual fund business; “registered public fund” means a public fund registered under section 33; “shares” means one or more of the shares in the share capital of a mutual fund company including, in the case of a company limited by guarantee, the interest of a member of such company and includes an interest in a mutual fund partnership and a unit in a mutual fund unit trust.

Division

Division 2

Content

content_453

Content

Subdivision 1 PRIVATE FUNDS Notification by private funds

Section

section_454

Section

28. A private fund shall be entitled to carry on business or arrange or administer its affairs by giving notice in writing to the Authority setting out the details of the scope and nature of its business. Private fund to lodge an information memorandum or such other offering document

Section

section_455

Section

29. (1) A private fund shall lodge the information memorandum or such other offering document relating to the private fund purporting to describe the business and affairs of the private fund with the Authority. Labuan Financial Services and Securities 55

Subsection

subsection_456

Subsection

(2) The information memorandum or such other offering document referred to in subsection (1) shall be lodged by a private fund through a licensed entity which shall be reasonably satisfied that—

Paragraph

paragraph_457

Paragraph

(a) the information memorandum or such other offering document being lodged refers to a private fund as defined under this Part; and

Paragraph

paragraph_458

Paragraph

(b) there is no element of fraud involved in the establishment of the private fund.

Subsection

subsection_459

Subsection

(3) An information memorandum or such other offering document lodged by a private fund shall be deemed to be a prospectus in so far as it relates to the liability of that private fund for any statement or information that is false or misleading or from which there is a material omission.

Subsection

subsection_460

Subsection

(4) Upon receipt of the information memorandum or such other offering document under subsection (1), the Authority shall enter the particulars of the same in the registers maintained pursuant to Division 5 of this Part. Exclusion of liability for errors or omission in the information memorandum or such other offering document

Section

section_461

Section

30. Where an information memorandum or such other offering document is lodged by the private fund with the Authority under section 29, neither the Authority nor any of its officers or employees shall be liable for any loss or damage suffered by any person or persons by reason of any error, misstatement or omission of whatever nature appearing therein. Subdivision 2 PUBLIC FUNDS Public funds shall be registered

Section

section_462

Section

31. (1) No public fund shall carry on business or arrange or administer its affairs unless it has been granted registration under paragraph 33(1)(a). Laws of Malaysia 56 Act 704

Subsection

subsection_463

Subsection

(2) Subject to subsection (3), no proposed public fund shall carry on business or arrange or administer its affairs unless it has been granted provisional acceptance under paragraph 33(1)(b).

Subsection

subsection_464

Subsection

(3) A proposed public fund to which a provisional acceptance has been granted under paragraph 33(1)(b) shall not carry on business or arrange or administer its affairs without the prior written consent of the Authority. Application by public funds

Section

section_465

Section

32. (1) An application to the Authority under subsection 31(1) or subsection 31(2) shall be accompanied by the following:

Paragraph

paragraph_466

Paragraph

(a) a statement setting out the scope and nature of the business to be carried on by the applicant in or from within Labuan;

Paragraph

paragraph_467

Paragraph

(b) the instrument by which the applicant is constituted or such other proof as the Authority may require to be satisfied that the applicant is lawfully constituted under the laws of Malaysia relating to Labuan or under the laws of any recognized country or jurisdiction;

Paragraph

paragraph_468

Paragraph

(c) a statement on the following:

Paragraph

paragraph_469

Paragraph

(i) the address of the applicant’s place of business and its address for service relating to Labuan;

Subparagraph

subparagraph_470

Subparagraph

(ii) the name and address of a person in Labuan who is authorized to represent the applicant and to accept service on its behalf;

Subparagraph

subparagraph_471

Subparagraph

(iii) the address of the applicant’s place of business outside Labuan; and

Subparagraph

subparagraph_472

Subparagraph

(iv) the names, addresses and relevant experience of the directors of the fund;

Paragraph

paragraph_473

Paragraph

(d) a signed declaration by the directors of the applicant fund on confidentiality and secrecy; and

Paragraph

paragraph_474

Paragraph

(e) where available, a copy of the prospectus, either in draft or final form, of the public fund. Labuan Financial Services and Securities 57

Subsection

subsection_475

Subsection

(2) The public fund or proposed public fund shall submit such other information as may be specified by the Authority from time to time.

Subsection

subsection_476

Subsection

(3) If any change is made or occurs in respect of any information under subsection (1) as specified by the Authority, the applicant, after being granted registration or provisional acceptance as the case may be, shall within thirty days after the change occurs lodge with the Authority a notice specifying the change. Power to grant or refuse registration of public funds

Section

section_477

Section

33. (1) The Authority may grant or refuse to grant—

Paragraph

paragraph_478

Paragraph

(a) registration of a public fund; or

Paragraph

paragraph_479

Paragraph

(b) provisional acceptance of a proposed public fund.

Subsection

subsection_480

Subsection

(2) A grant under subsection (1) may be made subject to any terms, conditions, limitations or restrictions.

Subsection

subsection_481

Subsection

(3) A provisional acceptance granted under paragraph (1)(b) shall be valid and effective for a period not exceeding six months from the date on which it is granted.

Subsection

subsection_482

Subsection

(4) A provisional acceptance may be renewed for a period not exceeding three months upon application being made to the Authority and accompanied by such documents or information as the Authority may require.

Subsection

subsection_483

Subsection

(5) Notwithstanding the grant of a provisional acceptance under paragraph (1)(b) to a proposed public fund, the Authority may grant registration to such a proposed public fund as a public fund under paragraph (1)(a). Registration procedure

Section

section_484

Section

34. (1) Where the Authority grants registration of a public fund under paragraph 33(1)(a), it shall—

Paragraph

paragraph_485

Paragraph

(a) register the public fund in the register maintained under

Division

Division 5 of this Part; and

Paragraph

paragraph_487

Paragraph

(b) issue a certificate of registration to the public fund. Laws of Malaysia 58 Act 704

Subsection

subsection_488

Subsection

(2) Where the Authority grants a provisional acceptance under paragraph 33(1)(b), the promoter of the proposed public fund shall, before the expiry of the provisional acceptance period or renewed provisional acceptance period deliver to the Authority—

Paragraph

paragraph_489

Paragraph

(a) the provisional acceptance of the Authority;

Paragraph

paragraph_490

Paragraph

(b) proof satisfactory to the Authority that the proposed public fund is lawfully constituted in Labuan or any recognized country or jurisdiction; and

Paragraph

paragraph_491

Paragraph

(c) the information referred to in subsection 32(1).

Subsection

subsection_492

Subsection

(3) If the Authority is satisfied that the proposed public fund referred to in subsection (2) has complied with the requirements of that subsection it may grant registration to the public fund.

Subsection

subsection_493

Subsection

(4) Where the Authority grants registration under subsection (3), it shall register the public fund in the register maintained under

Division

Division 5 of this Part and issue a certificate of registration.

Content

content_495

Content

Prospectus relating to public fund

Section

section_496

Section

35. (1) No registered public fund shall, in or outside Labuan, make an offer of securities unless prior to such offer it has lodged a prospectus with the Authority in accordance with the prospectus requirements under section 11.

Subsection

subsection_497

Subsection

(2) For the avoidance of doubt, the civil and criminal liabilities for misstatements in prospectuses provided for under Part II shall equally apply to a prospectus lodged under this section. Investors’ rights

Section

section_498

Section

36. (1) If a registered public fund publishes a prospectus or any amendment thereto that contains any misrepresentation relating to any of the matters required to be disclosed under subsection 11(5), a person who purchased any securities pursuant to such prospectus or amendment thereto is deemed to have relied upon the misrepresentation and shall have the rights provided in subsection (2). Labuan Financial Services and Securities 59

Subsection

subsection_499

Subsection

(2) A person referred to in subsection (1) may elect to exercise a right of action—

Paragraph

paragraph_500

Paragraph

(a) for the rescission of the purchase; or

Paragraph

paragraph_501

Paragraph

(b) for damages, jointly and severally against the fund and every person who, while aware of the misrepresentation, signed the prospectus or amendment thereto and consented to its publication and lodgement or caused it to be signed or published and filed.

Subsection

subsection_502

Subsection

(3) For the purposes of this section, “misrepresentation” means—

Paragraph

paragraph_503

Paragraph

(a) any untrue or misleading statement of any of the matters required to be disclosed referred to subsection (1); or

Paragraph

paragraph_504

Paragraph

(b) an omission to disclose any of such matters.

Subsection

subsection_505

Subsection

(4) No person shall be liable under this section if he proves that the purchaser purchased the shares offered by the prospectus or amendment thereto with knowledge of the misrepresentation.

Subsection

subsection_506

Subsection

(5) The right of action for rescission or damages conferred by subsection (2) is in addition to any other right which the aggrieved party may have at law. Limitation

Section

section_507

Section

37. Notwithstanding any other written law to the contrary, an action under subsection 36(2) may not be commenced after—

Paragraph

paragraph_508

Paragraph

(a) one hundred and eighty days from the day on which the aggrieved party first had knowledge of the misrepresentation; or

Paragraph

paragraph_509

Paragraph

(b) one year from the date of the purchase transaction that gave rise to the cause of action, whichever is earlier. Laws of Malaysia 60 Act 704 Certificate of compliance

Section

section_510

Section

38. Every registered public fund which carries on business outside Labuan under the laws of any recognized country or jurisdiction shall, every year, within ninety days of the end of its financial year, lodge with the Authority a certificate of compliance or an equivalent document by whatever named called from the competent authority that is responsible for the regulation and supervision of the conduct of its business in that recognized country or jurisdiction. Foreign public fund may be managed or administered in Labuan

Section

section_511

Section

39. A public fund lawfully registered under the laws of any recognized country or jurisdiction need not be registered as a public fund under section 33 so long as the public fund is administered or managed in Labuan by a fund administrator, a custodian, a trustee or a fund manager, who is licensed, registered or eligible under this Part.

Division

Division 3

Content

content_513

Content

Subdivision 1 FUND MANAGERS AND FUND ADMINISTRATORS Licensing of fund managers

Section

section_514

Section

40. (1) No person shall carry on business as a fund manager of a public fund unless that person is a Labuan company who has been granted a licence to act as a fund manager under this section.

Subsection

subsection_515

Subsection

(2) Notwithstanding subsection (1), the following persons may carry on business as a fund manager of a public fund:

Paragraph

paragraph_516

Paragraph

(a) a person who is and continues to be a qualified and authorized manager of mutual funds under the laws of any recognized country or jurisdiction and has received written permission from the Authority to carry on business as manager of public funds; or

Paragraph

paragraph_517

Paragraph

(b) a bank licensee. Labuan Financial Services and Securities 61

Subsection

subsection_518

Subsection

(3) A fund manager who is carrying on fund management activities in relation to a private fund only is not required to be licensed under this Part. Licensing of fund administrators

Section

section_519

Section

41. (1) No person shall carry on business as a fund administrator of a public fund unless that person is a Labuan company or Labuan trust company and has been granted a licence to act as a fund administrator under this Act.

Subsection

subsection_520

Subsection

(2) Notwithstanding subsection (1), the following persons may carry on business as a fund administrator of a public fund:

Paragraph

paragraph_521

Paragraph

(a) a bank licensee;

Paragraph

paragraph_522

Paragraph

(b) a Labuan trust company;

Paragraph

paragraph_523

Paragraph

(c) a securities licensee under Part IV;

Paragraph

paragraph_524

Paragraph

(d) a management company licensed under Part VIII; or

Paragraph

paragraph_525

Paragraph

(e) a person who is and continues to be a qualified and authorized fund administrator of mutual funds under the laws of any recognized country or jurisdiction and has received written permission from the Authority to carry on business as a fund administrator of public funds.

Subsection

subsection_526

Subsection

(3) A fund administrator who is carrying on fund administration activities in relation to a private fund only is not required to be licensed under this Part. Application for fund manager’s licence

Section

section_527

Section

42. An application for a licence to carry on business as a fund manager of a public fund shall be—

Paragraph

paragraph_528

Paragraph

(a) made in such form as may be specified by the Authority; and Laws of Malaysia 62 Act 704

Paragraph

paragraph_529

Paragraph

(b) accompanied by—

Paragraph

paragraph_530

Paragraph

(i) particulars of the financial and human resources and administrative facilities available to the applicant for the competent and efficient conduct of its business;

Subparagraph

subparagraph_531

Subparagraph

(ii) a statement on the following: (aa) the address of the applicant’s place of business and its address for service relating to Labuan; (bb) the name and address of a person in Labuan who is authorized to represent the applicant and to accept service on its behalf; and

Subparagraph

subparagraph_532

Subparagraph

(cc) the address of the applicant’s place of business outside Labuan; and

Subparagraph

subparagraph_533

Subparagraph

(iii) such information or documents as the Authority may require for the purpose of determining the application. Application for fund administrator’s licence

Section

section_534

Section

43. An application for a licence to carry on business as a fund administrator of public funds shall be—

Paragraph

paragraph_535

Paragraph

(a) made in such form as may be specified by the Authority; and

Paragraph

paragraph_536

Paragraph

(b) accompanied by such information or documents as the Authority may require for the purpose of determining the application. Power to grant or refuse licence

Section

section_537

Section

44. (1) Upon receiving an application, the Authority may grant or refuse to grant a licence. Labuan Financial Services and Securities 63

Subsection

subsection_538

Subsection

(2) The grant of a licence may be made subject to any terms, conditions, limitations or restrictions.

Subsection

subsection_539

Subsection

(3) Except with the written consent of the Authority no change shall be made in respect of the identity, residence, domicile, ownership or shareholding of the fund manager or fund administrator during the period of operation of the licence.

Subsection

subsection_540

Subsection

(4) The Authority shall not grant—

Paragraph

paragraph_541

Paragraph

(a) a licence to a fund manager of a public fund; or

Paragraph

paragraph_542

Paragraph

(b) a licence to a fund administrator of a public fund, unless it is satisfied that the applicant is a fit and proper person to engage in the business of fund management or fund administration of mutual funds. Subdivision 2 TRUSTEES OR CUSTODIANS Eligibility of trustees or custodians of public funds

Section

section_543

Section

45. (1) No person shall carry on business as a trustee of a public fund unless that person is a Labuan trust company.

Subsection

subsection_544

Subsection

(2) No person shall carry on business as a custodian of a public fund unless it is a bank licensee or a Labuan trust company.

Subsection

subsection_545

Subsection

(3) This section does not apply to a person who is and continues to be a qualified and authorized trustee or custodian of public funds under the laws of any recognized country or jurisdiction and has received written permission from the Authority to carry on business as a trustee or custodian of a public fund. Subdivision 3 GRANT OF LICENCE OR REGISTRATION Licence or registration

Section

section_546

Section

46. A licence or registration granted under this Part shall—

Paragraph

paragraph_547

Paragraph

(a) be in such form as may be specified; Laws of Malaysia 64 Act 704

Paragraph

paragraph_548

Paragraph

(b) remain in force until it is revoked; and

Paragraph

paragraph_549

Paragraph

(c) be admissible in all courts as prima facie evidence of the facts stated in it.

Division

Division 4

Content

content_551

Content

DUTIES Duties of fund managers and fund administrators of public funds

Section

section_552

Section

47. The fund manager or the fund administrator of a public fund and its officers shall, in exercising their powers and duties—

Paragraph

paragraph_553

Paragraph

(a) act honestly;

Paragraph

paragraph_554

Paragraph

(b) exercise the degree of care and diligence that would be reasonably expected of a person in that position;

Paragraph

paragraph_555

Paragraph

(c) act in the best interests of the investors in the public fund and, where there is a conflict between the interest of the investors and their own interests, give priority to the investors’ interests;

Paragraph

paragraph_556

Paragraph

(d) treat the investors who hold interests of the same class equally and participants who hold interests of different classes fairly;

Paragraph

paragraph_557

Paragraph

(e) not make use of information acquired through being a fund manager or fund administrator or its officer to—

Paragraph

paragraph_558

Paragraph

(i) gain an improper advantage for themselves or another person; or

Subparagraph

subparagraph_559

Subparagraph

(ii) cause detriment to the investors in the public fund;

Paragraph

paragraph_560

Paragraph

(f) ensure that all payments out of the property of the public fund are made in accordance with the constituent documents of the public fund, this Act and any regulations; Labuan Financial Services and Securities 65

Paragraph

paragraph_561

Paragraph

(g) report to the Authority, as soon as practicable after it becomes aware of any breach of—

Paragraph

paragraph_562

Paragraph

(i) this Act and any regulations; or

Subparagraph

subparagraph_563

Subparagraph

(ii) the public fund’s constituent documents that has had, or is likely to have, a materially adverse effect on the interests of the investors; and

Paragraph

paragraph_564

Paragraph

(h) take reasonable care to make and retain adequate records of all matters, transactions and dealings, including accounting records. Duties of fund managers, fund administrators, trustees or custodians and directors under applicable law

Section

section_565

Section

48. The duties of the fund manager, fund administrator, trustee or custodian and their directors imposed on them under this Division are in addition to and not in derogation from the duties which are otherwise imposed on them by any applicable law. Specific duties of fund managers of public funds

Section

section_566

Section

49. (1) The fund manager of a public fund shall—

Paragraph

paragraph_567

Paragraph

(a) ensure that a written agreement is entered into with each client before transactions are carried out on behalf of a client;

Paragraph

paragraph_568

Paragraph

(b) understand each client’s investment objectives, instructions, risk profile and investment restrictions, where applicable, which shall be reassessed and updated at least annually;

Paragraph

paragraph_569

Paragraph

(c) exercise diligence and thoroughness in, and have reasonable and adequate basis for, preparing the investment policy or investment recommendation;

Paragraph

paragraph_570

Paragraph

(d) obtain each client’s approval for the investment policy or investment recommendation prior to its implementation; Laws of Malaysia 66 Act 704

Paragraph

paragraph_571

Paragraph

(e) provide each client with full and accurate information in order to make an informed investment decision when approving the investment policy or investment recommendation;

Paragraph

paragraph_572

Paragraph

(f) avoid any misrepresentation in any investment policy or investment recommendation; and

Paragraph

paragraph_573

Paragraph

(g) ensure that sufficient monies and properties are available in the client’s account to carry out transactions.

Subsection

subsection_574

Subsection

(2) A written agreement referred to in paragraph (1)(a) shall cover amongst others, the following areas:

Paragraph

paragraph_575

Paragraph

(a) the client’s investment objectives, instructions, risk profile and investment restrictions;

Paragraph

paragraph_576

Paragraph

(b) notification of any significant change to the investment policy or investment recommendation;

Paragraph

paragraph_577

Paragraph

(c) mode and manner of reporting to client;

Paragraph

paragraph_578

Paragraph

(d) clear authorization of discretionary management;

Paragraph

paragraph_579

Paragraph

(e) frequency of written report for the performance and review of the client’s monies or properties against an appropriate benchmark;

Paragraph

paragraph_580

Paragraph

(f) amount of fees and charges to be paid by the client;

Paragraph

paragraph_581

Paragraph

(g) the fund manager’s intention to receive, or practice of receiving, soft commission;

Paragraph

paragraph_582

Paragraph

(h) details of the custodian arrangement; and

Paragraph

paragraph_583

Paragraph

(i) such other matters as may be specified by the Authority from time to time.

Subsection

subsection_584

Subsection

(3) A fund manager who contravenes subsection (1) commits an offence and shall, on conviction, be liable to a fine not exceeding one million ringgit or to imprisonment for a term not exceeding three years or to both. Labuan Financial Services and Securities 67 Duty to segregate client’s assets

Section

section_585

Section

50. (1) A fund manager of public funds shall ensure that each client’s assets are deposited into a trust account and maintained by a custodian or a trustee or any other person as may be permitted by the Authority, as the case may be, not later than the next bank business day or such other day as may be specified by the Authority, following the day on which the fund manager receives the client’s assets.

Subsection

subsection_586

Subsection

(2) Where client’s assets that are required by this section to be deposited into a trust account are received by a fund manager in a place outside Malaysia, the fund manager may deposit such assets into a trust account maintained by it in that place.

Subsection

subsection_587

Subsection

(3) The trust account referred to in subsections (1) and (2) shall always be kept separate from those of the fund manager, and shall be so marked in the books of the fund manager relating to each client’s account, so that at no time shall such monies, property or other valuable consideration form part of or be mixed with the general assets of the fund manager, and all investments made by the company as trustee shall be so designated that the trusts to which the investments belong can be readily identified at any time.

Subsection

subsection_588

Subsection

(4) Client’s assets held in a trust account shall not be available for the payment of the debts of a fund manager or liable to be paid or taken in execution under an order or process of court for the payment of the debt of a fund manager.

Subsection

subsection_589

Subsection

(5) Nothing in this section shall be construed as taking away or affecting any lawful claim or lien which any person has against or upon any client’s assets held in a trust account or against or upon any client’s assets received for the purchase or from the sale of securities before such assets are deposited into the trust account.

Subsection

subsection_590

Subsection

(6) Any person who contravenes this section commits an offence and shall, on conviction, be liable to a fine not exceeding three million ringgit or to imprisonment for a term not exceeding five years or to both. Laws of Malaysia 68 Act 704 Duty of fund manager and custodian or trustee to be independent of each other

Section

section_591

Section

51. (1) The fund manager and the custodian or trustee of a public fund shall—

Paragraph

paragraph_592

Paragraph

(a) be different persons and act independently of each other;

Paragraph

paragraph_593

Paragraph

(b) not be a related corporation of the other; and

Paragraph

paragraph_594

Paragraph

(c) not have executive directors or other officers in common.

Subsection

subsection_595

Subsection

(2) Any person who contravenes this section commits an offence and shall, on conviction, be liable to a fine not exceeding three million ringgit or to imprisonment for a term not exceeding five years or to both.

Division

Division 5

Content

content_597

Content

REGISTERS AND ACCOUNTING Registers

Section

section_598

Section

52. (1) The Authority may keep separate registers for—

Paragraph

paragraph_599

Paragraph

(a) private funds;

Paragraph

paragraph_600

Paragraph

(b) public funds; and

Paragraph

paragraph_601

Paragraph

(c) fund managers and fund administrators of public funds.

Subsection

subsection_602

Subsection

(2) The registers referred to in subsection (1) may contain—

Paragraph

paragraph_603

Paragraph

(a) the information required under sections 29, 32, 42 and 43 in respect of each person who has been granted a licence or registration or who has received written permission under this Act;

Paragraph

paragraph_604

Paragraph

(b) the date of such licence, registration or written permission, as the case may be; and

Paragraph

paragraph_605

Paragraph

(c) the date on which such licence or registration or written permission was revoked.

Subsection

subsection_606

Subsection

(3) The registers kept under this section shall be in such form as the Authority may determine.

Subsection

subsection_607

Subsection

(4) The Authority may issue to any person, upon request by the person, a certificate of compliance in such form, upon payment of such fee, as may be prescribed. Labuan Financial Services and Securities 69

Subsection

subsection_608

Subsection

(5) No person exercising any power or discharging any duty under this Part shall, knowingly, have any financial interest in any person who has been licensed, registered or given written permission under this Part. Accounts and audit

Section

section_609

Section

53. (1) Every registered public fund shall—

Paragraph

paragraph_610

Paragraph

(a) keep or cause to be kept accounts and records and shall, after the end of each financial year cause to be prepared a statement of accounts for that financial year which shall include a balance sheet and an account of income and expenditure in accordance with generally accepted accounting principles applicable in Malaysia or in any recognized country or jurisdiction;

Paragraph

paragraph_611

Paragraph

(b) keep such accounting records and financial statements or true copies thereof at its place of business in Labuan and make them available for inspection by the Authority or any person authorized in writing by the Authority;

Paragraph

paragraph_612

Paragraph

(c) keep at its place of business in Labuan and make available to the Authority or any person authorized in writing by the Authority such other records, statements, documents or information as the Authority may prescribe in writing;

Paragraph

paragraph_613

Paragraph

(d) within three months of the end of each financial year present to an auditor the financial statements referred to in paragraph (a) and such other records and information as may be required for audit in accordance with generally accepted auditing principles applicable in Malaysia or any recognized country or jurisdiction; and

Paragraph

paragraph_614

Paragraph

(e) provide to or make available for inspection by all the investors of the fund the financial statements referred to in paragraph (a) together with the report of the auditor thereon.

Subsection

subsection_615

Subsection

(2) The accounting records and financial statements required to be kept in accordance with subsection (1) may be kept in any currency and in any language, but if they are kept in a language other than the national language or English language, a translation into the national language or English language, verified in a manner satisfactory to the Authority, shall be kept by the public fund together with such accounting records and financial statements. Laws of Malaysia 70 Act 704

Part

Part IV

Content

content_617

Content

MARKET INTERMEDIARIES

Division

Division 1

Content

content_619

Content

Interpretation

Section

section_620

Section

54. In this Part, unless the context otherwise requires “securities licensee” means a person, who for valuable consideration, provides investment advice or administrative services in respect of securities for the purposes of investment, including dealing in securities or such other activity as may be specified by the Authority.

Division

Division 2

Content

content_622

Content

SECURITIES LICENSEE Securities licensee

Section

section_623

Section

55. (1) No person shall carry on business as a securities licensee unless that person is a Labuan company who has been granted a licence to act as a securities licensee under this section.

Subsection

subsection_624

Subsection

(2) Notwithstanding subsection (1), the following persons may carry on business as a securities licensee:

Paragraph

paragraph_625

Paragraph

(a) a fund manager referred to in subsections 40(1) and (2); and

Paragraph

paragraph_626

Paragraph

(b) a bank licensee. Application for licence

Section

section_627

Section

56. (1) An application to the Authority under subsection 55(1) to be licensed as a securities licensee under this Part shall be made in writing by or on behalf of the applicant to the Authority.

Subsection

subsection_628

Subsection

(2) An application for a licence to carry on business as a securities licensee shall be—

Paragraph

paragraph_629

Paragraph

(a) made in such form as may be specified by the Authority; and Labuan Financial Services and Securities 71

Paragraph

paragraph_630

Paragraph

(b) accompanied by—

Paragraph

paragraph_631

Paragraph

(i) such application fee as may be prescribed by regulations;

Subparagraph

subparagraph_632

Subparagraph

(ii) particulars of the financial and human resources and administrative facilities available to the applicant for the competent and efficient conduct of its business;

Subparagraph

subparagraph_633

Subparagraph

(iii) a statement on the following: (aa) the address of the applicant’s place of business and its address for service relating to Labuan; (bb) the name and address of a person in Labuan who is authorized to represent the applicant and to accept service on its behalf; and

Subparagraph

subparagraph_634

Subparagraph

(cc) the address of the applicant’s place of business outside Labuan;

Subparagraph

subparagraph_635

Subparagraph

(iv) a statement to the effect that applicant has declared its compliance with the *Anti-Money Laundering and Anti-Terrorism Financing Act 2001 [Act 613] and shall ensure that it shall update its policies and procedures periodically so as to comply with their requirements; and

Paragraph

paragraph_636

Paragraph

(v) such other information or documents as the Authority may reasonably require for the purpose of determining the application. Power to grant or refuse licence

Section

section_637

Section

57. (1) Upon receiving an application under section 56, the Authority may grant or refuse the application. *NOTE—The Anti-Money Laundering and Anti-Terrorism Financing Act 2001 [Act 613] has been amended and referred as Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 [Act 613] which comes into operation on 1 September 2014— see section 3 Anti-Money Laundering and Anti-Terrorism Financing (Amendment) Act 2014 [Act A1467] and P.U. (B) 400/2014. Laws of Malaysia 72 Act 704

Subsection

subsection_638

Subsection

(2) The grant of a licence under this Part may be made subject to any terms, conditions, limitations or restrictions.

Subsection

subsection_639

Subsection

(3) Except with the written consent of the Authority, no change shall be made in respect of the identity, residence, domicile, ownership or shareholding of the securities licensee during the period of operation of the licence.

Division

Division 3

Content

content_641

Content

GRANT OF LICENCE Licence

Section

section_642

Section

58. A licence granted under this Part shall—

Paragraph

paragraph_643

Paragraph

(a) be in such form as may be specified;

Paragraph

paragraph_644

Paragraph

(b) specify any terms, conditions, restrictions or limitations;

Paragraph

paragraph_645

Paragraph

(c) remain in force until it is revoked; and

Paragraph

paragraph_646

Paragraph

(d) be admissible in all courts as prima facie evidence of the facts stated in it.

Part

Part V

Content

content_648

Content

LABUAN TRUST COMPANIES

Division

Division 1

Content

content_650

Content

Interpretation

Section

section_651

Section

59. In this Part, unless the context otherwise requires— “estate” means any property, whether real or personal, which is committed to the administration or management of a Labuan trust company as executor, administrator, trustee, receiver, committee, guardian or agent; Labuan Financial Services and Securities 73 “Labuan managed trust company” means a person carrying on trust company business where such business is managed by another Labuan trust company pursuant to the provisions of Division 3 of this Part; “settlor” means—

Paragraph

paragraph_652

Paragraph

(a) a person who provides trust property or makes a testamentary disposition on trust or to a trust, but does not include a person who contributes to a unit trust and described as such within a trust instrument; and

Paragraph

paragraph_653

Paragraph

(b) if there is more than one settlor named in the trust instrument, the named settlors must be connected persons; “trust company business” means—

Paragraph

paragraph_654

Paragraph

(a) establishing or using a share transfer office or share registration office;

Paragraph

paragraph_655

Paragraph

(b) administering, managing or otherwise dealing with property as an agent, legal personal representative or trustee, whether by servant or agent or otherwise;

Paragraph

paragraph_656

Paragraph

(c) maintaining an agent for the purpose of soliciting or procuring business, whether or not the agent is continuously resident in Labuan;

Paragraph

paragraph_657

Paragraph

(d) maintaining an office, agency or branch, whether or not that office, agency or branch is also used for any purpose by another entity;

Paragraph

paragraph_658

Paragraph

(e) the provision of—

Paragraph

paragraph_659

Paragraph

(i) management and accounting services to; or

Subparagraph

subparagraph_660

Subparagraph

(ii) directors, secretaries and registered offices for, Labuan companies incorporated or registered under the Labuan Companies Act 1990 and foreign Labuan companies registered under that Act; Laws of Malaysia 74 Act 704

Paragraph

paragraph_661

Paragraph

(f) incorporating or registering companies under the Labuan Companies Act 1990 and generally acting as a lodging agent for any document required to be lodged by a company or person under that Act; and

Paragraph

paragraph_662

Paragraph

(g) providing such other services as may be approved by the Authority from time to time, to or on behalf or any person; “trust instrument” means an instrument in writing by which a trust is created and includes a unilateral declaration of trust and an instrument varying the terms of the trust. Licence required to carry on trust company business in Labuan

Section

section_663

Section

60. No person shall carry on or transact or hold himself out as carrying on or transacting any trust company business unless—

Paragraph

paragraph_664

Paragraph

(a) the person is incorporated or registered under the Labuan Companies Act 1990 and such person is licensed to do so under this Act; or

Paragraph

paragraph_665

Paragraph

(b) the person is licensed as a Labuan managed trust company. Licensing of trust companies

Section

section_666

Section

61. (1) Subject to section 60, a person incorporated or registered under the Labuan Companies Act 1990 may apply to the Authority, in the specified form, for a licence to carry on trust company business in Labuan.

Subsection

subsection_667

Subsection

(2) An applicant may apply to the Authority for a licence under subsection (1) by meeting the following criteria:

Paragraph

paragraph_668

Paragraph

(a) the applicant has contributed at least the equivalent in any foreign currency of one hundred and fifty thousand ringgit to the capital or working funds of the Labuan company or foreign Labuan company; Labuan Financial Services and Securities 75

Paragraph

paragraph_669

Paragraph

(b) the applicant either—

Paragraph

paragraph_670

Paragraph

(i) has obtained, or will obtain a professional indemnity insurance policy with a coverage of not less than one million ringgit or its equivalent in any foreign currency or such other amount or denomination as may be determined by the Authority; or

Subparagraph

subparagraph_671

Subparagraph

(ii) has deposited with the Authority security to the value of one hundred thousand ringgit or its equivalent in any foreign currency or such other amount or denomination as may be determined by the Authority;

Paragraph

paragraph_672

Paragraph

(c) the applicant is able to meet its obligations, including its liabilities to its shareholders; and

Paragraph

paragraph_673

Paragraph

(d) the directors and officers of the applicant who are responsible for the management of the Labuan trust company in Labuan, are fit and proper persons.

Subsection

subsection_674

Subsection

(3) A Labuan trust company shall have—

Paragraph

paragraph_675

Paragraph

(a) at least two trust officers, one of whom shall be based in Labuan; and

Paragraph

paragraph_676

Paragraph

(b) a place of business in Labuan. Terms and conditions of licence

Section

section_677

Section

62. (1) The Authority may approve the application for a licence as a Labuan trust company subject to such terms and conditions, if any, as it may deem fit.

Subsection

subsection_678

Subsection

(2) Every Labuan trust company shall lodge a notice in the specified form with the Authority of—

Paragraph

paragraph_679

Paragraph

(a) any change to its place of business in Labuan; and

Paragraph

paragraph_680

Paragraph

(b) any change to its trust officers, within seven days from the effective date of change specified. Laws of Malaysia 76 Act 704

Subsection

subsection_681

Subsection

(3) Every Labuan trust company shall remain indemnified under a professional indemnity insurance policy with a coverage of not less than one million ringgit or its equivalent in any foreign currency or such other amount as may be determined by the Authority throughout its operation as a Labuan trust company.

Subsection

subsection_682

Subsection

(4) No Labuan trust company shall open any office or acquire or establish any subsidiary outside Labuan without the prior written consent of the Authority.

Subsection

subsection_683

Subsection

(5) Any person who contravenes subsection (4) commits an offence and shall, on conviction, be liable to a fine not exceeding three million ringgit or to imprisonment for a term not exceeding one year or to both. Temporary continuation for winding-up

Section

section_684

Section

63. Notwithstanding any provision to the contrary, the Authority may authorize in writing the Labuan trust company to carry on business to such extent and for such duration as he may specify in the authorization for the purpose only of enabling the Labuan trust company to wind-up its affairs consequent upon the revocation of its licence.

Division

Division 2

Content

content_686

Content

POWERS OF LABUAN TRUST COMPANIES Disclosure of interests in relation to Labuan trust company

Section

section_687

Section

64. Every Labuan trust company who is in any way, whether directly or indirectly, interested in a contract or proposed contract or in the counterparty to a transaction where it is acting in a fiduciary position whether as a trustee or otherwise, shall, as soon as reasonably practicable, furnish details of its interest to the client concerned and the Authority. Labuan Financial Services and Securities 77 Labuan trust company’s power to act as executor

Section

section_688

Section

65. Where a Labuan trust company is appointed either alone or jointly with any other person as executor in the last will of a testator or in a codicil thereto, regardless of when the will or codicil was made, the Labuan trust company may act as executor and may apply for probate of such will and any codicil thereto, and may do and discharge all the acts and duties of an executor as fully and effectively as any other executor. Labuan trust company’s power to act as administrator

Section

section_689

Section

66. (1) In any case in which a person may apply for a grant of letters of administration of the estate of a deceased person, whether with or without the will annexed, that person may—

Paragraph

paragraph_690

Paragraph

(a) join with a Labuan trust company in an application for a grant of letters of administration of the estate to himself and the Labuan trust company jointly; or

Paragraph

paragraph_691

Paragraph

(b) authorize a Labuan trust company to apply for a grant of letters of administration of the estate.

Subsection

subsection_692

Subsection

(2) Where administration of an estate, whether with or without the will annexed, is granted to a Labuan trust company either alone or jointly with any other person, the Labuan trust company may do and discharge all acts and duties which belong to the office of an administrator or joint administrator, as the case may be, notwithstanding its incorporation. Additional powers of a Labuan trust company

Section

section_693

Section

67. A Labuan trust company may be appointed as agent or trustee under any settlement or other instrument creating a trust, or to perform any trust or duty which it is authorized, by this Act or by its memorandum or articles of association or by any instrument under which the Labuan trust company was incorporated, to undertake, and may be so appointed, regardless of when the settlement or instrument creating the trust or imposing the duty was made, and whether as an original trustee, a new trustee or an additional trustee, and may do and discharge all the acts and duties of a trustee as fully and effectively as any other trustee. Laws of Malaysia 78 Act 704 Labuan trust company’s power to act as sole trustee

Section

section_694

Section

68. (1) A Labuan trust company may be appointed or continue to act as sole trustee notwithstanding that it is provided by the terms of the instrument creating the trust or any power or otherwise that there shall be more than one trustee to perform the trust.

Subsection

subsection_695

Subsection

(2) Notwithstanding subsection (1), a Labuan trust company shall not be appointed or be entitled to act as sole trustee in any case in which the instrument creating the trust or power expressly—

Paragraph

paragraph_696

Paragraph

(a) forbids the appointment of a Labuan trust company;

Paragraph

paragraph_697

Paragraph

(b) provides that there shall be another trustee in addition to a Labuan trust company; or

Paragraph

paragraph_698

Paragraph

(c) provides that a Labuan trust company shall not be appointed to act as sole trustee. Labuan trust company’s power to act as joint trustee with another

Section

section_699

Section

69. (1) A Labuan trust company may act as trustee, executor or agent together with another Labuan trust company or person if—

Paragraph

paragraph_700

Paragraph

(a) the instrument under which it acts so provides;

Paragraph

paragraph_701

Paragraph

(b) it is authorized or required to do so by law; or

Paragraph

paragraph_702

Paragraph

(c) the Court so orders.

Subsection

subsection_703

Subsection

(2) A Labuan trust company shall not be liable for breach of trust or loss resulting from any act or omission of a joint trustee, executor or agent with whom it is acting, unless the Labuan trust company has itself actively participated in, or assented to, such breach of trust. Labuan Financial Services and Securities 79 Delegation to Labuan trust company

Section

section_704

Section

70. (1) It shall be lawful for any executor, administrator, trustee or agent to delegate by deed or in writing to a Labuan trust company either alone or together with any other company or person, as his attorney, all such trusts and powers as may be lawfully delegated by him.

Subsection

subsection_705

Subsection

(2) All acts done by the Labuan trust company as such delegatee shall, as against any person dealing with the Labuan trust company without notice of the revocation of such authority by such executor, administrator, trustee or agent, be valid and effectual notwithstanding such revocation.

Division

Division 3

Content

content_707

Content

LABUAN MANAGED TRUST COMPANIES Licensing of Labuan managed trust companies

Section

section_708

Section

71. (1) No person may be licensed as a Labuan managed trust company unless it is—

Paragraph

paragraph_709

Paragraph

(a) a Labuan company or a foreign Labuan company; or

Paragraph

paragraph_710

Paragraph

(b) a foreign company licensed, registered or approved to carry out trust company business in other jurisdictions.

Subsection

subsection_711

Subsection

(2) The Authority may grant or refuse to grant a licence to such person as a Labuan managed trust company and impose any terms and conditions on such licence as it deems necessary.

Subsection

subsection_712

Subsection

(3) An application for a licence under this Part shall be accompanied by—

Paragraph

paragraph_713

Paragraph

(a) submission of a proposed detailed management agreement between the applicant and the Labuan trust company;

Paragraph

paragraph_714

Paragraph

(b) submission of a certified copy of the certificate of incorporation or constituent document of the applicant; and

Paragraph

paragraph_715

Paragraph

(c) submission of a letter of good standing or such other document of this nature from the relevant authority of the applicant’s home country where applicable. Laws of Malaysia 80 Act 704 Terms and conditions of licence as Labuan managed trust company

Section

section_716

Section

72. (1) Prior to commencing business as a Labuan managed trust company, every Labuan managed trust company shall appoint a Labuan trust company as its Labuan managed trust manager to give effect to its trust company business.

Subsection

subsection_717

Subsection

(2) Every Labuan managed trust company shall at all times, ensure that the Labuan trust company is and continues to be licensed as a Labuan trust company under this Act.

Subsection

subsection_718

Subsection

(3) For the avoidance of doubt, save for sections 61 and 62 and Division 4 of this Part, all the provisions that apply to a Labuan trust company under this Act shall similarly apply to a Labuan managed trust company.

Subsection

subsection_719

Subsection

(4) If, subsequent to its appointment as the Labuan managed trust manager of a Labuan managed trust company, the licence of such managed trust manager is revoked under section 168, the managed trust company shall appoint a new managed trust manager within the period of four weeks following the date on which the licence of the managed trust company is revoked, failing which the licence of the managed trust company shall be automatically revoked by the Authority.

Division

Division 4

Content

content_721

Content

LABUAN PRIVATE TRUST COMPANIES Meaning of “connected persons”

Section

section_722

Section

73. For the purposes of Division 4—

Paragraph

paragraph_723

Paragraph

(a) a “private trust” means a trust where each beneficiary of the trust is a connected person in relation to the settlor of the trust;

Paragraph

paragraph_724

Paragraph

(b) a person is a connected person in respect of any of the following relationships:

Paragraph

paragraph_725

Paragraph

(i) his spouse;

Subparagraph

subparagraph_726

Subparagraph

(ii) his descendants and their spouses; Labuan Financial Services and Securities 81

Subparagraph

subparagraph_727

Subparagraph

(iii) his parents, including step-parents;

Subparagraph

subparagraph_728

Subparagraph

(iv) his grandparents and his spouse’s grandparents;

Paragraph

paragraph_729

Paragraph

(v) his parents-in-law, including step-parents-in-law;

Subparagraph

subparagraph_730

Subparagraph

(vi) his brother, step-brother, sister, step-sister and their spouses;

Subparagraph

subparagraph_731

Subparagraph

(vii) his spouse’s brother, step-brother, sister, step-sister and their spouses and children;

Subparagraph

subparagraph_732

Subparagraph

(viii) his parent’s brother, step-brother, sister, step-sister and their spouses;

Subparagraph

subparagraph_733

Subparagraph

(ix) children of the brother, step-brother, sister or step-sister of his parents, both present and future, including step-children and their spouses; and

Paragraph

paragraph_734

Paragraph

(x) children of his brother, step-brother, sister or step-sister, both present and future, including step-children and their spouses;

Paragraph

paragraph_735

Paragraph

(c) for any of the relationships specified in paragraph (b) that may be established by affinity or consanguinity, that same relationship may be established by adoption. Registration as Labuan private trust company

Section

section_736

Section

74. (1) No person may be registered as a Labuan private trust company unless it is—

Paragraph

paragraph_737

Paragraph

(a) a Labuan company; or

Paragraph

paragraph_738

Paragraph

(b) a foreign Labuan company.

Subsection

subsection_739

Subsection

(2) An applicant may apply to the Authority, in the specified form for registration as a Labuan private trust company in Labuan by meeting the following criteria:

Paragraph

paragraph_740

Paragraph

(a) it satisfies the Authority that it shall provide the services of a trust company only for a private trust or private trusts created or to be created by or at the direction of a settlor or an individual or individuals who are connected persons to the settlor described in the trust instrument; Laws of Malaysia 82 Act 704

Paragraph

paragraph_741

Paragraph

(b) submission of a certified copy of the executed trust instrument and any subsequently executed trust instrument;

Paragraph

paragraph_742

Paragraph

(c) submission of a letter of undertaking that it shall not carry out any trust company business other than with respect to the private trust or private trusts; and

Paragraph

paragraph_743

Paragraph

(d) it shall appoint a Labuan trust company as its agent.

Subsection

subsection_744

Subsection

(3) The Authority may refuse to register an applicant as a Labuan private trust company if it has reason to believe that the applicant is likely to carry on business in a manner detrimental to public interest or the interests of the beneficiaries of any private trust with respect to which it provides services.

Subsection

subsection_745

Subsection

(4) The Authority may, as it deems necessary, impose, vary or revoke any terms or conditions on any registration under this Division by specifying it in writing. Terms and conditions of registration as a Labuan private trust company

Section

section_746

Section

75. (1) A Labuan private trust company shall, at all times, ensure that—

Paragraph

paragraph_747

Paragraph

(a) it complies with paragraph 74(2)(a); and

Paragraph

paragraph_748

Paragraph

(b) its agent is a Labuan trust company licensed under this Part.

Subsection

subsection_749

Subsection

(2) Subject to subsection (3), a Labuan private trust company shall not be registered under this Division during any period in which it is in contravention of subsection (1).

Subsection

subsection_750

Subsection

(3) If, subsequent to its appointment as the agent of a Labuan private trust company, the licence of the agent is revoked, subsection (2) does not apply and the Labuan private trust company shall continue to be registered for the period of thirty days following the date on which the licence of the agent is revoked. Labuan Financial Services and Securities 83 Duties of agent of Labuan private trust company

Section

section_751

Section

76. (1) A Labuan trust company shall not act as the agent of a Labuan private trust company unless it has taken all reasonable steps to satisfy itself that the Labuan private trust company—

Paragraph

paragraph_752

Paragraph

(a) complies with paragraph 74(2)(a); or

Paragraph

paragraph_753

Paragraph

(b) where the Labuan private trust company is not at that time carrying on private trust business, that the Labuan private trust company will, on commencing its private trust business, comply with paragraph 74(2)(a).

Subsection

subsection_754

Subsection

(2) The agent of a Labuan private trust company shall on a periodic basis take all reasonable steps to satisfy itself that the Labuan private trust company continues to comply with paragraph 74(2)(a).

Subsection

subsection_755

Subsection

(3) The frequency with which the agent reviews the compliance of a Labuan private trust company with paragraph 74(2)(a) shall be determined by the agent on the basis of its assessment of the risk that the Labuan private trust company may fail to comply with that section.

Subsection

subsection_756

Subsection

(4) The agent shall take all reasonable steps to ensure that the most recent copies of the following records with respect to each Labuan private trust company for which it acts as agent are kept at its office in Labuan at all times:

Paragraph

paragraph_757

Paragraph

(a) the trust instrument and any deed or document varying the terms of the trust, for each relevant trust; and

Paragraph

paragraph_758

Paragraph

(b) the documentation and other information on which it has relied to satisfy itself that the Labuan private trust company complies with paragraph 74(2)(a).

Subsection

subsection_759

Subsection

(5) If at any time the agent of a Labuan private trust company forms the opinion that the Labuan private trust company does not comply with paragraph 74(2)(a), it shall immediately notify the Authority in writing of its opinion. Laws of Malaysia 84 Act 704 Powers of the Authority

Section

section_760

Section

77. (1) Notwithstanding anything to the contrary in any trust instrument, where the Authority is satisfied that in the interest of a private trust it is necessary for all or any of the trusts for which the Labuan private trust company is acting as trustee to be transferred to a new trustee for administration by such trustee, the Authority may petition the court for that purpose.

Subsection

subsection_761

Subsection

(2) Whenever the Authority takes action pursuant to subsection (1), the court may, after hearing representations from the Authority or any other person appearing to the court to be affected, order the transfer of any such trust to a new trustee, and may make such supplemental or incidental orders or give such directions as the court thinks fit.

Subsection

subsection_762

Subsection

(3) Without prejudice to any provision under any written law, the Authority shall have the locus standi or legal right to appear, institute and conduct proceedings pursuant to subsection (1).

Subsection

subsection_763

Subsection

(4) The Authority may claim the legal costs incurred in the exercise of its powers under subsection (1) from the relevant person or Labuan private trust company, as the case may be. Non-application of the provisions of this Part

Section

section_764

Section

78. The provisions of Divisions 1, 2, 3 and 5 of this Part shall not apply to Labuan private trust companies unless otherwise provided under this Part.

Division

Division 5

Content

content_766

Content

Labuan trust company subject to same control as any other executor

Section

section_767

Section

79. Where a Labuan trust company has been appointed as executor, administrator, trustee, agent or attorney, it shall be subject in all respects to the same control and to removal or restraint from acting, and generally to the jurisdiction of the court, in the same manner as any other executor, administrator, trustee, agent or attorney. Labuan Financial Services and Securities 85 Affidavit of officer

Section

section_768

Section

80. In all cases in which a Labuan trust company is required or authorized to make any affidavit, declaration or statement, it may do so by any of its officers appointed for the purpose. Examination of books and accounts of a Labuan trust company

Section

section_769

Section

81. (1) Any person who—

Paragraph

paragraph_770

Paragraph

(a) satisfies the Court that he has an interest under any trust which is for the time being under the control or management of a Labuan trust company; and

Paragraph

paragraph_771

Paragraph

(b) objects to an act or decision of the Labuan trust company on the basis that there was some irregularity or impropriety by the Labuan trust company in doing that act or making that decision, may apply to the Court to have such entries in the books and accounts of the Labuan trust company as are related to that act or decision examined.

Subsection

subsection_772

Subsection

(2) Where the Court receives an application under subsection (1), it may appoint an auditor to examine such entries in the books and accounts of the Labuan trust company and the auditor shall report his findings to the Court.

Subsection

subsection_773

Subsection

(3) Where it is established by the findings of the auditor that there has been an irregularity or impropriety by the Labuan trust company, the Court may make such order as it thinks fit.

Subsection

subsection_774

Subsection

(4) For the purposes of this section, an auditor shall not include any internal auditor of the Labuan trust company. Retention of records

Section

section_775

Section

82. (1) A Labuan trust company shall maintain any record as may be required to be kept under this Act for a period of not less than six years from the date an account has been closed or the transaction has been completed or terminated. Laws of Malaysia 86 Act 704

Subsection

subsection_776

Subsection

(2) Any Labuan trust company which contravenes subsection (1) commits an offence and shall, on conviction, be liable to a fine not exceeding one million ringgit or to imprisonment for a term not exceeding three years or to both. Money paid to a Labuan trust company to be held in trust

Section

section_777

Section

83. (1) Any money, property or other valuable consideration paid or given to or held by a Labuan trust company in a fiduciary capacity shall always be kept separate from those of the Labuan trust company, and shall be so marked in the books of the Labuan trust company relating to each particular trust as always to be distinguished from any other in the registers and other books of account kept by the Labuan trust company, so that at no time shall such monies, property or other valuable consideration form part of or be mixed with the general assets of the Labuan trust company, and all investments made by the company as trustee shall be so designated that the trusts to which the investments belong can be readily identified at any time.

Subsection

subsection_778

Subsection

(2) Any Labuan trust company which fails to comply with the requirement of subsection (1) and every officer of that Labuan trust company who is in default commits an offence and shall, on conviction, be liable to a fine not exceeding one million ringgit or to imprisonment for a term not exceeding three years or to both. Commission, fees, charges and expenses levied by a Labuan trust company

Section

section_779

Section

84. (1) A Labuan trust company shall be entitled—

Paragraph

paragraph_780

Paragraph

(a) where it holds an estate on behalf of any person, to receive out of the estate a commission, in addition to all monies properly expended by the Labuan trust company and fees payable to it and chargeable against the estate; and

Paragraph

paragraph_781

Paragraph

(b) in all other cases, to levy fees, charges and expenses in respect of any work performed by the Labuan trust company for or on behalf of any person. Labuan Financial Services and Securities 87

Subsection

subsection_782

Subsection

(2) Where the Court is of the opinion that any commission, fees, charges or expenses levied in respect of any estate or in respect of any work performed by the Labuan trust company are excessive, the Court may, on the application of any person, on whose behalf the estate is held, or on whose behalf the work was performed, review that commission, fees, charges or expenses, and may reduce it as it thinks fit.

Subsection

subsection_783

Subsection

(3) The commission, fees, charges or expenses which a Labuan trust company is entitled to receive under this section shall not in any way be affected or diminished by the fact that any other person may be entitled to a commission, fees, charges or expenses in respect of the work performed.

Subsection

subsection_784

Subsection

(4) A Labuan trust company shall have the right to share the commission, fee, charges or expenses to which it is entitled under this section with any other person. Translation of accounts and records

Section

section_785

Section

85. Where any accounts or other records required to be kept under this Act are not kept in the national or English language, the directors of the Labuan trust company shall cause a true translation of such accounts and records to be made from time to time at intervals of not more than seven days and shall cause such translations to be kept with the original accounts and records.

Part

Part VI

Content

content_787

Content

LABUAN BANKING

Division

Division 1

Content

content_789

Content

Interpretation

Section

section_790

Section

86. In this Part, unless the context otherwise requires— “bank licence” means a licence granted pursuant to an application under section 88 or section 89, as the context may require; Laws of Malaysia 88 Act 704 “building credit business” means the business of providing any credit facilities to any person for the express purpose of—

Paragraph

paragraph_791

Paragraph

(a) the purchase of immovable property;

Paragraph

paragraph_792

Paragraph

(b) the construction, reconstruction or renovation of any building or other structure, for residential, commercial or industrial purposes; “capital funds” means paid-up capital and reserves; “commodity derivative instrument” includes, to the extent such instrument is not a derivative financial instrument, commodity futures, commodity forward, commodity swap, commodity option or other commodity instruments with similar characteristics, that are reasonably possible to be settled in cash or with securities or other derivative instruments; “credit facilities” means—

Paragraph

paragraph_793

Paragraph

(a) any advance, loan or other facility in whatever form or by whatever name called, by the giving of which the person to whom the same is given has access, directly or indirectly, to the funds of the person giving the same; or

Paragraph

paragraph_794

Paragraph

(b) any liability whatsoever incurred on behalf of any person; “credit token business” means any business where a token, being a cheque, card, voucher, stamps, booklet, coupon, form or other document or thing is given or issued to a person, referred to as “customer”, by the person carrying on the business, referred to as “issuer”, whereby such issuer undertakes—

Paragraph

paragraph_795

Paragraph

(a) that on the production of the token, whether or not some other action is also required, the issuer will supply cash, goods or services on credit; or Labuan Financial Services and Securities 89

Paragraph

paragraph_796

Paragraph

(b) that where, on the production of the token to a third party, whether or not any other action is also required, the third party supplies cash, goods or services, the issuer will pay the third party for them, whether or not deducting any discount or commission, in return for payment to be made thereafter to the issuer by the customer, and for the purposes of this definition, the use of a token to operate a machine provided by the issuer or by a third party shall be regarded as the production of the token to the person providing the machine; “deposit” means a sum of money received or paid on terms—

Paragraph

paragraph_797

Paragraph

(a) under which it will be repaid, with or without interest or at a premium or discount;

Paragraph

paragraph_798

Paragraph

(b) under which it is repayable, either wholly or in part, with any consideration in money or money’s worth, and such repayment being either on demand or at a time or in circumstances agreed by or on behalf of the person making the payment and the person receiving it, regardless whether the transaction is described as a loan, an advance, an investment, a saving, a sale or a sale and repurchase, but does not include money paid bona fide—

Paragraph

paragraph_799

Paragraph

(A) by way of an advance or a part payment under a contract for the sale, hire or other provision of property or services, and is repayable only in the event that the property or services is not or are not in fact sold, hired or otherwise provided;

Paragraph

paragraph_800

Paragraph

(B) by way of security for the performance of a contract or by way of security in respect of any loss which may result from the non-performance of a contract;

Paragraph

paragraph_801

Paragraph

(C) without prejudice to paragraph (B), by way of security for the delivery up or return of any property, whether in a particular state of repair or otherwise; and

Paragraph

paragraph_802

Paragraph

(D) in such other circumstances, or to or by such other person, as the Authority may specify; Laws of Malaysia 90 Act 704 “derivative financial instrument” means futures, forward, swap, or option contract, or other financial instrument with similar characteristics but does not include—

Paragraph

paragraph_803

Paragraph

(a) all on-balance-sheet receivables and payables, including those that derive their values or contractually require cash flows from the price of some other security or index, such as mortgage-backed securities, interest-only and principal-only obligations, and indexed debt instruments; and

Paragraph

paragraph_804

Paragraph

(b) option features that are embedded within an on-balance-sheet receivable or payable, such as the conversion feature and call provisions embedded in convertible bonds; “derivative instrument” means an instrument the value of which depends upon the value of underlying indices or assets such as currencies, securities, commodities or other derivative instruments and includes a derivative financial instrument and a commodity derivative instrument; “development finance business” means the business of providing capital or other credit facility on terms which would require the same to be utilized for industrial, agricultural, commercial or other economic development; and for the purposes of this definition, “development” includes the commencement of any new industrial, agricultural, commercial or other economic venture or the expansion or improvement of any such existing venture; “factoring business” means the business of acquiring debts due to any person; “Labuan banking business” means—

Paragraph

paragraph_805

Paragraph

(a) the business of receiving deposits on current account, deposit account, savings account or any other account as may be specified by the Authority;

Paragraph

paragraph_806

Paragraph

(b) Labuan investment banking business;

Paragraph

paragraph_807

Paragraph

(c) Labuan financial business;

Paragraph

paragraph_808

Paragraph

(d) Labuan Islamic banking business; Labuan Financial Services and Securities 91

Paragraph

paragraph_809

Paragraph

(e) such other business as the Authority, with the approval of the Minister, may specify, in any currency (including ringgit where permitted by the *Exchange Control Act 1953 or such other relevant law in force); “Labuan financial business” means—

Paragraph

paragraph_810

Paragraph

(a) building credit business;

Paragraph

paragraph_811

Paragraph

(b) credit token business;

Paragraph

paragraph_812

Paragraph

(c) development finance business;

Paragraph

paragraph_813

Paragraph

(d) leasing business;

Paragraph

paragraph_814

Paragraph

(e) factoring business;

Paragraph

paragraph_815

Paragraph

(f) money-broking business;

Paragraph

paragraph_816

Paragraph

(g) Labuan Islamic financial business; or

Paragraph

paragraph_817

Paragraph

(h) such other business as the Authority, with the approval of the Minister, may specify, in any currency (including ringgit where permitted by the *Exchange Control Act 1953 or such other relevant law in force); “Labuan investment banking business” means—

Paragraph

paragraph_818

Paragraph

(a) the business of providing credit facilities;

Paragraph

paragraph_819

Paragraph

(b) the business of providing consultancy and advisory services relating to corporate and investment matters, including dealing in securities, or making and managing investments on behalf of any person;

Paragraph

paragraph_820

Paragraph

(c) the business of undertaking foreign exchange transactions, interest rate swaps, dealings in derivative instruments or derivative financial instruments or any other similar risk management activities;

Paragraph

paragraph_821

Paragraph

(d) Labuan Islamic investment banking business; *NOTE—The Exchange Control Act 1953 [Act 17] has since been repealed by the Financial Services Act 2013 [Act 758] which comes into operation on 30 June 2013—see sections 271 and 272 of Act 758. Laws of Malaysia 92 Act 704

Paragraph

paragraph_822

Paragraph

(e) Labuan financial business; or

Paragraph

paragraph_823

Paragraph

(f) such other business as the Authority, with the approval of the Minister, may specify, in any currency (including ringgit where permitted by the *Exchange Control Act 1953 or such other relevant law in force); “Labuan Islamic banking business” means Islamic banking business carried on by a person licensed to do so under Part VI of the Labuan Islamic Financial Services and Securities Act 2010; “Labuan Islamic financial business” means Islamic financial business carried on by a person licensed to do so under Part VI of the Labuan Islamic Financial Services and Securities Act 2010; “Labuan Islamic investment banking business” means Islamic investment banking business carried on by a person licensed under

Part

Part VI of the Labuan Islamic Financial Services and Securities

Content

content_825

Content

Act 2010; “leasing business” means the business of letting or sub-letting property on hire for the purpose of the use of such property by the hirer regardless whether the letting is with or without an option to purchase the property, including charters of ships, and for the purpose of this definition, “property” includes any plant, machinery, equipment or other chattel attached or to be attached to the earth and “charters of ships” means bareboat charters only and does not include the transportation of passengers or cargo by sea or the charter of ships on a voyage or time charter; “Malaysian bank” means a licensed as bank defined in the **Banking and Financial Institutions Act 1989 [Act 372] or an Islamic bank as defined in the ***Islamic Banking Act 1983 [Act 276]; *NOTE—The Exchange Control Act 1953 [Act 17] has since been repealed by the Financial Services Act 2013 [Act 758] which comes into operation on 30 June 2013—see sections 271 and 272 of Act 758. **NOTE—The Banking and Financial Institutions Act 1989 [Act 372] has since been repealed by the Financial Services Act 2013 [Act 758] which comes into operation on 30 June 2013—see sections 271 and 272 of Act 758. ***NOTE—The Islamic Banking Act 1983 [Act 276] has since been repealed by the Islamic Financial Services Act 2013 [Act 759] which comes into operation on 30 June 2013—see sections 282 and 283 of Act 759. Labuan Financial Services and Securities 93 “money-broking business” means the business of arranging transactions between buyers and sellers in the money or foreign exchange markets as an intermediary in consideration of brokerage fees paid or to be paid, but does not include the buying or selling of ringgit or foreign currencies as a principal in such markets; “payment system” means any system or arrangement for the transfer, clearing or settlement of funds or securities, but excludes—

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(a) a payment system established or operated by the Central Bank or operated on behalf of the Central Bank, under the Central Bank of Malaysia Act 2009 [Act 701];

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(b) a clearing house as defined under the Capital Markets and Services Act 2007;

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(c) an in-house payment system operated by a person solely for his own administrative purposes that does not transfer, clear or settle funds or securities for third parties; and

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(d) a system that solely facilitates the initiation of payment instructions; “paid-up capital”, in relation to an applicant under sections 88, 89 and 90 or a bank licensee, means the amount of money contributed by its participants for it to carry on business but does not include credit facilities granted to it by its participants.

Division

Division 2

Content

content_831

Content

Labuan banking business, Labuan investment banking business and Labuan financial business to be carried on only under licence

Section

section_832

Section

87. (1) No person shall carry on Labuan banking business, Labuan investment banking business or Labuan financial business unless—

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(a) it is a Labuan company or a foreign Labuan company; or

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(b) it is a Malaysian bank, and holds a valid licence to carry on such business. Laws of Malaysia 94 Act 704

Subsection

subsection_835

Subsection

(2) Any person who contravenes subsection (1) commits and offence and shall, on conviction, be liable to a fine not exceeding ten million ringgit or to imprisonment for a term not exceeding five years or to both, and in the case of a continuing offence, shall, in addition, be liable to a daily fine not exceeding ten thousand ringgit for each day the offence continues to be committed. Application for licence to carry on Labuan banking business

Section

section_836

Section

88. (1) An application for a licence to carry on Labuan banking business shall be made in writing by or on behalf of the applicant to the Authority.

Subsection

subsection_837

Subsection

(2) An application for a licence to carry on Labuan banking business by a Labuan company shall be accompanied by the following:

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(a) the applicant’s constituent documents duly authenticated by an officer of the applicant in such manner as may be acceptable to the Authority; and

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(b) a statement on the following:

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(i) the name, place and date of establishment of the applicant;

Subparagraph

subparagraph_841

Subparagraph

(ii) the principal business and the principal place of business of the applicant; and

Subparagraph

subparagraph_842

Subparagraph

(iii) the names and addresses of the directors of the applicant and the participants who each holds ten per centum or more of the paid-up capital of the applicant;

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(c) a statement on the names, addresses, qualifications, working experience and proposed positions of all officers who would be responsible for the management of the applicant’s Labuan banking business; Labuan Financial Services and Securities 95

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(d) a proposed amendment to the applicant’s constituent documents to the effect that the sole and exclusive object of the Labuan company shall be the carrying on of Labuan banking business;

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(e) where the applicant—

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(i) is a Labuan company which is a subsidiary of a holding company, a copy of the audited balance sheet of its holding company’s business for each of the three financial years immediately preceding the date of application;

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Subparagraph

(ii) is a Labuan company which is not a subsidiary of any corporation, a copy of the audited balance sheet of the business of its participants who each holds ten per centum or more of the paid-up capital of the applicant for each of the three financial years immediately preceding the date of application;

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(f) a guarantee secured and an undertaking given by the applicant in respect of its Labuan banking business, in such manner and such form as may be acceptable to the Authority, and such guarantee and undertaking shall provide, inter alia, that—

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(i) the applicant shall comply with the financial obligations and requirements imposed under this Act and shall meet the applicant’s liabilities in respect of its Labuan banking business;

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Subparagraph

(ii) no participant of the applicant who holds ten per centum or more of the paid-up capital of the applicant shall be changed without the prior written approval of the Authority;

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Subparagraph

(iii) every director or the principal officer of the applicant responsible for the management of its Labuan banking business shall be a fit and proper person and the appointment of such director or principal officer shall only be made after consultation with the Authority. Laws of Malaysia 96 Act 704

Subsection

subsection_852

Subsection

(3) An application for a licence to carry Labuan banking business by a proposed Labuan company to be incorporated under the Labuan Companies Act 1990 (“proposed Labuan company”) shall be accompanied by the following:

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(a) its proposed constituent documents duly authenticated in such manner as may be acceptable to the Authority by any of its officers;

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(b) a statement on the following:

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(i) the name, place and date of the proposed establishment of the applicant;

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Subparagraph

(ii) the proposed principal business and the proposed principal place of business of the applicant; and

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Subparagraph

(iii) the names and addresses of the proposed directors of the applicant and the proposed participants who each holds ten per centum or more of the paid-up capital of the applicant;

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(c) a statement on the names, addresses, qualifications, working experience and proposed positions of all officers who would be responsible for the management of the applicant’s Labuan banking business;

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(d) a copy of the audited balance sheet of the business of the proposed participants who would each hold ten per centum or more of its paid-up capital for each of the three financial years immediately preceding the date of its application; and

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(e) a statement on a guarantee secured and an undertaking given by its proposed participants that they would cause the proposed Labuan company, upon being incorporated, to secure a guarantee and give an undertaking as are referred to in paragraph (2)(f).

Subsection

subsection_861

Subsection

(4) An application for a licence to carry on Labuan banking business by a foreign Labuan company shall be accompanied by the following:

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(a) its constituent documents duly authenticated by an officer of the applicant in such manner as may be acceptable to the Authority; Labuan Financial Services and Securities 97

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(b) a statement on the following:

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(i) the name, place and date of establishment of the applicant;

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Subparagraph

(ii) the principal business and the principal place of business of the applicant; and

Subparagraph

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Subparagraph

(iii) the names and addresses of the directors of the applicant and the participants who each holds ten per centum or more of the paid-up capital of the applicant;

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(c) a proposed amendment to the applicant’s constituent documents to the effect that the sole and exclusive object of the foreign Labuan company shall be the carrying on of Labuan banking business;

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(d) a copy of the audited balance sheet of the applicant’s business for each of the three financial years immediately preceding the date of the application;

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(e) an undertaking given by the applicant in respect of its Labuan banking business, in such manner and such form as may be acceptable to the Authority, and such undertaking shall provide, inter alia that—

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(i) the applicant shall comply with the financial obligations and requirements imposed under this Act and shall meet the applicant’s liabilities in respect of its Labuan banking business;

Subparagraph

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Subparagraph

(ii) where the applicant is a foreign Labuan company, that it shall promptly notify the Authority of any change in its participants who hold ten per centum or more of its paid-up capital;

Subparagraph

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Subparagraph

(iii) every director or the principal officer of the applicant responsible for the management of its Labuan banking business shall be a fit and proper person and the appointment of such director or principal officer shall only be made after consultation with the Authority. Laws of Malaysia 98 Act 704

Subsection

subsection_873

Subsection

(5) An application for a licence to carry on Labuan banking business by a foreign company which is seeking registration as a foreign Labuan company under the Labuan Companies Act 1990 (“proposed foreign Labuan company”) shall be accompanied by the following:

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(a) the constituent documents under which it is to be established, duly authenticated by any of its proposed officers in such manner as may be acceptable to the Authority;

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(b) a copy of the audited balance sheet of the business for each of the three financial years immediately preceding the date of the application;

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(c) a statement on—

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(i) the name, place and date of the establishment of the foreign company;

Subparagraph

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Subparagraph

(ii) the principal business and the principal place of business of the foreign company;

Subparagraph

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Subparagraph

(iii) the names and addresses of the directors of the foreign company;

Subparagraph

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Subparagraph

(iv) the names and addresses of the participants of the foreign company who each holds ten per centum or more of the paid-up capital of the foreign company;

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(v) the names, addresses, qualifications, working experience and proposed positions of all proposed officers of the proposed foreign Labuan company who would be responsible for the management of its Labuan banking business; and

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(d) an undertaking given by the foreign company as is referred to in paragraph (4)(e). Labuan Financial Services and Securities 99

Subsection

subsection_883

Subsection

(6) An application for a licence to carry on Labuan banking business by a Malaysian bank shall be accompanied by the following:

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(a) the applicant’s constituent documents duly authenticated by an officer of the applicant in such manner as may be acceptable to the Authority; and

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(b) a copy of the audited balance sheet of the applicant’s business for each of the three financial years immediately preceding the date of the application;

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(c) a statement on the following:

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(i) the name, place and date of establishment of the applicant;

Subparagraph

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Subparagraph

(ii) the principal business and the principal place of business of the applicant; and

Subparagraph

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Subparagraph

(iii) the names and addresses of the directors of the applicant and the participants who each holds ten per centum or more of the paid-up capital of the applicant;

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(d) a statement on the names, addresses, qualifications, working experience and proposed positions of all officers who would be responsible for the management of the applicant’s Labuan banking business. Application for licence to carry on Labuan investment banking business

Section

section_891

Section

89. An application for a licence to carry on Labuan investment banking business shall be made in writing by or on behalf of the applicant to the Authority and the provisions of section 88 relating to Labuan banking business shall apply similarly save that “Labuan banking business” shall be read as “Labuan investment banking business”. Laws of Malaysia 100 Act 704 Application for licence to carry on Labuan financial business

Section

section_892

Section

90. An application for a licence to carry on Labuan financial business shall be made in writing by or on behalf of the applicant to the Authority and shall be accompanied by such documents, statements and information as may be specified by the Authority. Additional information

Section

section_893

Section

91. The Authority may, at any time after receiving an application under section 88, 89 or 90 and before a determination is made, verbally or in writing require the applicant to provide verbally or in writing such additional information, or to provide such additional documents, as may be considered necessary by the Authority for the purposes of determining the suitability of the applicant for the licence. Grant of licence by the Authority

Section

section_894

Section

92. (1) Upon receiving an application for a licence under section 88, 89 or 90 and after being provided with all such information and documents as it may require under those sections, the Authority may approve the application, with or without conditions, or reject the application.

Subsection

subsection_895

Subsection

(2) Where the Authority rejects the application, the Authority shall notify the applicant in writing of the rejection.

Subsection

subsection_896

Subsection

(3) Where the Authority approves the application for a licence under subsection (1), the Authority shall issue the licence to the applicant upon the applicant’s satisfaction of any condition imposed under such application for licence.

Subsection

subsection_897

Subsection

(4) A licence granted under this section shall remain in force until it is surrendered or revoked in accordance with this Act.

Subsection

subsection_898

Subsection

(5) No applicant shall be granted a bank licence under this section without the written consent of the Authority if its capital funds are less than ten million ringgit or its equivalent in any foreign currency in cash or such amount as may be specified in writing by the Authority. Labuan Financial Services and Securities 101

Subsection

subsection_899

Subsection

(6) The Authority may, upon consultation with the Minister, by written notice to the bank licensee, vary the existing terms and conditions or impose such additional terms and conditions, in respect of a bank licence, from time to time as it deems fit. Requirement to use, and restriction on use of, the words “licensed Labuan bank”, etc.

Section

section_900

Section

93. (1) A bank licensee shall at all times affix or paint, and keep affixed or painted, in a prominent position on the outside of each of its offices and so as to be easily legible, its name, licence number and the words “licensed Labuan bank” or “licensed Labuan investment bank”, as the case may be.

Subsection

subsection_901

Subsection

(2) A bank licensee shall, in any bill-head, printed form, letter paper, notice, advertisement, or any other document issued from its office and in the course of its business, prominently print its name, licence number and the words “licensed Labuan bank” or “licensed Labuan investment bank”, as the case may be.

Subsection

subsection_902

Subsection

(3) No person, not being a bank licensee, shall, without the written consent of the Authority, assume or use the words “licensed Labuan bank”, “licensed Labuan investment bank” or any derivative of such words in any language capable of being construed as indicating the carrying on of Labuan banking business or Labuan investment banking business by such person.

Subsection

subsection_903

Subsection

(4) Any person who contravenes subsection (3) commits an offence and shall, on conviction, be liable to a fine not exceeding ten million ringgit or to imprisonment for a term not exceeding five years or to both, and in the case of a continuing offence, shall in addition, be liable to a daily fine not exceeding ten thousand ringgit for each day the offence continues to be committed. Maintenance of capital adequacy ratio

Section

section_904

Section

94. (1) No bank licensee shall carry on Labuan banking business or Labuan investment banking business if its capital funds are less than the amount specified in writing by the Authority. Laws of Malaysia 102 Act 704

Subsection

subsection_905

Subsection

(2) Every bank licensee shall maintain at all times, such capital adequacy ratio, as may be specified in writing by the Authority from time to time and no bank licensee shall carry on Labuan banking business or Labuan investment banking business if such specified capital adequacy ratio is not complied with, except with the approval of the Authority.

Subsection

subsection_906

Subsection

(3) A bank licensee shall at all times maintain its capital funds to reflect the risk weighted capital ratio as may be specified in writing by the Authority from time to time.

Subsection

subsection_907

Subsection

(4) The Authority may direct a bank licensee to take appropriate measures to rectify any deficiencies in such specified ratio in such manner as the Authority deems fit. Amendment or alteration of constituent documents of bank licensees

Section

section_908

Section

95. (1) Every bank licensee which is a Labuan company shall, prior to the making of any amendment or alteration to any of its constituent documents, furnish to the Authority particulars in writing as to such proposed amendment or alteration for the approval of the Authority.

Subsection

subsection_909

Subsection

(2) Every bank licensee which is a foreign Labuan company or a Malaysian bank shall within three months after the making of any amendment or alteration to its constituent documents, furnish to the Authority particulars in writing of such amendment or alteration duly authenticated in a manner acceptable to the Authority by a director of the bank licensee.

Subsection

subsection_910

Subsection

(3) No bank licensee shall make any amendment or alteration that is contrary to any written law to its constituent documents.

Subsection

subsection_911

Subsection

(4) No participant of the bank licensee who holds fifteen per centum or more of the paid-up capital of the bank licensee shall be changed without the prior written approval of the Authority and, where the bank licensee is a foreign Labuan company, it shall promptly notify the Authority of any change in its participants who hold fifteen per centum or more of its paid-up capital. Labuan Financial Services and Securities 103 Authority to publish list of Labuan banks and Labuan investment banks

Section

section_912

Section

96. The Authority shall publish annually not later than 31 March of each year a list of all existing Labuan banks and Labuan investment banks as at 31 December of the preceding year and their licence numbers in the Gazette, and if any licence is issued, revoked or surrendered, subsequent to such publication, the Authority shall cause to be published in the Gazette as soon as practicable a revised list of all existing Labuan banks and Labuan investment banks and their licence numbers.

Division

Division 3

Content

content_914

Content

DUTIES OF BANK LICENSEES Offices and subsidiaries

Section

section_915

Section

97. A bank licensee which is a Labuan company may, subject to the prior written consent of the Authority, open any office other than its principal place of business in Labuan, or acquire or establish any subsidiary. Prohibition of certain accounts

Section

section_916

Section

98. (1) No bank licensee shall accept any money on deposit or loan which is repayable on demand by cheque, draft, order or any other instrument drawn by the depositor on the bank licensee.

Subsection

subsection_917

Subsection

(2) Every bank licensee shall conduct proper due diligence enquiries prior to opening any account for a customer.

Subsection

subsection_918

Subsection

(3) Any person who contravenes subsection (1) commits an offence and shall, on conviction, be liable to a fine not exceeding ten million ringgit or to imprisonment for a term not exceeding five years or to both, and in the case of a continuing offence, shall, in addition, be liable to a daily fine not exceeding ten thousand ringgit for each day the offence continues to be committed. Financial statements, statistics and information to be submitted to the Authority

Section

section_919

Section

99. The bank licensee shall comply with the requirements with respect to financial statements, statistics and information to the Authority as set out in the Third Schedule. Laws of Malaysia 104 Act 704

Division

Division 4

Content

content_921

Content

GENERAL PROVISION Payment from a deceased person’s account

Section

section_922

Section

100. (1) Notwithstanding anything in any written law or rule of law, a bank licensee may, without the production of letters of probate or letters of administration, pay any sum not exceeding the equivalent of five thousand ringgit standing to the credit of a deceased person to any person who produces satisfactory proof of—

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(a) the death of such deceased person; and

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Paragraph

(b) his entitlement under the law to the sum standing to the credit of such deceased person.

Subsection

subsection_925

Subsection

(2) A bank licensee shall not make any payment under subsection (1) if it has received other claims to any money standing to the credit of the deceased person.

Subsection

subsection_926

Subsection

(3) A bank licensee or its directors or officers shall not be liable in respect of any claim by any person in connection with any payment made in accordance with this section but such person may recover any sum lawfully due to him from the person to whom such payment has been made.

Part

Part VII

Content

content_928

Content

LABUAN INSURANCE

Division

Division 1

Content

content_930

Content

Interpretation

Section

section_931

Section

101. (1) In this Part, unless the context otherwise requires— “domestic insurance business” means insurance business where the subject matter of the contract is—

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(a) property which at the time of the making of the contract is situated in Malaysia or is in transit to or from Malaysia; Labuan Financial Services and Securities 105

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(b) a ship or an aircraft registered in Malaysia and all liabilities arising from the operation of such ship or aircraft;

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paragraph_934

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(c) the life or any contingency related to any person who, at the time of the making of the contract, is a resident; or

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(d) a risk of any nature in respect of any person who, at the time of the making of the contract, is a resident; “general insurance business” means insurance business which is not life insurance business but which includes accident, medical, surgical and hospital expenses insurances related to any person; “insurance business” means the business of effecting and carrying out contracts—

Paragraph

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(a) protecting persons against loss or liability to loss in respect of risks to which such persons may be exposed; or

Paragraph

paragraph_937

Paragraph

(b) to pay a sum of money or other thing of value upon the happening of an event, and includes reinsurance business; “insurance licence” means a licence granted under this Part; “insured” means a person who is covered by an insurance policy; “insurer” means a person who carries on insurance business; “Labuan captive insurance business” means Labuan insurance business where the insured is a related corporation or associate corporation of the Labuan insurer or where the insured is any other person in respect of whom the Labuan insurer is authorized by the Authority to provide insurance or reinsurance; “Labuan insurance broker” means a person who is licensed to—

Paragraph

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(a) arrange Labuan insurance business on behalf of prospective or existing policy owners; Laws of Malaysia 106 Act 704

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Paragraph

(b) arrange Labuan reinsurance business on behalf of any insurer seeking reinsurance; or

Paragraph

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(c) analyze the financial circumstances of another person and provides a plan to meet that other person’s financial needs and objectives, whether or not a fee is charged in relation thereto; “Labuan insurance business” means insurance and reinsurance business which includes takaful and retakaful business, Labuan captive insurance business and such other insurance business approved by the Authority but does not include any insurance business that is regulated or prohibited under other written law in Malaysia; “Labuan insurance manager” means a person who is licensed to provide management or administration services related to Labuan insurance business but does not include a Labuan underwriting manager; “Labuan insurer” means a person who is licensed to carry on Labuan insurance business; “Labuan underwriting manager” means a person, not being a bona fide employee, who is licensed to provide underwriting services, including the administration of the business, to one or more Labuan insurers; “life insurance business” means insurance business connected with any policy by which payment of policy monies is insured on death or on the happening of any contingency dependent on the termination or continuation of human life and includes any incidental extension of cover and reinsurances of such business; “Malaysian insurer” means an insurer which is licensed under the *Insurance Act 1996 [Act 553] or the **Takaful Act 1984 [Act 312]; “net premium income”, in relation to a financial year, means the premiums receivable under contracts of insurance or reinsurance after deducting any premiums payable for reinsurances arranged in respect of such contracts of insurance or reinsurance; *NOTE—The Insurance Act 1996 [Act 553] has since been repealed by the Financial Services Act 2013 [Act 758] which comes into operation on 30 June 2013—see sections 271 and 272 of Act 758. **NOTE—The Takaful Act 1984 [Act 312] has since been repealed by the Islamic Financial Services Act 2013 [Act 759] which comes into operation on 30 June 2013—see sections 282 and 283 of Act 759. Labuan Financial Services and Securities 107 “policy” means an insurance policy and includes a cover note or any written contract of insurance whether or not embodied in or evidenced by an instrument in the form of an insurance policy; and any reference to a policy of an insurer includes a reference to any policy in respect of which the insurer is under any liability, whether the policy was issued by the insurer or the liability was transferred to the insurer from another insurer; “policy owner” means any person who effects a policy; “reinsurance business” means a business whereby the reinsurer assumes a part of the liability under an original contract of insurance of another insurer or reinsurer; “reinsurer” means a person who carries on or transacts or holds himself out as carrying on or transacting reinsurance business; “working funds” means—

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Paragraph

(a) in relation to a Labuan company, the paid-up capital unimpaired by losses; and

Paragraph

paragraph_942

Paragraph

(b) in relation to a foreign Labuan company or a branch of a Malaysian insurer, the surplus of assets over liabilities to be maintained in the books of its office in Labuan.

Subsection

subsection_943

Subsection

(2) Where fifteen per centum or more of the voting shares of a corporation are held by another corporation, the first-mentioned corporation shall be deemed to be an associate corporation of the other corporation, and any reference in this Act to an “associate corporation” shall be construed as a reference to that first-mentioned corporation or that other corporation, as the case may be.

Division

Division 2

Content

content_945

Content

LICENSING OF LABUAN INSURANCE BUSINESS AND LABUAN INSURANCE-RELATED ACTIVITIES Licensing of Labuan insurance business and Labuan insurance-related activities

Section

section_946

Section

102. (1) No person shall carry on or transact or hold himself out as carrying on or transacting any Labuan insurance business unless that person is—

Paragraph

paragraph_947

Paragraph

(a) a Labuan company; Laws of Malaysia 108 Act 704

Paragraph

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Paragraph

(b) a foreign Labuan company; or

Paragraph

paragraph_949

Paragraph

(c) a branch of a Malaysian insurer, and holds a valid insurance licence.

Subsection

subsection_950

Subsection

(2) No person shall carry on or transact or hold himself out as carrying on or transacting any business as a Labuan insurance manager, Labuan underwriting manager or Labuan insurance broker or any other Labuan insurance-related activities as may be specified by the Authority unless that person holds a valid insurance licence.

Subsection

subsection_951

Subsection

(3) Except with the prior written approval of the Authority, a person who is not an insurance licensee shall not assume or use the words “Labuan insurer”, “Labuan insurance manager”, “Labuan underwriting manager”, “Labuan insurance broker” or any derivative of such words in any language capable of being construed as indicating the carrying on of Labuan insurance business or Labuan insurance-related activities by such person.

Subsection

subsection_952

Subsection

(4) This section shall not apply to bank licensees as defined in

Part

Part VI, distributing the insurance products of a Labuan insurer subject to the prior written approval of the Authority.

Content

content_954

Content

Application for insurance licence to carry on Labuan insurance business

Section

section_955

Section

103. (1) Every applicant for an insurance licence to carry on Labuan insurance business shall satisfy the Authority that—

Paragraph

paragraph_956

Paragraph

(a) the applicant is, or will be, a Labuan company or a foreign Labuan company or a branch of a Malaysian insurer;

Paragraph

paragraph_957

Paragraph

(b) the working funds of the applicant—

Paragraph

paragraph_958

Paragraph

(i) in a case where the applicant proposes to carry on either life insurance business or general insurance business, are at least seven million and five hundred thousand ringgit or its equivalent in any foreign currency or such other amount or denomination as may be specified by the Authority; Labuan Financial Services and Securities 109

Subparagraph

subparagraph_959

Subparagraph

(ii) in a case where the applicant proposes to carry on solely reinsurance business, are at least ten million ringgit or its equivalent in any foreign currency or such other amount or denomination as may be specified by the Authority; or

Subparagraph

subparagraph_960

Subparagraph

(iii) in a case where the applicant proposes to carry on solely Labuan captive insurance business, are at least three hundred thousand ringgit or its equivalent in any foreign currency or such other amount or denomination as may be specified by the Authority;

Paragraph

paragraph_961

Paragraph

(c) the sum of money specified in paragraph (b) is maintained in an account of the applicant with a bank in Labuan, as evidenced by a certificate of such bank, at the time when the application is made;

Paragraph

paragraph_962

Paragraph

(d) the person in control, director and principal officer of the applicant are fit and proper persons to be associated with a Labuan insurer;

Paragraph

paragraph_963

Paragraph

(e) the applicant either—

Paragraph

paragraph_964

Paragraph

(i) has established, or will establish, its management in Labuan with adequate knowledge and expertise of the Labuan insurance business to be carried on; or

Subparagraph

subparagraph_965

Subparagraph

(ii) has appointed, or will appoint, a licensed Labuan underwriting manager or Labuan insurance manager in Labuan with adequate knowledge and experience of the Labuan insurance business to be carried on, save that with respect to applicants who apply to carry out Labuan captive insurance business, only a Labuan underwriting manager may be appointed; and

Paragraph

paragraph_966

Paragraph

(f) the applicant will become a member of an association of Labuan insurers. Laws of Malaysia 110 Act 704

Subsection

subsection_967

Subsection

(2) Notwithstanding paragraph (1)(b), the Authority may, having regard to the extent and volume of Labuan insurance business which the applicant proposes to carry on, specify a lesser amount of working funds, subject to the applicant providing adequate guarantee on such terms and conditions as may be acceptable to the Authority for the difference in amount.

Subsection

subsection_968

Subsection

(3) Every application for a license to carry on Labuan insurance business shall—

Paragraph

paragraph_969

Paragraph

(a) be made in writing and be submitted to the Authority;

Paragraph

paragraph_970

Paragraph

(b) state whether such Labuan insurance business is in relation to life insurance business or general insurance business;

Paragraph

paragraph_971

Paragraph

(c) set out the types of Labuan insurance business, as the case may be, which are to be carried on under the insurance licence;

Paragraph

paragraph_972

Paragraph

(d) set out the applicant’s business plans; and

Paragraph

paragraph_973

Paragraph

(e) be accompanied by—

Paragraph

paragraph_974

Paragraph

(i) a copy of— (aa) the applicant’s constituent documents duly authenticated by a director or officer of the applicant; (bb) the resolutions of the board and the general meeting, if any, of the applicant, duly authenticated by a director or officer of the applicant, authorizing the applicant to apply for an insurance licence;

Subparagraph

subparagraph_975

Subparagraph

(cc) the applicant’s certificate of incorporation or registration, as the case may be, certified by the relevant registering authority in the place of establishment or origin of the applicant; and

Subparagraph

subparagraph_976

Subparagraph

(dd) except in relation to an application to carry on a Labuan captive insurance business, a letter of awareness from the applicant’s home supervisory authority or such authority as may be specified by the Authority. Labuan Financial Services and Securities 111

Subparagraph

subparagraph_977

Subparagraph

(ii) a copy of the applicant’s audited annual accounts for the three consecutive years immediately preceding the application, where applicable;

Subparagraph

subparagraph_978

Subparagraph

(iii) a statement on— (aa) the name, place and date of establishment of the applicant; (bb) the names, addresses, qualifications and experience of the directors and officers responsible for the overall management of the affairs of the applicant; and

Subparagraph

subparagraph_979

Subparagraph

(cc) the name and address of each member who holds fifteen per centum or more of the voting shares of the applicant;

Subparagraph

subparagraph_980

Subparagraph

(iv) a declaration by the applicant on the probity of the applicant’s directors and officers who would be concerned in the management of the proposed Labuan insurer; and

Paragraph

paragraph_981

Paragraph

(v) in the case of an application by a Labuan company, a guarantee secured and an undertaking given, and, in the case of an application by a foreign Labuan company or a branch of a Malaysian insurer, an undertaking given, by the applicant in respect of its Labuan insurance business, in such manner and such form as may be acceptable to the Authority, and such guarantee and undertaking shall provide, inter alia, that— (aa) the applicant shall comply with the financial obligations and requirements imposed under this Act and shall meet the applicant’s liabilities in respect of its Labuan insurance business; (bb) where the applicant is a Labuan company, no participant of the applicant who holds ten per centum or more of the paid-up capital of the applicant shall be changed without the prior written approval of Laws of Malaysia 112 Act 704 the Authority and, where the applicant is a foreign Labuan company, that it shall promptly notify the Authority of any change in its participants who hold ten per centum or more of its paid-up capital; and

Subparagraph

subparagraph_982

Subparagraph

(cc) every director or the principal officer of the applicant responsible for the management of its Labuan insurance business shall be a fit and proper person and the appointment of such director or principal officer shall only be made after consultation with the Authority.

Subsection

subsection_983

Subsection

(4) Paragraph (3)(e)(v) shall not apply to an application to carry on a Labuan captive insurance business where the policy owner is a related corporation or associate corporation of the Labuan insurer.

Subsection

subsection_984

Subsection

(5) The Authority may require from the applicant such other information or documents as may be specified by the Authority for the purpose of determining the application.

Subsection

subsection_985

Subsection

(6) The matters specified under subsection (5) may differ as between applicants, or different classes, categories or descriptions of applicants as may be determined by the Authority.

Subsection

subsection_986

Subsection

(7) An application under this section may be made in relation to a person not yet established under the Labuan Companies Act 1990 but will be so established in the event of such person obtaining an insurance licence, and in such event the requirements of subsection (1) may be varied by the Authority as it deems appropriate. Application for insurance licence to carry on Labuan insurance-related activities

Section

section_987

Section

104. (1) Every applicant for an insurance licence to carry on business as a Labuan insurance manager, Labuan underwriting manager or Labuan insurance broker shall satisfy the Authority that—

Paragraph

paragraph_988

Paragraph

(a) the person in control, director and principal officer of the applicant are fit and proper persons; Labuan Financial Services and Securities 113

Paragraph

paragraph_989

Paragraph

(b) the applicant is able to maintain sufficient funds in its business to cover its expenses of operations and management in Labuan for at least six months;

Paragraph

paragraph_990

Paragraph

(c) in respect of an applicant for an insurance licence to carry on the business of a Labuan insurance manager or Labuan underwriting manager—

Paragraph

paragraph_991

Paragraph

(i) the applicant has established, or undertakes to establish, its management in Labuan with adequate knowledge and expertise of the Labuan insurance business to be carried on; or

Subparagraph

subparagraph_992

Subparagraph

(ii) the applicant has appointed, or undertakes to appoint, a licensed Labuan insurance manager or Labuan underwriting manager in Labuan with adequate knowledge and experience of the Labuan insurance business to be carried on;

Paragraph

paragraph_993

Paragraph

(d) in respect of an applicant for an insurance licence to carry on business as a Labuan insurance broker—

Paragraph

paragraph_994

Paragraph

(i) the applicant has established, or undertakes to establish, its management in Labuan with adequate knowledge and expertise of the Labuan insurance business to be carried on; or

Subparagraph

subparagraph_995

Subparagraph

(ii) the applicant has appointed, or undertakes to appoint, a licensed Labuan insurance manager in Labuan with adequate knowledge and experience of the Labuan insurance business to be carried on;

Paragraph

paragraph_996

Paragraph

(e) the applicant either has obtained or undertakes to obtain any professional indemnity insurance policy of not less than two million and five hundred thousand ringgit or its equivalent in any foreign currency or such other amount or denomination as may be specified by the Authority, and remain indemnified under such policy throughout its operation in Labuan; Laws of Malaysia 114 Act 704

Paragraph

paragraph_997

Paragraph

(f) the applicant holds such qualification as may be specified by the Authority; and

Paragraph

paragraph_998

Paragraph

(g) the applicant undertakes to become a member of an association of Labuan insurers.

Subsection

subsection_999

Subsection

(2) Every application for a licence to carry on business as a Labuan insurance manager, Labuan underwriting manager or Labuan insurance broker shall—

Paragraph

paragraph_1000

Paragraph

(a) be made in writing and be submitted to the Authority;

Paragraph

paragraph_1001

Paragraph

(b) state the nature of the business to be carried on under the insurance licence; and

Paragraph

paragraph_1002

Paragraph

(c) be accompanied by—

Paragraph

paragraph_1003

Paragraph

(i) a copy of— (aa) the applicant’s constituent documents, duly authenticated by a director or officer of the applicant; (bb) the resolutions of the board and the general meeting, if any, of the applicant, duly authenticated by a director or officer of the applicant, authorizing the applicant to apply for an insurance licence;

Subparagraph

subparagraph_1004

Subparagraph

(cc) the applicant’s certificate of incorporation or registration, as the case may be, certified by the relevant registering authority in the place of establishment or origin of the applicant; and

Subparagraph

subparagraph_1005

Subparagraph

(dd) a letter of awareness from the applicant’s home supervisory authority or such authority as may be specified by the Authority;

Subparagraph

subparagraph_1006

Subparagraph

(ii) a copy of the applicant’s audited annual accounts for the three consecutive years immediately preceding the application, where applicable; Labuan Financial Services and Securities 115

Subparagraph

subparagraph_1007

Subparagraph

(iii) a statement on— (aa) the name, place and date of establishment of the applicant; (bb) the names, addresses, qualifications and experience of the directors and officers responsible for the overall management of the affairs of the applicant; and

Subparagraph

subparagraph_1008

Subparagraph

(cc) the name and address of each member who holds fifteen per centum or more of the voting shares of the applicant;

Subparagraph

subparagraph_1009

Subparagraph

(iv) a declaration by the applicant on the probity of the applicant’s directors and officers who would be concerned in the management of the proposed Labuan insurance manager, the proposed Labuan underwriting manager or the proposed Labuan insurance broker, as the case may be;

Paragraph

paragraph_1010

Paragraph

(v) in the case of an application by a Labuan company, a guarantee secured and an undertaking given, and, in the case of an application by a foreign Labuan company or a branch of a Malaysian insurer, an undertaking given, by the applicant in respect of the business of a Labuan insurance manager, Labuan underwriting manager or Labuan insurance broker, as the case may be, in such manner and such form as may be acceptable to the Authority, and such guarantee and undertaking shall provide, inter alia, that– (aa) the applicant shall comply with the financial obligations and requirements imposed under this Act and shall meet the applicant’s liabilities in respect of the business of a Labuan insurance manager, Labuan underwriting manager or Labuan insurance broker, as the case may be; Laws of Malaysia 116 Act 704 (bb) where the applicant is a Labuan company, no participant of the applicant who holds ten per centum or more of the paid-up capital of the applicant shall be changed without the prior written approval of the Authority and, where the applicant is a foreign Labuan company, that it shall promptly notify the Authority of any change in its participants who hold ten per centum or more of its paid-up capital; and

Subparagraph

subparagraph_1011

Subparagraph

(cc) every director or the principal officer of the applicant responsible for the management of the business of a Labuan insurance manager, Labuan underwriting manager or Labuan insurance broker, as the case may be, shall be a fit and proper person and the appointment of such director or principal officer shall only be made after consultation with the Authority.

Subsection

subsection_1012

Subsection

(3) The Authority may require from the applicant such other information or documents as may be specified by the Authority for the purpose of determining the application.

Subsection

subsection_1013

Subsection

(4) The matters specified under subsection (3) may differ as between applicants, or different classes, categories or descriptions of applicants as may be determined by the Authority. Grant of insurance licence

Section

section_1014

Section

105. (1) Upon receiving an application for an insurance licence, the Authority may approve the application, with or without conditions, or reject the application.

Subsection

subsection_1015

Subsection

(2) Where the Authority rejects the application, the Authority shall notify the applicant in writing of the rejection.

Subsection

subsection_1016

Subsection

(3) Where the Authority approves the insurance licence under subsection (1), the Authority shall issue the insurance licence to the applicant. Labuan Financial Services and Securities 117

Subsection

subsection_1017

Subsection

(4) The Authority may specify in the insurance licence the type of activities the insurance licensee may carry on.

Subsection

subsection_1018

Subsection

(5) An applicant who is aggrieved by the decision of the Authority under subsection (1) to reject his application, may within thirty days of the decision being notified to him, appeal to the Minister in writing.

Subsection

subsection_1019

Subsection

(6) An insurance licensee shall comply with any conditions imposed under a license granted under subsection (1) for the duration of the license.

Subsection

subsection_1020

Subsection

(7) A licence granted under this section shall remain in force until it is surrendered or revoked in accordance with this Act.

Subsection

subsection_1021

Subsection

(8) The Authority may, upon consultation with the Minister, by written notice to the insurance licensee vary the existing terms and conditions or impose such additional terms and conditions, in respect of an insurance licence, from time to time as it deems fit. Publication of list of all insurance licensees

Section

section_1022

Section

106. The Authority shall publish annually not later than 31 March of each year a list of all existing insurance licensees as at 31 December of the preceding year and their licence numbers in the Gazette, and if any licence is issued, revoked or surrendered, subsequent to such publication, the Authority shall cause to be published in the Gazette as soon as practicable a revised list of all existing insurance licensees and their licence numbers. Continuing licensing requirements

Section

section_1023

Section

107. (1) Every Labuan insurer which is a Labuan company shall, prior to the making of any amendment or alteration to any of its constituent documents, or prior to any change of its person in control, director or principal officer, furnish to the Authority particulars in writing of any such proposed amendment, alteration or change, for the approval of the Authority. Laws of Malaysia 118 Act 704

Subsection

subsection_1024

Subsection

(2) Every Labuan insurer which is a foreign Labuan company shall, prior to the making of any change of its principal officer, furnish to the Authority the particulars in writing of any proposed change for the approval of the Authority.

Subsection

subsection_1025

Subsection

(3) Every Labuan insurer which is a foreign Labuan company or a branch of a Malaysian insurer shall notify in writing within three months after the making of any amendment or alteration to any of its constituent documents, or any change of its person in control or director and furnish to the Authority particulars in writing of such amendment, alteration or change duly authenticated in a manner acceptable to the Authority by a director of the Labuan insurer.

Subsection

subsection_1026

Subsection

(4) Every insurance licensee shall immediately notify the Authority of any amendment or alteration to any information which had been furnished to the Authority in connection with the application for the insurance licence.

Subsection

subsection_1027

Subsection

(5) No Labuan insurer shall make any amendment or alteration to its constituent documents which are contrary to any written law.

Subsection

subsection_1028

Subsection

(6) Where the Labuan insurer is a Labuan company, no participant of the Labuan insurer who holds fifteen per centum or more of the paid-up capital of the applicant shall be changed without the prior written approval of the Authority and, where the Labuan insurer is a foreign Labuan company, it shall promptly notify the Authority of any change in its participants who hold fifteen per centum or more of its paid-up capital.

Division

Division 3

Content

content_1030

Content

FINANCIAL REQUIREMENTS AND DUTIES OF AND RESTRICTIONS ON INSURANCE LICENSEES Appointment of actuary

Section

section_1031

Section

108. Every Labuan insurer carrying on life insurance business shall appoint an actuary annually within such period as may be specified by the Authority. Labuan Financial Services and Securities 119 Margin of solvency

Section

section_1032

Section

109. Every Labuan insurer, including an insurance licensee which carries on Labuan captive insurance business, shall ensure that the realizable value of its assets exceeds the amount of its liabilities by a margin in such an amount or calculated in such manner as may be specified in writing by the Authority from time to time. Separate accounts to be kept by Labuan insurer

Section

section_1033

Section

110. (1) Every Labuan insurer shall keep the accounts and funds in respect of its Labuan insurance business separate from its other funds.

Subsection

subsection_1034

Subsection

(2) Every Labuan insurer which carries on both life insurance business and general insurance business shall keep the accounts and funds in respect of its life insurance business separate from the accounts and funds in respect of its general insurance business.

Subsection

subsection_1035

Subsection

(3) Every Labuan insurer which is a branch of a Malaysian insurer shall keep the accounts in respect of its Labuan insurance business separate from the accounts in respect of its domestic insurance business carried on in Labuan. Submission of financial statements

Section

section_1036

Section

111. Every Labuan insurer shall comply with the requirements with respect to the submission of financial statements as set out in the Third Schedule. Subsidiaries and offices of insurance licensee

Section

section_1037

Section

112. An insurance licensee which is a Labuan company may, subject to the prior written consent of the Authority, open any office other than its principal place of business in Labuan, or acquire or establish any subsidiary. Laws of Malaysia 120 Act 704 Restriction on business by Labuan insurer

Section

section_1038

Section

113. (1) No Labuan insurer shall carry on any business activities in Labuan or elsewhere from its office in Labuan other than its Labuan insurance business or business activities in connection with or for the purposes of such Labuan insurance business.

Subsection

subsection_1039

Subsection

(2) Notwithstanding the definition of “Labuan insurance business” and notwithstanding subsection (1), a Labuan insurer may carry on the reinsurance of domestic insurance business, including the reinsurance of domestic insurance business transacted in the Malaysian currency and such other business as may be specified by the Authority.

Subsection

subsection_1040

Subsection

(3) No Labuan insurer shall act on behalf of another Labuan insurer as a Labuan insurance manager or Labuan underwriting manager unless such first-mentioned Labuan insurer has been granted an insurance licence to carry on business as Labuan insurance manager or Labuan underwriting manager, as the case may be. Restrictions on and duties of Labuan insurance manager, Labuan underwriting manager and Labuan insurance broker

Section

section_1041

Section

114. (1) No licensed Labuan insurance manager shall provide any services other than administrative services and no licensed Labuan underwriting manager shall provide any services other than underwriting services.

Subsection

subsection_1042

Subsection

(2) No licensed Labuan underwriting manager shall provide underwriting services in or from Labuan to any person not licensed under this Act or to any business carried on by an insurer registered under the *Insurance Act 1996 or by a takaful operator registered under the **Takaful Act 1984. *NOTE—The Insurance Act 1996 [Act 553] has since been repealed by the Financial Services Act 2013 [Act 758] which comes into operation on 30 June 2013—see sections 271 and 272 of Act 758. **NOTE—The Takaful Act 1984 [Act 312] has since been repealed by the Islamic Financial Services Act 2013 [Act 759] which comes into operation on 30 June 2013—see sections 282 and 283 of Act 759. Labuan Financial Services and Securities 121

Subsection

subsection_1043

Subsection

(3) A licensed Labuan insurance broker may handle the insurance or reinsurance of domestic insurance business, transacted in the Malaysian currency provided that such activity does not include any activity that is regulated or prohibited under other written law in Malaysia.

Subsection

subsection_1044

Subsection

(4) Every licensed Labuan insurance manager or licensed Labuan underwriting manager who acts on behalf of a Labuan insurer shall maintain its own funds separate from the funds of the Labuan insurer and shall not apply the funds of such Labuan insurer to meet any of its expenses or liabilities other than in respect of the Labuan insurance business. List of Labuan insurers to be supplied by Labuan insurance manager and Labuan underwriting manager 115. Every licensed Labuan insurance manager and licensed Labuan underwriting manager shall, within thirty days from the close of its financial year, submit to the Authority, in such form and manner as may be specified by the Authority, a list of all Labuan insurers for whom such licensed Labuan insurance manager provides administrative services or licensed Labuan underwriting manager provides underwriting services. Conduct of business

Section

section_1045

Section

116. (1) Every Labuan insurer shall—

Paragraph

paragraph_1046

Paragraph

(a) conduct its business with due diligence and care in accordance with sound insurance principles;

Paragraph

paragraph_1047

Paragraph

(b) follow accepted international accounting standards or such other standards as may be approved by the Authority;

Paragraph

paragraph_1048

Paragraph

(c) register all assets in its name, or in the name of a custodian or nominee for the Labuan insurer where assets are acquired in the name of such custodian or nominee, and in the case of bearer shares, hold them in safe custody; and

Paragraph

paragraph_1049

Paragraph

(d) indicate clearly on its letterhead, stationery and other documents containing its name that it is licensed under this Act, together with the number of its insurance licence. Laws of Malaysia 122 Act 704

Subsection

subsection_1050

Subsection

(2) No Labuan insurer shall advertise or publish, in any form, information which is untrue or which is likely to mislead another person in relation to the written laws applicable to Labuan insurers and their related businesses and activities or that Labuan insurer’s financial status or insurance or reinsurance plans or any other matter in respect of its Labuan insurance business.

Subsection

subsection_1051

Subsection

(3) Paragraphs (1)(a) and (d) and subsection (2) shall apply with the necessary modifications to a licensed Labuan insurance manager, licensed Labuan underwriting manager and licensed Labuan insurance broker.

Division

Division 4

Content

content_1053

Content

PAYMENT OF POLICY MONIES UNDER A LIFE POLICY AND PERSONAL ACCIDENT POLICY Application of this Division

Section

section_1054

Section

117. In this Division, a reference to a policy is a reference to a life policy, including a life policy under section 23 of the Civil Law Act 1956 [Act 67], and a personal accident policy effected by a policy owner upon his own life providing for payment of policy monies on his death. Power to make nomination

Section

section_1055

Section

118. (1) A policy owner who has attained the age of eighteen years may nominate a natural person to receive policy monies payable upon his death under the policy by notifying the Labuan insurer in writing of the name, date of birth, identity card number or birth certificate number and address of the nominee at the time the policy is issued.

Subsection

subsection_1056

Subsection

(2) Where a nomination is made after the policy is issued, the policy owner shall submit the policy together with the particulars of the nominee referred to in subsection (1) for the Labuan insurer’s endorsement of the nomination on the policy.

Subsection

subsection_1057

Subsection

(3) A nomination made under subsection (1) shall be witnessed by a person of sound mind who has attained the age of eighteen years and who is not a nominee named under that subsection. Labuan Financial Services and Securities 123

Subsection

subsection_1058

Subsection

(4) The Labuan insurer—

Paragraph

paragraph_1059

Paragraph

(a) shall prominently display in the nomination form a notice that the policy owner has to assign the policy benefits to his nominee if his intention is for his nominee, other than his spouse, child or parent, to receive the policy benefits beneficially and not as an executor;

Paragraph

paragraph_1060

Paragraph

(b) shall record the nomination and the particulars of the nominee in its register of policies; and

Paragraph

paragraph_1061

Paragraph

(c) shall register in its register of policies the nomination made under subsection (1) and such nomination shall take effect from the date the nomination is registered.

Subsection

subsection_1062

Subsection

(5) A failure to comply with subsection (4) shall affect the validity of the nomination unless otherwise proven that the necessary notification of the nomination was made by the policy owner and given to the Labuan insurer for endorsement on the policy.

Subsection

subsection_1063

Subsection

(6) A nomination made under subsection (1) may be in favour of one person or several persons and where there is more than one person nominated, the policy owner may direct that specified shares be paid to the persons nominated and in the absence of direction by the policy owner, the Labuan insurer shall pay such persons in equal shares. Revocation of nomination

Section

section_1064

Section

119. (1) A nomination, including a nomination to which section 121 applies, shall be revoked—

Paragraph

paragraph_1065

Paragraph

(a) upon the death of the nominee, or where there is more than one nominee, upon the death of all the nominees, during the lifetime of the policy owner;

Paragraph

paragraph_1066

Paragraph

(b) by a notice in writing given by the policy owner; or

Paragraph

paragraph_1067

Paragraph

(c) by any subsequent nomination.

Subsection

subsection_1068

Subsection

(2) Subject to subsection (1), a nomination shall not be revoked by a will or by any other act, event or means. Laws of Malaysia 124 Act 704

Subsection

subsection_1069

Subsection

(3) Where there is more than one nominee and one of the nominees predeceases the policy owner, in the absence of any subsequent nomination by the policy owner disposing of the share of the deceased nominee, the Labuan insurer shall pay the share of the deceased nominee to the remaining nominees in proportion to their respective shares. Payment of policy monies

Section

section_1070

Section

120. (1) Subject to subsection (2), where a policy owner dies having made a nomination, the Labuan insurer shall pay the policy monies of the deceased policy owner according to the direction of the nomination upon receipt of a claim by the nominee and the claim is accompanied by proof of death of the policy owner.

Subsection

subsection_1071

Subsection

(2) Where a nominee fails to claim the policy monies within two months of the Labuan insurer becoming aware of the death of the policy owner, the Labuan insurer shall notify the nominee in writing at his last-known address of his entitlement to claim the policy monies.

Subsection

subsection_1072

Subsection

(3) Where a nominee fails to claim the policy monies within twelve months of the notification under subsection (2), section 124 shall apply as though no nomination was made.

Subsection

subsection_1073

Subsection

(4) Where a nominee, other than a nominee under section 121, dies after the death of the policy owner but before any policy monies has been paid to him as nominee, section 119 or section 124 shall apply to the policy, as the case may be. Trustee of policy monies

Section

section_1074

Section

121. (1) A nomination by a policy owner, other than a Muslim policy owner, shall create a trust in favour of the nominee of the policy monies payable upon the death of the policy owner, if—

Paragraph

paragraph_1075

Paragraph

(a) the nominee is his spouse or child; or

Paragraph

paragraph_1076

Paragraph

(b) where there is no spouse or child living at the time of nomination, the nominee is his parent. Labuan Financial Services and Securities 125

Subsection

subsection_1077

Subsection

(2) A payment under subsection (1) shall not form part of the estate of the deceased policy owner or be subject to his debts.

Subsection

subsection_1078

Subsection

(3) The policy owner, by the policy, or by a notice in writing to the Labuan insurer, may appoint trustees of the policy money and where there is no trustee—

Paragraph

paragraph_1079

Paragraph

(a) the nominee who is competent to contract; or

Paragraph

paragraph_1080

Paragraph

(b) where the nominee is incompetent to contract, the parent of the incompetent nominee and where there is no surviving parent, the Public Trustee, shall be the trustee of the policy monies and the receipt of a trustee shall be a discharge to the Labuan insurer for all liability in respect of the policy monies paid to the trustee.

Subsection

subsection_1081

Subsection

(4) A policy owner shall not deal with a policy to which subsection (1) applies by revoking a nomination under the policy, by varying or surrendering the policy, or by assigning or pledging the policy as security, without the written consent of the trustee.

Subsection

subsection_1082

Subsection

(5) Nothing in this section shall prejudice a creditor of a policy owner from applying to the court for a declaration that this section, wholly or partly, is inapplicable to any particular policy on the ground that the premiums under that policy were paid to defraud the creditor. Nominee other than a nominee under section 121

Section

section_1083

Section

122. (1) A nominee, other than a nominee under section 121, shall receive the policy monies payable on the death of the policy owner as an executor and not solely as a beneficiary and any payment to the nominee shall form part of the estate of the deceased policy owner and be subject to his debts and the Labuan insurer shall be discharged from liability in respect of the policy monies paid.

Subsection

subsection_1084

Subsection

(2) Subsection (1) applies to a nominee of a Muslim policy owner who, on receipt of the policy monies, shall distribute the policy monies in accordance with syariah principles. Laws of Malaysia 126 Act 704 Assigned or pledged policy monies

Section

section_1085

Section

123. (1) Notwithstanding a nomination under section 118 or the creation of a trust under subsection 121(1), where the policy monies, wholly or partly, have been pledged as security or assigned to a person, the claim of the person entitled under the security or the assignee shall have priority over the claim of the nominee and, subject to the rights under the security or the assignment being preserved, the Labuan insurer shall pay the balance of the policy monies to the nominee.

Subsection

subsection_1086

Subsection

(2) Where more than one person is entitled under the security or the assignment, the respective rights of the persons entitled under the security or the assignment shall be in the order of priority according to the priority of the date on which the security or the assignment was created, both security and assignment being treated as one class for this purpose. Payment of policy monies where there is no nomination

Section

section_1087

Section

124. (1) Where a policy owner of a policy dies without having made a nomination, subject to section 123, the Labuan insurer shall pay the policy monies of the deceased policy owner to the applicant who produces the Grant of Probate or Letters of Administration or Distribution Order.

Subsection

subsection_1088

Subsection

(2) Subject to subsection (1), the Labuan insurer may pay to the policy owner’s spouse, child or parent in that order of priority and where there is more than one spouse, child or parent, in equal shares to each person of that class and where there is no spouse, child or parent and—

Paragraph

paragraph_1089

Paragraph

(a) where the policy monies do not exceed one hundred thousand ringgit or its equivalent in foreign currency or such greater amount or denomination as may be specified, the Labuan insurer may pay all that policy monies without requiring the Grant of Probate or Letters of Administration or Distribution Order—

Paragraph

paragraph_1090

Paragraph

(i) to a person who satisfies the Labuan insurer to be entitled and likely to be given the Grant of Probate or Letters of Administration or Distribution Order; or Labuan Financial Services and Securities 127

Subparagraph

subparagraph_1091

Subparagraph

(ii) to a person who satisfies the Labuan insurer to be beneficially entitled to the estate of the deceased policy owner; or

Paragraph

paragraph_1092

Paragraph

(b) where the policy monies are more than one hundred thousand ringgit or its equivalent in foreign currency, or such greater amount or denomination may be specified, the Labuan insurer may pay to the person referred to in subparagraph (a)(i) or (ii) the amount referred to in that paragraph and subject to subsection (6), pay to that person the balance of the policy monies upon production of the Grant of Probate or Letters of Administration or Distribution Order.

Subsection

subsection_1093

Subsection

(3) In this section, a reference to policy monies is a reference to the aggregate amount of policy monies in respect of all policies of the policy owner with that Labuan insurer where there is no nomination.

Subsection

subsection_1094

Subsection

(4) The Grant of Probate or Letters of Administration or Distribution Order granted or having effect as if granted, in respect of the personal estate comprising the policy monies, by a court in Malaysia or a competent authority outside Malaysia, or its certified copy shall be sufficient proof to the Labuan insurer to pay the policy monies to the person to whom the grant was made.

Subsection

subsection_1095

Subsection

(5) The Labuan insurer may accept the Grant of Probate or Letters of Administration or Distribution Order or any other document having the same effect, granted by a court in Malaysia or a competent authority outside Malaysia, as sufficient proof to pay the policy monies of the deceased policy owner to the person to whom the grant was made, provided that such Grant of Probate or Letters of Administration or Distribution Order or other document having the same effect has been duly registered with the court in Malaysia and sealed in accordance with the Probate and Administration Act 1959 [Act 97].

Subsection

subsection_1096

Subsection

(6) Where, upon the expiry of twelve months after a payment under paragraph (2)(b) has been made by a Labuan insurer, a balance of the policy monies still remains payable and no claim has been made by a person who holds a Grant of Probate or Letters of Administration or Distribution Order, the Labuan insurer shall pay the balance of the policy monies to the person who received the initial payment of the policy monies. Laws of Malaysia 128 Act 704

Subsection

subsection_1097

Subsection

(7) Policy monies paid under this section shall be deemed to have been duly paid and the Labuan insurer shall be discharged from liability in respect of the policy monies so paid notwithstanding the absence or invalidity of, or any defect in, the Grant of Probate or Letters of Administration or Distribution Order or any other document having the same effect.

Subsection

subsection_1098

Subsection

(8) A person to whom a payment may be made under this section shall give a receipt which shall be deemed to be a valid receipt. Payment to person incompetent to contract

Section

section_1099

Section

125. Where a person has not attained the age of eighteen years, or is certified by a medical practitioner in the public service to be of unsound mind and no committee of his estate has been appointed, or to be incapable, by reason of infirmity of mind or body, of managing himself and his property and affairs, the Labuan insurer—

Paragraph

paragraph_1100

Paragraph

(a) in the case of a nominee under subsection 121(1)—

Paragraph

paragraph_1101

Paragraph

(i) if the policy monies are ten thousand ringgit or its equivalent in foreign currency or less or such other amount or denomination as may be specified, may pay to a person who satisfies the Labuan insurer that he will apply the policy monies for the maintenance and benefit of the nominee under subsection 121(1), or a person to whom policy monies are payable under subsection 124(2) or

Subsection

subsection_1102

Subsection

(6), subject to the execution of an undertaking by that person that the policy monies will be applied solely for the maintenance and benefit of the nominee; and

Subparagraph

subparagraph_1103

Subparagraph

(ii) if the policy monies are more than the amount specified in paragraph (a), shall pay to the Public Trustee or a trust company nominated by the Public Trustee; or

Paragraph

paragraph_1104

Paragraph

(b) in the case of a person to whom policy monies are payable under subsection 124(2) or (6), shall pay to the Public Trustee or a Labuan trust company nominated by the Public Trustee. Labuan Financial Services and Securities 129 Distribution of policy monies in due course of administration

Section

section_1105

Section

126. A person to whom policy monies may be paid under section 124 shall receive the policy monies as an executor and not solely as a beneficiary and shall distribute the policy monies in the due course of administration of the estate of the deceased person in accordance with the terms of a will of the deceased person, and if there is not such will, in accordance with the law applicable to the administration, distribution and disposition of his estate upon his intestacy. This Division to prevail over policy and any other written law

Section

section_1106

Section

127. (1) This Division shall have effect in relation to a policy which is in force on or after its operation, and in relation to a nomination made before, on or after its operation, notwithstanding anything contained in the policy, and nothing contained in a policy shall derogate from, or be construed as derogating in any manner or to any extent from, this Division.

Subsection

subsection_1107

Subsection

(2) This Division shall have shall force and effect notwithstanding anything inconsistent with or contrary to any other written law relating to probate, administration, distribution or disposition of the estates of deceased persons, or in any rule of law, practice or custom in relation to those matters.

Division

Division 5

Content

content_1109

Content

WINDING-UP Winding-up of Labuan insurer

Section

section_1110

Section

128. (1) The Authority shall be a party to any petition for the winding-up of any Labuan insurer.

Subsection

subsection_1111

Subsection

(2) The Authority may present a petition for the winding-up of a Labuan insurer or its Labuan insurance business on the grounds of its inability to meet any liabilities or when it suspends payment to its creditors. Laws of Malaysia 130 Act 704

Subsection

subsection_1112

Subsection

(3) For the purposes of subsections (1) and (2), the court shall have regard to the interests of the policy owners, other customers and creditors of the Labuan insurer.

Subsection

subsection_1113

Subsection

(4) In any winding-up of a Labuan insurer, or when a Labuan insurer becomes insolvent, there shall be paid from the assets in the insurance fund or other funds of the Labuan insurer in priority to all other unsecured debts—

Paragraph

paragraph_1114

Paragraph

(a) firstly, the costs and expenses of the winding-up, including the costs of the liquidator or the receiver;

Paragraph

paragraph_1115

Paragraph

(b) secondly, all wages or salary, whether or not earned wholly or in part by way of commission, including any amount payable by way of allowance or reimbursement under any contract of employment or award or agreement regulating conditions of employment, of any employee not exceeding one thousand five hundred ringgit or its equivalent in foreign currency or such other amount or denomination as may be specified from time to time in respect of services rendered by him to the Labuan insurer within a period of four months before the commencement of the winding-up;

Paragraph

paragraph_1116

Paragraph

(c) thirdly, all amounts due in respect of workers’ compensation, under any written law relating to workers’ compensation, which accrued before the commencement of the winding-up;

Paragraph

paragraph_1117

Paragraph

(d) fourthly, all remuneration payable to any employee in respect of vacation leave, or in the case of his death to any other person in his right, which accrued in respect of any period before the commencement of the winding-up;

Paragraph

paragraph_1118

Paragraph

(e) fifthly, all amounts due in respect of contributions payable during the twelve months next before the commencement of the winding-up by the Labuan insurer as the employer of any person under any written law relating to employees’ superannuation or provident funds or under any scheme of superannuation or retirement benefit which is an approved scheme under any federal law relating to income tax; Labuan Financial Services and Securities 131

Paragraph

paragraph_1119

Paragraph

(f) sixthly, the amount of all federal tax assessed under any written law before the date of the commencement of the winding-up or assessed at any time before the time fixed for the proving of debts has expired;

Paragraph

paragraph_1120

Paragraph

(g) seventhly, all the liabilities and expenses attributable to its Labuan insurance business of the class for which the particular insurance fund is created; and

Paragraph

paragraph_1121

Paragraph

(h) eighthly, after the liabilities and expenses attributable to the Labuan insurance business of the class to which the particular insurance fund referred to in paragraph (g) is applicable have been fully met, the amounts required to make good any deficit in the other insurance funds.

Subsection

subsection_1122

Subsection

(5) The debts in each class specified in subsection (4) shall rank in the order therein specified but debts of the same class shall rank equally between themselves, and shall be paid in full, unless the assets in the insurance fund of the Labuan insurer are insufficient to meet them, in which case they shall abate in equal proportions between themselves.

Subsection

subsection_1123

Subsection

(6) The provisions of this section shall have effect notwithstanding anything inconsistent therewith or contrary thereto in any other written law.

Part

Part VIII

Content

content_1125

Content

COMPANY MANAGEMENT Interpretation

Section

section_1126

Section

129. In this Part, unless the context otherwise requires— “company management” means the provision of treasury processing services and such other services, and to such persons, as may be permitted by the Authority; “management company” means a Labuan company incorporated or foreign Labuan company registered under this Act for the purpose of undertaking or offering to undertake the business of company management. Laws of Malaysia 132 Act 704 Register of management companies

Section

section_1127

Section

130. (1) The Authority may keep a register of all management companies licensed under this Part.

Subsection

subsection_1128

Subsection

(2) The register kept under subsection (1) shall show—

Paragraph

paragraph_1129

Paragraph

(a) the information required under paragraph 131(2)(c) with respect to each management company licensed under this Part;

Paragraph

paragraph_1130

Paragraph

(b) the date of grant of the licence; and

Paragraph

paragraph_1131

Paragraph

(c) if such licence is revoked, the date of its revocation.

Subsection

subsection_1132

Subsection

(3) The register shall be in such form as the Authority may determine. Application for licence

Section

section_1133

Section

131. (1) No person, except a Labuan company incorporated, or a foreign Labuan company registered, under the Labuan Companies Act 1990, may apply to the Authority for a licence to carry on the business of company management.

Subsection

subsection_1134

Subsection

(2) An application under subsection (1) shall be—

Paragraph

paragraph_1135

Paragraph

(a) made in such manner as the Authority may determine; and

Paragraph

paragraph_1136

Paragraph

(b) accompanied by—

Paragraph

paragraph_1137

Paragraph

(i) such application fees as may be prescribed;

Subparagraph

subparagraph_1138

Subparagraph

(ii) a statement of the financial and human resources and administrative facilities available to the applicant for the competent and efficient conduct of its business; and

Subparagraph

subparagraph_1139

Subparagraph

(iii) such other documents or information as the Authority may reasonably require for the purpose of considering the application; Labuan Financial Services and Securities 133

Paragraph

paragraph_1140

Paragraph

(c) contain—

Paragraph

paragraph_1141

Paragraph

(i) the address of the applicant’s place of business and its address for service in Labuan;

Subparagraph

subparagraph_1142

Subparagraph

(ii) the name and address of a person resident in Labuan who is authorized to represent the applicant and to accept service on its behalf; and

Subparagraph

subparagraph_1143

Subparagraph

(iii) the address of any place of business that the applicant may have outside Labuan.

Subsection

subsection_1144

Subsection

(3) If any information referred to in paragraph (2)(c) is altered at any time after its submission, the applicant, upon being granted a licence under this Part, shall give in writing to the Authority particulars of the alteration within one month of the date of the grant of the licence or within one month after the alteration is made, whichever is the later. Grant of licence

Section

section_1145

Section

132. (1) The Authority may grant or refuse to grant a licence to any applicant.

Subsection

subsection_1146

Subsection

(2) The Authority shall not grant a licence unless he is satisfied that the applicant—

Paragraph

paragraph_1147

Paragraph

(a) is of sufficient good repute to be engaged in the business of company management;

Paragraph

paragraph_1148

Paragraph

(b) has or has available to it adequate knowledge, expertise, resources and facilities necessary for the proper management or administration of its business;

Paragraph

paragraph_1149

Paragraph

(c) has sufficient financial resources at its disposal to enable it to conduct its business effectively and meet its liabilities; and

Paragraph

paragraph_1150

Paragraph

(d) will be in a position to comply with any conditions imposed by the Authority. Laws of Malaysia 134 Act 704

Subsection

subsection_1151

Subsection

(3) Notwithstanding subsection (2), the Authority shall reject an application if it determines that a licence should not be granted in the public interest.

Subsection

subsection_1152

Subsection

(4) A licence may be granted subject to such terms, conditions, restrictions or limitations as the Authority deems fit.

Subsection

subsection_1153

Subsection

(5) A licence shall—

Paragraph

paragraph_1154

Paragraph

(a) be in such form as may be specified;

Paragraph

paragraph_1155

Paragraph

(b) be admitted in all courts as prima facie evidence of the facts stated therein; and

Paragraph

paragraph_1156

Paragraph

(c) remain in force until it is revoked.

Subsection

subsection_1157

Subsection

(6) Where the Authority grants a licence to an applicant, it shall issue a licence to the applicant on payment of such licence fee as may be prescribed.

Subsection

subsection_1158

Subsection

(7) Every licence issued under this Part shall bear the date on which the licence is granted.

Part

Part IX

Division

Division 1

Content

content_1161

Content

Interpretation

Section

section_1162

Section

133. (1) In this Part, unless the context otherwise requires— “business day” means a day during any part of which the facilities of an exchange established pursuant to this Part are available to its trading agents for trading purposes or would have been available but for a suspension of trading ordered by the Authority under section 143; Labuan Financial Services and Securities 135 “committee” means the persons responsible for all matters relating to listing, licensing, trading and other matters related to the securities market; “exchange” includes a body corporate established as a securities exchange under section 134 and the Labuan International Financial Exchange that was established by the Minister under section 30 of the *Labuan Offshore Securities Industry Act 1998 [Act 579] that was approved and recognized immediately before the effective date; “listing sponsor” means a person licensed by an exchange established pursuant to this Part, pursuant to its rules to carry on functions as a listing sponsor; “secretary” means the secretary for the time being of an exchange established pursuant to this Part and includes an acting or assistant secretary; “securities market” means a stock market or a place at which, or a facility by means of which—

Paragraph

paragraph_1163

Paragraph

(a) offers to sell, purchase or exchange securities are regularly made or accepted;

Paragraph

paragraph_1164

Paragraph

(b) offers or invitations that are intended, or may reasonably be expected, to result, whether directly or indirectly, in the making or acceptance of offers to sell, purchase or exchange securities, are regularly made; or

Paragraph

paragraph_1165

Paragraph

(c) information concerning the prices at which or the consideration for which particular persons or classes of persons propose to sell, purchase or exchange, or may reasonably be expected to sell, purchase or exchange, securities is regularly provided; “trading agent” means a person licensed and authorized to engage in the business of dealing in securities pursuant to the rules of the exchange established pursuant to this Part. *NOTE—The Labuan Offshore Securities Industries Act 1998 [Act 579] has since been repealed by the Labuan Financial Services and Securities Act 2010 [Act 704] which comes into operation on 11 February 2010—see section 201 of Act 704. Laws of Malaysia 136 Act 704

Division

Division 2

Content

content_1167

Content

Establishment of exchanges

Section

section_1168

Section

134. The Authority may approve a Labuan company to be an exchange in Labuan upon such terms as it deems fit. By-laws of exchanges

Section

section_1169

Section

135. The Authority may prescribe such by-laws as may be expedient or necessary for the purpose of carrying out the provisions and matters connected with any exchange. Rules of exchanges

Section

section_1170

Section

136. An exchange established under section 134 may make rules which provide for—

Paragraph

paragraph_1171

Paragraph

(a) the conditions and administration of licences issued by such exchange and for the regulation generally of the conduct of trading agents and listing sponsors in connection with the business of such exchange;

Paragraph

paragraph_1172

Paragraph

(b) the financial, accounting, record-keeping, disclosure and capital adequacy requirements applicable to trading agents and listing sponsors;

Paragraph

paragraph_1173

Paragraph

(c) the conditions under which securities may be listed for trading in the securities market proposed to be operated by such exchange;

Paragraph

paragraph_1174

Paragraph

(d) the conditions governing dealings in securities by trading agents and listing sponsors;

Paragraph

paragraph_1175

Paragraph

(e) the class or classes of securities that may be dealt in by trading agents and listing sponsors or listed in such exchange; Labuan Financial Services and Securities 137

Paragraph

paragraph_1176

Paragraph

(f) confidentiality with respect to information relating to the affairs of such exchange and of any trading agent or listing sponsor in connection with the business of such exchange;

Paragraph

paragraph_1177

Paragraph

(g) the arbitration of disputes arising out of or in connection with any securities market operated by such exchange;

Paragraph

paragraph_1178

Paragraph

(h) the suspension of trading in and the delisting of any security listed on such exchange;

Paragraph

paragraph_1179

Paragraph

(i) the carrying on of the business of such exchange with due regard to the interests of the public;

Paragraph

paragraph_1180

Paragraph

(j) a fair and independent market for the listing and trading of securities; and

Paragraph

paragraph_1181

Paragraph

(k) such other matters as the exchange deems necessary or desirable for the proper and efficient regulation, management and control of such exchange and the securities market operated by it. Regulatory functions of exchanges

Section

section_1182

Section

137. (1) In addition to its other functions, an exchange established under section 134 shall have regulatory functions and shall—

Paragraph

paragraph_1183

Paragraph

(a) ensure that it adequately supervises the market operations and the conduct of market participants;

Paragraph

paragraph_1184

Paragraph

(b) ensure the adequacy and efficiency of internal controls;

Paragraph

paragraph_1185

Paragraph

(c) ensure market participants follow capital adequacy rules;

Paragraph

paragraph_1186

Paragraph

(d) investigate misconduct or apparent misconduct by market participants and their representatives that could seriously affect investors or other participating organizations and promptly report to the Authority on these instances of misconduct; Laws of Malaysia 138 Act 704

Paragraph

paragraph_1187

Paragraph

(e) investigate possible market abuses, including insider dealing and fraudulent behaviour; and

Paragraph

paragraph_1188

Paragraph

(f) take disciplinary measures or agree to a settlement after a public hearing.

Subsection

subsection_1189

Subsection

(2) Where an investigation is carried out by such exchange, it shall, in writing, forthwith—

Paragraph

paragraph_1190

Paragraph

(a) inform the Authority of the nature of such investigation and persons involved in the investigation; and

Paragraph

paragraph_1191

Paragraph

(b) advise the Authority on the status of such investigation at such intervals as the Authority may request.

Subsection

subsection_1192

Subsection

(3) On the completion of an investigation, such exchange shall—

Paragraph

paragraph_1193

Paragraph

(a) transmit to the Authority all information in its possession relating to any such investigation; and

Paragraph

paragraph_1194

Paragraph

(b) inform the Authority of the outcome of such investigation and of any disciplinary measure or other course of action taken as a result of an investigation.

Subsection

subsection_1195

Subsection

(4) An exchange established under section 134 shall ensure that an adequate budget allocation is made to properly carry out the regulatory functions mentioned in subsection (1).

Subsection

subsection_1196

Subsection

(5) In this section “internal controls” means the system of controls put in place to asses and ensure the effectiveness of an exchange in the exercise of its regulatory functions and “market participants” means any investment dealer or any other person which has been given direct access to trading on the exchange. Powers of the committee

Section

section_1197

Section

138. (1) The affairs of an exchange established under section 134 shall be managed by a committee consisting of not less than three persons who possess relevant experience in financial, commercial or legal matters of whom the chairman and one other person shall be appointed by the Minister and the rest appointed by the Authority. Labuan Financial Services and Securities 139

Subsection

subsection_1198

Subsection

(2) Subject to this Division, such committee shall have full power in all matters relating to listing, licensing, securities or dealings on such exchange and other matters related thereto.

Subsection

subsection_1199

Subsection

(3) Subject to section 184, the provisions of the Labuan Companies Act 1990 shall, unless the context otherwise requires, apply in all respects to the persons who make up the committee as if such persons were directors for the purposes of that Act. Dealing in securities

Section

section_1200

Section

139. (1) No person other than a trading agent shall engage in or hold himself out as engaging in the business of dealing in securities on any exchange.

Subsection

subsection_1201

Subsection

(2) Any person who contravenes subsection (1) commits an offence and shall, on conviction, be liable to a fine not exceeding one million ringgit or to imprisonment for a term not exceeding three years or to both. Register of trading agents and listing sponsors

Section

section_1202

Section

140. (1) An exchange established under section 134 shall keep a register of the trading agents and listing sponsors and shall enter therein the names and addresses of the trading agents and listing sponsors and the date upon which each was admitted and ceased to be a trading agent or listing sponsor.

Subsection

subsection_1203

Subsection

(2) The register of trading agents and listing sponsors shall be made available for inspection at the registered office of such exchange during business hours.

Subsection

subsection_1204

Subsection

(3) Any person may require, and if required, the relevant exchange shall forthwith provide, a copy of the register or any part thereof on payment of such fee as may be specified in writing by such exchange.

Subsection

subsection_1205

Subsection

(4) Any payment under subsection (3) shall be made to such exchange. Laws of Malaysia 140 Act 704 Financial statements of an exchange

Section

section_1206

Section

141. Within six months of the end of each financial year, an exchange established under section 134 shall file with the Authority a copy, certified by the secretary as a true copy, of the financial statements of such exchange for that year prepared and audited in accordance with the provisions of Part VI of the Labuan Companies Act 1990. Persons not deemed to be carrying on business in Malaysia

Section

section_1207

Section

142. No person shall be deemed to be engaging in or carrying on a trade or business in Malaysia or with residents of Malaysia for the purpose of any written law by reason only of the fact that—

Paragraph

paragraph_1208

Paragraph

(a) securities of such person are listed on a securities market operated by an exchange established under section 134;

Paragraph

paragraph_1209

Paragraph

(b) such person is a trading agent or listing sponsor and that transactions are effected by it or on its behalf through the facilities of such exchange; or

Paragraph

paragraph_1210

Paragraph

(c) such person undertakes activities in Labuan incidental to the proper conduct of the activities referred to in paragraphs (a) and (b). Suspension of trading on exchanges

Section

section_1211

Section

143. (1) The Authority may direct any exchange established under section 134 by written notice to suspend trading, or any committee established under section 138 may, after notifying the Authority, suspend trading, on such exchange either wholly for a period not exceeding five consecutive business days or in respect of specified securities for such period as the Authority deems fit if the Authority after consultation with the committee determines that the orderly conduct of such trading is being or is likely to be prevented by reason of force majeure, natural disaster, strike or lock-out, revolution or other political upheaval or economic or financial crisis, wherever occurring. Labuan Financial Services and Securities 141

Subsection

subsection_1212

Subsection

(2) Pursuant to subsection (1), suspension of trading shall be carried out in accordance with the rules of the relevant exchange.

Subsection

subsection_1213

Subsection

(3) The Authority may, after consultation with the committee, direct an exchange to extend the period of suspension of trading under subsection (1) either wholly for additional periods not exceeding five consecutive business days or in relation to specified securities for such additional periods as it deems fit.

Subsection

subsection_1214

Subsection

(4) The Authority shall within two business days give written notice of such extension to an exchange indicating therein the reason therefor and duration thereof and such notices shall take effect upon its delivery to such exchange.

Subsection

subsection_1215

Subsection

(5) The Authority shall on the business day next following delivery to an exchange of the notice under this section and if so requested by such exchange provide an opportunity for such exchange to be heard on the need for any suspension of trading or any extension thereof.

Subsection

subsection_1216

Subsection

(6) The Authority may revoke, withdraw or modify any direction made under subsections (1) and (3) at any time prior to expiry of the period of suspension or extension thereof. Minister’s power to suspend trading

Section

section_1217

Section

144. (1) Without prejudice to section 143, where the Minister is satisfied that it is in the public interest to do so, or that it is expedient for the protection of investors or for the proper regulation of an exchange to do so, he may, on the recommendation of the Authority, make a suspension order relating to all or any of the following:

Paragraph

paragraph_1218

Paragraph

(a) the functions of an exchange or its committee;

Paragraph

paragraph_1219

Paragraph

(b) the functions of any subcommittee established by the committee referred to in paragraph (a); or

Paragraph

paragraph_1220

Paragraph

(c) the functions of the principal officer, by whatever name called, who is responsible for the conduct of the business and operations of an exchange or any committee, as the case may be. Laws of Malaysia 142 Act 704

Subsection

subsection_1221

Subsection

(2) For so long as the suspension order is in force, the following provisions shall apply:

Paragraph

paragraph_1222

Paragraph

(a) none of the functions to which the order relates shall be performed by such exchange or committee or any subcommittee established by the committee or by any officer of such exchange or the committee or any such subcommittee;

Paragraph

paragraph_1223

Paragraph

(b) any function to which paragraph (a) applies may be performed by such person as shall be specified in the order in relation to that function; and

Paragraph

paragraph_1224

Paragraph

(c) a person or body referred to in paragraph (a) shall not, by act or omission, either directly or indirectly, affect the manner in which the functions referred to in the order are performed unless the person referred to in paragraph (b) requests for his or its assistance.

Subsection

subsection_1225

Subsection

(3) Subject to subsection (6), a suspension order shall continue to be in force for such period, being a period not exceeding six months, as shall be specified in the order.

Subsection

subsection_1226

Subsection

(4) A suspension order or any extension thereof under subsection (6) shall take effect when a copy of the order or notice of the extension is served under paragraph (7)(a) to such exchange, committee or the subcommittee established by the committee to which the order relates.

Subsection

subsection_1227

Subsection

(5) Without prejudice to subsection (4), where a suspension order is made or such an order is extended under subsection (6), the Authority shall, as soon as it may be practicable, give a copy of the order or, as the case may be, the notice of its extension, to the principal officer of such exchange, the committee or a subcommittee established by the committee as the Authority may consider appropriate in the circumstances.

Subsection

subsection_1228

Subsection

(6) The Minister may, on the recommendation of the Authority, extend the period during which a suspension order is to remain in force for any further periods each not exceeding three months. Labuan Financial Services and Securities 143

Subsection

subsection_1229

Subsection

(7) Where a suspension order is made or extended under this section, the Authority shall—

Paragraph

paragraph_1230

Paragraph

(a) forthwith serve a copy of the order or notice in writing of the extension on such exchange, committee or the subcommittee to which the order relates; and

Paragraph

paragraph_1231

Paragraph

(b) cause a suspension order or the notice of the extension as the case may be, to be published in the Gazette.

Subsection

subsection_1232

Subsection

(8) Any person who contravenes a suspension order issued under subsection (1) commits an offence and shall, on conviction, be liable to a fine not exceeding five million ringgit or to imprisonment for a term not exceeding five years or to both.

Subsection

subsection_1233

Subsection

(9) For the purposes of this section, “principal officer” includes a person, by whatever name called, who either individually or jointly with one or more other persons, is responsible for matters relating to listing, licensing, securities or dealings on such exchange or the committee. Powers of the Authority

Section

section_1234

Section

145. (1) For the purposes of this Act and the proper conduct of the business of any exchange established under section 134 and in addition to any other powers accorded to it under this Act, the Authority may—

Paragraph

paragraph_1235

Paragraph

(a) at any time investigate or enquire into any transaction involving the purchase or sale of securities entered into by any person whether directly or indirectly to ascertain if that person has used dishonest, unfair or unethical devices or trading practices whether such devices or trading practices constitute an offence under this Act or any other written law or an infringement of any of the rules or otherwise;

Paragraph

paragraph_1236

Paragraph

(b) require any such person to submit detailed information of any transaction involving the purchase or sale of securities; Laws of Malaysia 144 Act 704

Paragraph

paragraph_1237

Paragraph

(c) require the production of, inspect and make copies or printouts of or take extracts from any document record or thing relating to—

Paragraph

paragraph_1238

Paragraph

(i) the business or affairs of an exchange;

Subparagraph

subparagraph_1239

Subparagraph

(ii) any dealing in securities;

Subparagraph

subparagraph_1240

Subparagraph

(iii) any advice, report or analysis concerning securities; or

Subparagraph

subparagraph_1241

Subparagraph

(iv) the accounts or records of any person concerned in any capacity with the matters referred to in subparagraph (i), (ii) or (iii) and any audit of, or report of an auditor concerning, the same; or

Paragraph

paragraph_1242

Paragraph

(d) whenever the Authority considers it necessary, examine by way of on-site inspections, the affairs or business of any market participants, which shall include listing sponsors and trading agents, for the purpose of—

Paragraph

paragraph_1243

Paragraph

(i) assessing whether the market participant is carrying out its permitted activities in accordance with this Act, any regulations made under this Act and or any other applicable law;

Subparagraph

subparagraph_1244

Subparagraph

(ii) confirming that the provisions of the *Anti-Money Laundering and Anti-Terrorism Financing Act 2001 are being complied with; and

Subparagraph

subparagraph_1245

Subparagraph

(iii) carrying out the functions of the Authority;

Paragraph

paragraph_1246

Paragraph

(e) with the authority of a search warrant issued by the court to that effect and with or without the assistance of such persons as the Authority may require unless the Authority has reasonable grounds for believing that, by reason of the delay in obtaining the search warrant, the object of any entry is likely to be frustrated, and in such instance without a warrant—

Paragraph

paragraph_1247

Paragraph

(i) break into and search any premises, place or item therein on or in which the Authority has reason to suspect there may be any document, record *NOTE—The Anti-Money Laundering and Anti-Terrorism Financing Act 2001 [Act 613] has been amended and referred as Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 [Act 613] which comes into operation on 1 September 2014— see section 3 Anti-Money Laundering and Anti-Terrorism Financing (Amendment) Act 2014 [Act A1467] and P.U. (B) 400/2014. Labuan Financial Services and Securities 145 or thing the production of which was required by virtue of this section but not produced in compliance with such requirement; or

Subparagraph

subparagraph_1248

Subparagraph

(ii) take possession of or secure against interference any document, record or thing the production of which was required.

Subsection

subsection_1249

Subsection

(2) The Authority may in writing authorize any other person to assist it to perform functions under this Act.

Subsection

subsection_1250

Subsection

(3) A person who—

Paragraph

paragraph_1251

Paragraph

(a) fails to comply with a requirement made under subsection (1);

Paragraph

paragraph_1252

Paragraph

(b) in purported compliance with a requirement made under subsection (1) furnishes information or makes a statement that is false or misleading in a material particular; or

Paragraph

paragraph_1253

Paragraph

(c) obstructs or hinders the Authority or another person in the exercise of any power under subsection (1), commits an offence and shall, on conviction, be liable to a fine not exceeding ten million ringgit or to imprisonment for a term not exceeding five years or to both.

Subsection

subsection_1254

Subsection

(4) The powers conferred under this section are in addition to, and not in derogation of, any other powers conferred by law.

Division

Division 3

Content

content_1256

Content

FALSE OR MISLEADING MARKET AND INSIDER DEALING Creation of false or misleading market

Section

section_1257

Section

146. Whoever creates or does anything which is calculated to create a false or misleading appearance of active trading in any securities or a false or misleading appearance with respect to the market for, or the price of, any such securities commits an offence and shall, on conviction, be liable to a fine not exceeding three million ringgit. Laws of Malaysia 146 Act 704 Insider dealing

Section

section_1258

Section

147. Subject to the defences available under this Division, any individual who has information as an insider and—

Paragraph

paragraph_1259

Paragraph

(a) he deals in securities that are price-affected securities in relation to the information;

Paragraph

paragraph_1260

Paragraph

(b) he encourages another person to deal in securities that, whether or not that other person knows it, are price-affected securities in relation to the information; or

Paragraph

paragraph_1261

Paragraph

(c) he discloses the information otherwise than in the proper performance of the functions of his employment, office or profession, to another person, commits an offence and shall, on conviction, be liable to a fine not exceeding five million ringgit. Defences

Section

section_1262

Section

148. (1) An individual is not guilty of insider dealing by virtue of dealing in securities or encouraging another person to do so if he shows—

Paragraph

paragraph_1263

Paragraph

(a) that he did not at the time expect the dealing to result in a profit attributable to the fact that the information in question was price-sensitive information in relation to securities;

Paragraph

paragraph_1264

Paragraph

(b) that at the time he believed on reasonable grounds that the information had been disclosed widely enough to ensure that none of those taking part in the dealing in the securities would be prejudiced by not having that information; or

Paragraph

paragraph_1265

Paragraph

(c) that he would have done what he did even if he had not had the information. Labuan Financial Services and Securities 147

Subsection

subsection_1266

Subsection

(2) An individual is not guilty of insider dealing by virtue of a disclosure of information if he shows—

Paragraph

paragraph_1267

Paragraph

(a) that he did not at the time expect any person, because of the disclosure, to deal in securities; or

Paragraph

paragraph_1268

Paragraph

(b) that, although he had such an expectation at the time, he did not expect the dealing to result in profit attributable to the fact that the information was price-sensitive information in relation to securities.

Subsection

subsection_1269

Subsection

(3) For the avoidance of doubt, any references to a profit in this Division includes the avoidance of a loss. Dealing in securities

Section

section_1270

Section

149. For the purposes of this Division, a person deals in securities if—

Paragraph

paragraph_1271

Paragraph

(a) he acquires or disposes of securities, whether as principal or agent; or

Paragraph

paragraph_1272

Paragraph

(b) he procures, directly or indirectly, an acquisition or disposal of listed securities by another person. Procuring the acquisition or disposal of securities

Section

section_1273

Section

150. (1) A person procures the acquisition or disposal of securities if securities are acquired or disposed of by a person who is, in relation to the acquisition or disposal—

Paragraph

paragraph_1274

Paragraph

(a) his agent;

Paragraph

paragraph_1275

Paragraph

(b) his nominee; or

Paragraph

paragraph_1276

Paragraph

(c) a person who is acting at his direction.

Subsection

subsection_1277

Subsection

(2) Subsection (1) is not exhaustive as to the circumstances in which a person may be regarded as procuring an acquisition or disposal of securities by another. Laws of Malaysia 148 Act 704

Subsection

subsection_1278

Subsection

(3) “Acquisition” or “disposal” in relation to securities includes agreeing to acquire or dispose of securities or entering into or terminating a contract which creates the securities, as the case may be. Inside information

Section

section_1279

Section

151. “Inside information” means information which—

Paragraph

paragraph_1280

Paragraph

(a) relates to particular securities or to a particular issuer of securities or to particular issuers of securities and not to securities generally or to issuers of securities generally;

Paragraph

paragraph_1281

Paragraph

(b) is specific or precise;

Paragraph

paragraph_1282

Paragraph

(c) has not been made public; and

Paragraph

paragraph_1283

Paragraph

(d) is price sensitive. “Price-affected securities” and “price-sensitive information”

Section

section_1284

Section

152. Securities are “price-affected” securities in relation to inside information, and inside information is “price-sensitive” in relation to securities, if and only if the information would, if made public, be likely to have a significant effect on the price or value of the securities. Information as an insider

Section

section_1285

Section

153. An individual has information as an insider if and only if—

Paragraph

paragraph_1286

Paragraph

(a) it is, and he knows it is, inside information; and

Paragraph

paragraph_1287

Paragraph

(b) he has it, and knows that he has it, from an inside source, that is to say—

Paragraph

paragraph_1288

Paragraph

(i) by virtue of being a director, employee or shareholder of an issuer of securities; Labuan Financial Services and Securities 149

Subparagraph

subparagraph_1289

Subparagraph

(ii) by virtue of having access to the information through his employment, office or profession; or

Subparagraph

subparagraph_1290

Subparagraph

(iii) by virtue of the direct or indirect source of his information being a person who has it in either of the ways set out in subparagraph (i) or (ii). Definition of “made public”

Section

section_1291

Section

154. (1) “Made public” shall be construed in accordance with subsections (2) and (3), but these provisions are not exhaustive as to the meaning of that expression.

Subsection

subsection_1292

Subsection

(2) Information is made public if—

Paragraph

paragraph_1293

Paragraph

(a) it is published in accordance with the rules of the exchange for the purpose of informing investors and their professional advisors;

Paragraph

paragraph_1294

Paragraph

(b) it is contained in records which by virtue of law are open to inspection by the public;

Paragraph

paragraph_1295

Paragraph

(c) it can be readily acquired by those likely to deal in any securities, or with any issuer of securities, to which the information relates; or

Paragraph

paragraph_1296

Paragraph

(d) it is derived from information which has been made public.

Subsection

subsection_1297

Subsection

(3) Information may be treated as made public even though—

Paragraph

paragraph_1298

Paragraph

(a) it can be acquired only by persons exercising diligence or expertise;

Paragraph

paragraph_1299

Paragraph

(b) it is communicated to a section of the public and not the public at large;

Paragraph

paragraph_1300

Paragraph

(c) it can be acquired only by observation;

Paragraph

paragraph_1301

Paragraph

(d) it is communicated only on payment of a fee; or

Paragraph

paragraph_1302

Paragraph

(e) it is published only outside Labuan. Laws of Malaysia 150 Act 704 Exceptions

Section

section_1303

Section

155. (1) For the avoidance of doubt, insider dealing is not committed in the following circumstances:

Paragraph

paragraph_1304

Paragraph

(a) an acquisition or disposal of securities or the communication of information that is carried out under any other written law relating to schemes of arrangement, reconstructions and take-overs relating to corporations;

Paragraph

paragraph_1305

Paragraph

(b) a clearing house which acquires or disposes of securities for the purpose of settlement of a market contract or in relation to any proceedings or other action relating to the settlement of a market contract where the acquisition or disposal of securities is effected in accordance with the rules of the clearing house;

Paragraph

paragraph_1306

Paragraph

(c) a stock exchange in relation to a sale or purchase of securities where the stock exchange acts on an instruction from a clearing house;

Paragraph

paragraph_1307

Paragraph

(d) the redemption of units of a collective investment scheme by a trustee or manager under a trust deed relating to that collective investment scheme in accordance with a buy-back covenant contained or deemed to be contained in the trust deed at a price that is required by the trust deed to be calculated, so far as is reasonably practicable, by reference to the underlying value of the assets less—

Paragraph

paragraph_1308

Paragraph

(i) any liabilities of that collective investment scheme to which the units relates; and

Subparagraph

subparagraph_1309

Subparagraph

(ii) any reasonable charge for purchasing the units;

Paragraph

paragraph_1310

Paragraph

(e) subscribing for, or purchasing, securities under an underwriting agreement or a sub-underwriting agreement and includes entering in to such an agreement or selling securities subscribed for, or purchased, under such an agreement; Labuan Financial Services and Securities 151

Paragraph

paragraph_1311

Paragraph

(f) the sale or purchase of securities pursuant to a requirement imposed by the Government, a statutory body or any regulatory authority, or any requirement imposed under any written law or order of court; and

Paragraph

paragraph_1312

Paragraph

(g) communication of information pursuant to a requirement imposed by the Government, a statutory body or any regulatory body or any requirement imposed under any written law or order of court.

Part

Part X

Content

content_1314

Content

SELF-REGULATORY ORGANIZATIONS Declaration or recognition of a self-regulatory organization

Section

section_1315

Section

156. (1) “Self-regulatory organization” means a self-regulatory organization whose object is to regulate the operations of its members or of the users of its services, their standards of practice and business conduct in order to better protect investors and consumers of securities or related services and includes such other organizations as may be declared or recognized as such by the Authority.

Subsection

subsection_1316

Subsection

(2) The Authority may, subject to such terms and conditions as it thinks fit, by publication in the Gazette declare or recognize that a corporation or organization shall be a self-regulatory organization in relation to a specified sector or industry, or any part thereof, where the Authority is satisfied that the corporation or organization—

Paragraph

paragraph_1317

Paragraph

(a) has a constitution and internal rules and policies which are consistent with this Act and any written law applicable to such sector or industry, or part thereof;

Paragraph

paragraph_1318

Paragraph

(b) has the capacity and the financial and administrative resources necessary or desirable to carry out its functions and the regulatory or supervisory functions it shall perform as a self-regulatory organization, including dealing with breaches of the law or of the applicable standards and guidelines; Laws of Malaysia 152 Act 704

Paragraph

paragraph_1319

Paragraph

(c) shall not discriminate unreasonably against a person in offering access to its services or in carrying out its functions as a self-regulatory organization;

Paragraph

paragraph_1320

Paragraph

(d) is managed or controlled by officers or persons in control who are fit and proper persons under this Act; and

Paragraph

paragraph_1321

Paragraph

(e) satisfies such criteria as may be specified in the rules stipulated by the Authority.

Subsection

subsection_1322

Subsection

(3) The Authority may, by written arrangement, delegate a power or function of the Authority to a self-regulatory organization.

Subsection

subsection_1323

Subsection

(4) An arrangement under subsection (3) shall provide for—

Paragraph

paragraph_1324

Paragraph

(a) any power or function delegated to the self-regulatory organization by the Authority under subsection (3);

Paragraph

paragraph_1325

Paragraph

(b) the terms and conditions upon which the power or function has been delegated and may be exercised by the self-regulatory organization;

Paragraph

paragraph_1326

Paragraph

(c) the persons authorized to exercise the power or function delegated on behalf of the self-regulatory organization; and

Paragraph

paragraph_1327

Paragraph

(d) the submission to the Authority of periodical reports in respect of the exercise of a delegated power or function by the self-regulatory organization. Rules of a self-regulatory organization

Section

section_1328

Section

157. (1) A self-regulatory organization may make rules, not inconsistent with this Act, any regulations made under this Act or guidelines issued by the Authority or any other applicable law, with respect to the matters for which it has regulatory or supervisory functions, including such functions as may be delegated to it by the Authority.

Subsection

subsection_1329

Subsection

(2) Rules made by the self-regulatory organization under subsection (1), and amendments thereto, shall be of no effect unless approved by the Authority. Labuan Financial Services and Securities 153

Subsection

subsection_1330

Subsection

(3) The Authority shall be taken to have granted approval for the purposes of subsection (1) where it has not objected to them within one month after they were submitted to the Authority for such approval.

Subsection

subsection_1331

Subsection

(4) The rules of a self-regulatory organization may make provision with respect to shareholding and voting rights in the self-regulatory organization in the interests of the members of the self-regulatory organization, the consumers, investors and of the users of their services. Restriction on decision-making

Section

section_1332

Section

158. A self-regulatory organization shall not make a decision under its rules that adversely affects the rights of a person unless—

Paragraph

paragraph_1333

Paragraph

(a) the self-regulatory organization has given the person an opportunity to make representations about the matter; or

Paragraph

paragraph_1334

Paragraph

(b) the self-regulatory organization considers, on reasonable grounds, that any delay in making the decision will prejudicially affect a class of consumers, investors or members of the sector or industry as may be applicable. Obligations of and in relation to officers of a self-regulatory organization

Section

section_1335

Section

159. A self-regulatory organization shall notify the Authority, in the manner specified by the Authority, as soon as practicable before or after a person is appointed as an officer of the self-regulatory organization. Powers to direct a self-regulatory organization

Section

section_1336

Section

160. (1) The Authority may, after giving a self-regulatory organization reasonable opportunity to make representations about the matter, give a written direction to the self-regulatory organization—

Paragraph

paragraph_1337

Paragraph

(a) suspending, for the period specified in the direction, a specified provision of its constitution or its rules; Laws of Malaysia 154 Act 704

Paragraph

paragraph_1338

Paragraph

(b) requiring, subject to the Labuan Companies Act 1990 or any other law, the amendment of its constitution as specified in the direction so as to bring it in conformity with this Act, any regulations made under this Act or any rules made by the Authority;

Paragraph

paragraph_1339

Paragraph

(c) requiring the amendment of its rules as specified in the direction so as to bring them in conformity with the relevant Act; or

Paragraph

paragraph_1340

Paragraph

(d) for the implementation or enforcement of its constitution or its rules.

Subsection

subsection_1341

Subsection

(2) Where the Authority has reasonable grounds to believe that—

Paragraph

paragraph_1342

Paragraph

(a) an officer of a self-regulatory organization is not a fit and proper person under this Act; or

Paragraph

paragraph_1343

Paragraph

(b) a particular person’s appointment or continuing in office as an officer of a self-regulatory organization is likely to be detrimental to the self-regulatory organization or to affect prejudicially the interest of the investors and consumers of financial services or of members of the relevant sector or industry, the Authority may, after giving the officer and the self-regulatory organization reasonable opportunity to make representations, direct the self-regulatory organization not to appoint the officer, or to remove the officer from office.

Subsection

subsection_1344

Subsection

(3) Subsections (1) and (2) shall not limit the directions that the Authority may give to a self-regulatory organization. Termination of arrangements and revocation of declaration or recognition

Section

section_1345

Section

161. (1) The Authority may revoke a declaration or recognition where—

Paragraph

paragraph_1346

Paragraph

(a) the self-regulatory organization has failed to commence operations within three months after an arrangement under this Part has been entered into; Labuan Financial Services and Securities 155

Paragraph

paragraph_1347

Paragraph

(b) the Authority is not satisfied that the self-regulatory organization is properly performing or is able to perform the functions or powers delegated to it, or its other functions and powers;

Paragraph

paragraph_1348

Paragraph

(c) the Authority is satisfied that the self-regulatory organization has committed a material breach of an arrangement or of a relevant Act or other applicable law;

Paragraph

paragraph_1349

Paragraph

(d) it appears to the Authority that the self-regulatory organization is involved in a financial crime; or

Paragraph

paragraph_1350

Paragraph

(e) the self-regulatory organization fails to comply with a direction of the Authority.

Subsection

subsection_1351

Subsection

(2) The Authority shall not revoke a declaration or a recognition unless the Authority has notified the self-regulatory organization of its intention and the reason for the Authority’s action, and has given the self-regulatory organization a reasonable opportunity to make representations to the Authority.

Subsection

subsection_1352

Subsection

(3) The Authority shall cause notice of the revocation under subsection (1) to be published in the Gazette. Amendments to the constitution of a self-regulatory organization

Section

section_1353

Section

162. Notwithstanding section 24 of the Labuan Companies Act 1990, an amendment to the constituent documents of a self-regulatory organization shall be of no effect unless it is approved by the Authority. Protection for a self-regulatory organization

Section

section_1354

Section

163. A self-regulatory organization, the officer or employee of a self-regulatory organization or a member of a committee of a self-regulatory organization shall not be liable for any loss sustained by or damage caused to any person as a result of anything done or omitted by them in the performance, in good faith, of their functions and duties in connection with the regulatory or supervisory functions of the self-regulatory organization, including those delegated to it by the Authority. Laws of Malaysia 156 Act 704 Financial statements of the self-regulatory organization

Section

section_1355

Section

164. (1) Within six months of the end of each financial year the self-regulatory organization shall file with the Authority a copy, certified by the secretary as a true copy, of the financial statements of the self-regulatory organization for that year prepared and audited in accordance with Part VI of the Labuan Companies Act 1990.

Subsection

subsection_1356

Subsection

(2) The financial statements shall be audited by an auditor.

Subsection

subsection_1357

Subsection

(3) Where, in the course of his audit, the auditor of a self-regulatory organization has reason to believe that—

Paragraph

paragraph_1358

Paragraph

(a) there has been a material adverse change in the risks inherent in the business of a self-regulatory organization with the potential to jeopardize the ability of the self-regulatory organization to continue as a going concern;

Paragraph

paragraph_1359

Paragraph

(b) the self-regulatory organization may be in contravention of this Act, any regulations made under this Act, any guidelines issued by the Authority or any directions issued by the Authority;

Paragraph

paragraph_1360

Paragraph

(c) a financial crime has been, is being or is likely to be committed; or

Paragraph

paragraph_1361

Paragraph

(d) serious irregularities have occurred, he shall forthwith report in writing the matter to the Authority.

Subsection

subsection_1362

Subsection

(4) Any report made under subsection (3) shall not constitute a breach of the duties of the auditor. Powers of Authority with respect to self-regulatory organizations

Section

section_1363

Section

165. For the purposes of this Division, the powers conferred to the Authority under section 160 shall apply equally with respect to any Labuan corporation or organization declared or recognized by the Authority as a self-regulatory organization under section 156. Labuan Financial Services and Securities 157

Part

Part XI

Division

Division 1

Content

content_1366

Content

APPEALS Appeals

Section

section_1367

Section

166. (1) Any person who is aggrieved by the decision of the Authority to reject an application for a licence or registration or to revoke a licence or registration under this Act may, within thirty days of the decision being notified to him, appeal to the Authority in writing.

Subsection

subsection_1368

Subsection

(2) The Authority shall, after considering the appeal under subsection (1), make a final decision and shall notify the applicant in writing of its decision.

Subsection

subsection_1369

Subsection

(3) An applicant who is aggrieved by the decision of the Authority under subsection (2) may, within thirty days of the decision being notified to him, appeal to the Minister in writing who may confirm, vary or reverse the decision, and whose decision shall be final.

Subsection

subsection_1370

Subsection

(4) For the avoidance of doubt, the bringing of an appeal under subsections (1) and (3), does not suspend the decision being appealed against.

Division

Division 2

Content

content_1372

Content

REVOCATION AND SURRENDER Revocation of consent, licence or registration

Section

section_1373

Section

167. The Authority may revoke any consent, licence or registration made under this Act—

Paragraph

paragraph_1374

Paragraph

(a) at the request of the licensed entity; Laws of Malaysia 158 Act 704

Paragraph

paragraph_1375

Paragraph

(b) where—

Paragraph

paragraph_1376

Paragraph

(i) the licensed entity has ceased to carry on business in or from within Labuan;

Subparagraph

subparagraph_1377

Subparagraph

(ii) the licensed entity has contravened any provision of this Act or any terms, conditions, restrictions or limitations attached to the licence or registration as the case may be;

Subparagraph

subparagraph_1378

Subparagraph

(iii) the Authority has, either in connection with the application for the licence or registration, or at any time after the grant of the licence or registration, been provided with false or misleading information, document or declaration by or on behalf of the licensed entity;

Subparagraph

subparagraph_1379

Subparagraph

(iv) the licensed entity has been convicted of an offence under this Act or of a criminal offence in any recognized country or jurisdiction;

Paragraph

paragraph_1380

Paragraph

(v) the licensed entity has knowingly and willfully supplied false, misleading or inaccurate information or failed to disclose information required under this Act;

Subparagraph

subparagraph_1381

Subparagraph

(vi) the licensed entity is carrying on business in a manner that the Authority reasonably believes to be detrimental to the interests of, in the case of licensed entities under Part III, investors of mutual funds, or to the public interest;

Subparagraph

subparagraph_1382

Subparagraph

(vii) the licensed entity is declared bankrupt or has been wound-up or otherwise dissolved;

Subparagraph

subparagraph_1383

Subparagraph

(viii) a resolution for the licensed entity’s voluntary winding-up has been passed;

Subparagraph

subparagraph_1384

Subparagraph

(ix) in relation to a bank licensee or an insurance licensee, where any guarantee or undertaking referred to in sections 88 and 89 or sections 103 and 104 has not been honoured; or

Paragraph

paragraph_1385

Paragraph

(x) the Authority in its discretion deems fit for any other reason. Labuan Financial Services and Securities 159 Revocation procedure

Section

section_1386

Section

168. (1) Before revoking any consent, licence or registration under section 167, the Authority shall—

Paragraph

paragraph_1387

Paragraph

(a) give the licensed entity notice in writing of the grounds on which it intends to do so;

Paragraph

paragraph_1388

Paragraph

(b) afford the licensed entity opportunity to make written representations to it within a period of thirty days after receipt of the notice; and

Paragraph

paragraph_1389

Paragraph

(c) take such representations into consideration.

Subsection

subsection_1390

Subsection

(2) Where the Authority revokes any licence or registration under section 167, the Authority shall give notice in writing to the licensed entity of such revocation and the revocation shall take effect on the date specified in the notice.

Subsection

subsection_1391

Subsection

(3) Where the revocation is of a bank licence or an insurance licence, the Authority shall, as soon as practicable, publish in one widely circulated newspaper in Malaysia and one international financial newspaper a notice of the revocation of the bank licence or the insurance licence, as the case may be, under this section but any delay in publishing such notice or failure to publish such notice shall not in any manner affect the validity of such revocation.

Subsection

subsection_1392

Subsection

(4) Where the revocation is of the registration of a Labuan trust company, in addition to subsections (1) and (2)—

Paragraph

paragraph_1393

Paragraph

(a) upon a request for revocation, the Labuan trust company shall satisfy the Authority that it has made adequate provision in respect of all its liabilities and shall also appoint a date on which the revocation is to take effect; and

Paragraph

paragraph_1394

Paragraph

(b) the Labuan trust company shall, not later than twenty-one days before the date appointed under paragraph (4)(a) above, publish an advertisement of the proposed revocation of its registration in at least one widely circulated Malaysian newspaper and one international financial newspaper. Laws of Malaysia 160 Act 704 Surrender of licence or registration

Section

section_1395

Section

169. (1) Any licensed entity under this Act may surrender its licence or registration respectively with the prior approval of the Authority.

Subsection

subsection_1396

Subsection

(2) The licensed entity shall give fourteen days’ notice to the Authority of the surrender.

Subsection

subsection_1397

Subsection

(3) The Authority shall give its approval if it is satisfied that licensed entity has made adequate provision in respect of all its liabilities, and thereupon shall appoint a date on which the surrender is to take effect.

Subsection

subsection_1398

Subsection

(4) Where the approval of the Authority has been obtained under subsection (3), the licensed entity shall, not later than twenty-one days before the date appointed under subsection (3), publish an advertisement of the proposed surrender in at least one widely circulated Malaysian newspaper and one international financial newspaper.

Subsection

subsection_1399

Subsection

(5) The Authority shall, as soon as practicable, publish in the one widely circulated Malaysian newspaper and one international financial newspaper a notice of every surrender under this section but any delay in publishing such notice or failure to publish such notice shall not in any manner affect the validity of such surrender. Consequences of revocation or surrender of licence

Section

section_1400

Section

170. (1) Where the revocation of a licence or registration under section 167 or the surrender of a licence or registration under section 169 has taken effect, the licensed entity shall, as from the date such revocation or surrender takes effect, cease to transact any further business.

Subsection

subsection_1401

Subsection

(2) Notwithstanding subsection (1), where a licensed entity continues to exist as a corporation after the revocation of its licence has taken effect, the Minister may, on the recommendation of the Authority, authorize in writing such licensed entity to continue to transact its business activities to such extent and for such duration as the Minister may specify in the authorization for the purposes of the winding-up of its affairs or for the purposes of meeting the claims of its policy owners, other customers or creditors. Labuan Financial Services and Securities 161

Subsection

subsection_1402

Subsection

(3) Every licensed entity whose licence has been revoked or surrendered shall continue to be subject to the provisions of this Act as long as its liabilities remain unsatisfied or not otherwise provided for.

Division

Division 3

Content

content_1404

Content

GENERAL Payment systems

Section

section_1405

Section

171. (1) No person shall—

Paragraph

paragraph_1406

Paragraph

(a) commence to operate any payment system in, from or through Labuan; or

Paragraph

paragraph_1407

Paragraph

(b) where such person has been operating any payment system in, from or through Labuan immediately before the coming into operation of this Act, continue to operate such system, unless he has submitted for the approval of the Authority the scheme of operations of the payment system and the rules, contract, by-laws or other documents relating to the rights, duties and liabilities of the persons participating in the payment system and obtained the authorization in writing of the Authority to operate the payment system.

Subsection

subsection_1408

Subsection

(2) Before making any decision under subsection (1), the Authority may require the person seeking authorization to submit to the Authority such other information and particulars relating to the payment system or to the person seeking the authorization, or to the persons who are or will be participating in the payment system, as the Authority may specify, and may also make such inspection of the premises, equipment, machinery, books or other documents, accounts and transactions relating to the payment system as the Authority may consider desirable.

Subsection

subsection_1409

Subsection

(3) The Authority may approve or reject a scheme submitted under subsection (1) and the rules, contract, by-laws or other documents relating to the scheme and submitted with the scheme or may approve the same subject to such modifications and alterations to the scheme, or to any or all such documents submitted therewith, as it may deem necessary, desirable or expedient, and may in giving any authorization under this section, impose such restrictions, limitations, or conditions as it may deem fit. Laws of Malaysia 162 Act 704

Subsection

subsection_1410

Subsection

(4) Notwithstanding anything contained in any authorization given, or in any scheme or document approved, under subsection (3), any person authorized under that subsection shall comply with any regulations made under this Act relating to payment systems, and where there is any conflict or inconsistency between the terms of such authorization or anything in such scheme or in any such document and such regulations, the provisions of the regulations shall prevail and have full force and effect.

Subsection

subsection_1411

Subsection

(5) While an authorization under subsection (3) is in force, the Authority may, from time to time, inspect the premises, equipment, machinery, books or other documents, accounts or transactions relating to the payment system.

Subsection

subsection_1412

Subsection

(6) The Authority may, at any time, after giving the person authorized under subsection (3) a reasonable opportunity to make representations, revoke or suspend, or amend anything contained in, an authorization granted under that subsection.

Subsection

subsection_1413

Subsection

(7) In making any revocation under subsection (6), the Authority may include requirements of a consequential, ancillary or incidental nature to be complied with by the person whose authorization is being revoked or by any person participating in the system, and in making any suspension under that subsection, the Authority may impose such terms, conditions and requirements as it deems necessary or expedient.

Subsection

subsection_1414

Subsection

(8) Any person whose authorization is revoked or suspended under subsection (6) shall immediately cease to operate the payment system in respect of which the authorization was revoked or suspended.

Subsection

subsection_1415

Subsection

(9) No Labuan licensed entity shall be granted an approval to operate any payment system under this section. Transfer of business

Section

section_1416

Section

172. (1) For the purposes of this section, any reference to “transferor” is a reference to a licensed entity under Part V (Divisions 1, 2 and 3 only), Part VI and Part VII, transferring its business which requires it to be licensed under this Act and the “transferee” is a reference to the licensed entity who is licensed to carry out such business, receiving the transfer from the transferor. Labuan Financial Services and Securities 163

Subsection

subsection_1417

Subsection

(2) The whole or any part of the business of a transferor may be transferred to the transferee if the transfer is effected by a scheme under this section.

Subsection

subsection_1418

Subsection

(3) A scheme under this section shall not provide for the business of the transferor to be transferred to a person who is not yet licensed to carry out such business under this Act or who is not yet in existence except when it is expressly provided in the scheme that such scheme shall only come into operation upon such person being licensed.

Subsection

subsection_1419

Subsection

(4) A scheme under this section may include provisions for matters incidental to the transfer thereby effected and provisions for giving effect to that transfer, and in particular may include provision for—

Paragraph

paragraph_1420

Paragraph

(a) any property, rights or liabilities of the transfer including the assets comprising the insurance fund (in the case of a transfer of an insurance business), to vest, by virtue of the scheme and without further assurance, in the transferee;

Paragraph

paragraph_1421

Paragraph

(b) in the case of a transfer of an insurance business, the registration by the transferee of policies transferred, for the amounts to be included in respect of those policies in the transferee’s insurance fund and for other matters arising under this Act out of the transfer;

Paragraph

paragraph_1422

Paragraph

(c) the continuation by or against the transferee of any legal proceedings pending or against the transferor;

Paragraph

paragraph_1423

Paragraph

(d) the dissolution without the winding-up, of the transferor; or

Paragraph

paragraph_1424

Paragraph

(e) such incidental, consequential and supplementary matters as are necessary to secure that the scheme shall be fully and effectively carried out.

Subsection

subsection_1425

Subsection

(5) A scheme under this section shall be of no effect unless it is first approved by the Authority and subsequently confirmed by the Court. Laws of Malaysia 164 Act 704

Subsection

subsection_1426

Subsection

(6) The following provisions shall apply in respect of every scheme:

Paragraph

paragraph_1427

Paragraph

(a) the transferor shall submit to the Authority a copy of the scheme together with copies of reports, if any, setting out the terms of the scheme;

Paragraph

paragraph_1428

Paragraph

(b) each of the parties to the scheme shall, not later than one month after a copy of the scheme is submitted to the Authority, cause to be published in not less than two daily newspapers approved by the Authority a notice, containing such particulars as may be specified, of the intention to make an application to the Court for confirmation of the scheme; and

Paragraph

paragraph_1429

Paragraph

(c) each of the parties to the scheme shall, for a period of fifteen days after the publication of the notice mentioned in paragraph (b), keep of a copy of that scheme at its office in Labuan and such copy shall be open to inspection by all of its members and policy owners who are affected by the scheme.

Subsection

subsection_1430

Subsection

(7) In addition to subsection (6), in respect of a scheme for the transfer of an insurance business, the following provisions shall apply:

Paragraph

paragraph_1431

Paragraph

(a) actuarial reports, if any, shall be submitted together with copies of the scheme;

Paragraph

paragraph_1432

Paragraph

(b) the transferor shall submit to the Authority a report sufficient to indicate the opinion of the actuary on the likely effects of the scheme on policy owners of the parties to the scheme in respect of any transfer of life insurance business;

Paragraph

paragraph_1433

Paragraph

(c) each of the parties to the scheme shall furnish a copy of and the report mentioned in paragraph (b) to any person who asks for such copy at any time before the Court confirms the scheme; and

Paragraph

paragraph_1434

Paragraph

(d) the Authority may cause a report on a scheme to be made by an actuary independent of the parties to the scheme and, if it does so, shall cause a copy of the report to be sent to each of such parties. Labuan Financial Services and Securities 165

Subsection

subsection_1435

Subsection

(8) Copies of any scheme and any such report as are mentioned in subsections (6) and (7), or summaries thereof approved by the Authority, shall, except so far as the Court upon application made in that behalf otherwise directs, be transmitted by each of the parties to the scheme to each of its policy owners affected by the scheme.

Subsection

subsection_1436

Subsection

(9) The parties to a scheme shall be jointly and severally liable to reimburse to the Authority any costs or expenses incurred by the Authority under this section in connection with the scheme; and the scheme shall include provisions as to how the liability is to be borne as between such parties: Provided that where the Court has made any order as to costs, the costs to be reimbursed to the Authority shall not exceed the amount specified in such order.

Subsection

subsection_1437

Subsection

(10) The Authority may approve or reject a scheme.

Subsection

subsection_1438

Subsection

(11) After a scheme has been approved by the Authority under subsection (10), an application may be jointly made to the Court by way of ex parte originating summons by the parties to the scheme for such order of the Court to confirm such approved scheme and to facilitate or enable the scheme being given effect to.

Subsection

subsection_1439

Subsection

(12) An application to the Court with respect to any matter connected with a scheme may, at any time before confirmation of the scheme by the Court, be made by the Authority or by any person who in the opinion of the Court is likely to be affected by the scheme.

Subsection

subsection_1440

Subsection

(13) The Court may confirm a scheme with or without modifications or may refuse to confirm the scheme.

Subsection

subsection_1441

Subsection

(14) A scheme which has been confirmed by the Court under subsection (13) shall have effect according to its tenor notwithstanding anything in the preceding sections and shall be binding on any person thereby affected.

Subsection

subsection_1442

Subsection

(15) On confirmation of the scheme, each of the parties to the scheme shall, unless it is an unincorporated company file a copy of the scheme with the Authority and with the regulatory authorities in its country of establishment or origin. Laws of Malaysia 166 Act 704

Subsection

subsection_1443

Subsection

(16) The transferee shall, within one month after the scheme takes effect, lodge with the Authority—

Paragraph

paragraph_1444

Paragraph

(a) statements of the assets and liabilities of each of the parties to the scheme, as at the time immediately before the transfer, signed on behalf of such party;

Paragraph

paragraph_1445

Paragraph

(b) a copy of the scheme as confirmed by the Court and a sealed copy of the order of the Court confirming the scheme; and

Paragraph

paragraph_1446

Paragraph

(c) a declaration made by the chairman of the board of directors of the transferee, or by its principal officer in Labuan, fully setting out every payment made or to be made to any person on account of the transfer, and stating that, to the best of his belief, no other payment beyond those so set out has been, or is to be, made on account thereof by or with the knowledge of the parties to the scheme.

Subsection

subsection_1447

Subsection

(17) The transferor shall lodge, within thirty days of the making of the order of the Court under subsection (11), an authenticated copy of such order together with an authenticated copy of the scheme approved by the Authority under subsection (10), with the appropriate authority, if any, concerned with the registration or recording of dealings in any movable property or an interest in movable property transferred pursuant to the order.

Subsection

subsection_1448

Subsection

(18) Where an order of the Court under subsection (11) vests any alienated land, or any share or interest in any alienated land, in the transferee—

Paragraph

paragraph_1449

Paragraph

(a) the Court shall, where such alienated land is in West Malaysia, pursuant to subsection 420(2) of the *National Land Code [Act 56 of 1965], cause a copy of the order to be served on the Registrar of Titles or the Land Administrator, as the case may be, immediately after the making of the order so that the Registrar of Titles or the Land Administrator, as the case may be, gives effect to the provisions of the subsections 420(2), (3) and (4); *NOTE—National Land Code [Act 56 of 1965] has been revised and named as National Land Code [Act 828] which comes into operation on 15 October 2022. Labuan Financial Services and Securities 167

Paragraph

paragraph_1450

Paragraph

(b) where such alienated land is in Sabah, the transferee shall, as soon as practicable after the order has been made, produce an authenticated copy of such order to the Registrar for the registration of the vesting of the alienated land or of the share or interest in alienated land in the transferee as provided under the Land Ordinance of Sabah [Sabah Cap. 68]; or

Paragraph

paragraph_1451

Paragraph

(c) where such alienated land is in Sarawak, the transferee shall, as soon as practicable after the order has been made, produce an authenticated copy of such order to the Registrar for the registration of the vesting of the alienated land or of the share or interest in alienated land, in the transferee, as provided under the Land Code of Sarawak [Sarawak Cap. 81].

Subsection

subsection_1452

Subsection

(19) An order of the Court under subsection (11) may relate to any property or business of the transferor outside Malaysia and, if it so relates, effect may be given to it either in accordance with any reciprocal arrangements relating to enforcement of judgements that may exist between Malaysia and the country, territory or place outside Malaysia in which such property or business is, or where there are no such arrangements, in accordance with the law applicable in such country, territory or place.

Subsection

subsection_1453

Subsection

(20) In this section, “parties to the scheme” means the transferor and the transferee, and “parties to a scheme” shall be construed accordingly. Internal audit

Section

section_1454

Section

173. (1) Every bank licensee and insurance licensee shall conduct an internal audit of its books and operations as the Authority may specify from time to time and shall submit to the Authority a report of such internal audit which shall include a report on the said licensee’s accounting system and controls.

Subsection

subsection_1455

Subsection

(2) An internal auditor appointed by a bank licensee or an insurance licensee to carry out an internal audit of its books and operations under subsection (1) shall for the purposes of this Part be deemed to be an officer of the bank licensee or the insurance licensee respectively and shall, at all times, be subject to section 178. Laws of Malaysia 168 Act 704

Subsection

subsection_1456

Subsection

(3) An internal audit may be carried out by any person except an external auditor of the bank licensee or insurance licensee, as the case may be, under section 174.

Subsection

subsection_1457

Subsection

(4) An internal auditor shall immediately report to the Authority if, in the course of his duties as an internal auditor of a bank licensee or insurance licensee, he is satisfied that—

Paragraph

paragraph_1458

Paragraph

(a) there has been a contravention of the provisions of this Act or that an offence under any written laws has been committed by the bank licensee or insurance licensee or any of its officers or employees; or

Paragraph

paragraph_1459

Paragraph

(b) any irregularity which jeopardizes the interests of the creditors of the bank licensee or the insurance licensee, or, in the case of the insurance licensee, the interests of the policy owners, or any other serious irregularity, has occurred.

Subsection

subsection_1460

Subsection

(5) Any person who contravenes subsection (1) commits an offence and shall, on conviction, be liable to a fine not exceeding three million ringgit or to imprisonment for a term not exceeding five years or to both. External auditor

Section

section_1461

Section

174. (1) Every licensed entity shall appoint an external auditor annually before such date or within such period as may be specified by the Authority.

Subsection

subsection_1462

Subsection

(2) The Authority may maintain a list of auditors for the purpose of this section.

Subsection

subsection_1463

Subsection

(3) An auditor appointed under subsection (1) shall carry out an audit of the accounts of the licensed entity in respect of its business operations and shall submit a report of such audit together with his comments on the accounting system and controls of the licensed entity to the participants of the licensed entity and to the Authority.

Subsection

subsection_1464

Subsection

(4) The Authority may, at any time, require an auditor appointed under this section to submit to the Authority such clarifications in relation to his audit as the Authority may specify. Labuan Financial Services and Securities 169

Subsection

subsection_1465

Subsection

(5) An auditor shall immediately report to the Authority if, in the course of his duties as an auditor of a licensed entity, he is satisfied that—

Paragraph

paragraph_1466

Paragraph

(a) there has been a contravention of the provisions of any Part of this Act or that an offence under any written laws has been committed by the licensed entity or any of its employees; or

Paragraph

paragraph_1467

Paragraph

(b) any irregularity which jeopardizes the interests of policy owners, in the case of a licensed entity under Part V, or creditors of the licensed entity, or any other serious irregularity, has occurred.

Subsection

subsection_1468

Subsection

(6) Any person who contravenes subsection (1) commits an offence and shall, on conviction, be liable to a fine not exceeding three million ringgit or to imprisonment for a term not exceeding five years or to both. Accounts and records

Section

section_1469

Section

175. (1) A licensed entity under this Act shall cause to be kept proper accounting and other records that will sufficiently explain the transaction and financial position of the licensed entity.

Subsection

subsection_1470

Subsection

(2) Every licensed entity and the directors thereof shall cause appropriate entries to be made in the accounting and other records of the licensed entity within sixty days of completion of the transaction to which they relate.

Subsection

subsection_1471

Subsection

(3) It shall be mandatory for the accounting and other records of a licensed entity to be kept at the registered office of the licensed entity or at such place in Labuan as the directors of the licensed entity think fit and the accounting and other records shall at all times be open to inspection by any director and shall be kept in such manner as to enable them to be conveniently and properly audited.

Subsection

subsection_1472

Subsection

(4) The Authority may, in any particular case, direct that the accounting and other records of a licensed entity be open to inspection by an auditor acting for a director, but only upon an undertaking in writing that the information acquired by the auditor during his inspection shall not be disclosed to him except to that director. Laws of Malaysia 170 Act 704

Subsection

subsection_1473

Subsection

(5) Any director of a licensed entity who fails to take all reasonable steps to secure compliance by the licensed entity with the requirements of this section, or a director who has by his own willful act been the cause of any default by the licensed entity under this section commits an offence.

Subsection

subsection_1474

Subsection

(6) For the purposes of this section, “accounting and other records” shall include, if applicable, the following:

Paragraph

paragraph_1475

Paragraph

(a) all sums of money received and expended by the licensed entity and the matters in respect of which the receipt and expenditure took place;

Paragraph

paragraph_1476

Paragraph

(b) all sales and purchases of goods by the licensed entity;

Paragraph

paragraph_1477

Paragraph

(c) the assets and liabilities of the licensed entity; and

Paragraph

paragraph_1478

Paragraph

(d) all such relevant books and records as specified by the Authority.

Subsection

subsection_1479

Subsection

(7) Notwithstanding subsection (3), the Authority may in writing allow a licensed entity to keep accounting and other records outside Labuan provided that the licensed entity shall also maintain accounts and records that reflect its financial position with reasonable accuracy and such accounts and records are updated once every six months in Labuan. Money or other property from illegal activities

Section

section_1480

Section

176. (1) Any licensed entity or any person carrying on any activity under this Act shall not accept—

Paragraph

paragraph_1481

Paragraph

(a) any money or other property originating from a transaction, operation or other activity which is a criminal offence under the laws of Malaysia or which, had it been carried out in Malaysia, would have been such an offence; or

Paragraph

paragraph_1482

Paragraph

(b) any money or other property the receipt, ownership or control of which is or would be an offence as specified in paragraph (1)(a). Labuan Financial Services and Securities 171

Subsection

subsection_1483

Subsection

(2) Where any person, being a director, officer or agent of any such licensed entity or such person specified in subsection (1)—

Paragraph

paragraph_1484

Paragraph

(a) has reason to believe that the licensed entity or person specified in subsection (1) has property or has income accruing to it or derived by it and originating from a transaction, operation or other activity which is a criminal offence under the laws of Malaysia or which, had it been carried out in Malaysia, would have been such an offence; or

Paragraph

paragraph_1485

Paragraph

(b) has received or has in its possession or control money or other property the receipt, ownership or control of which is or would be an offence as specified in paragraph (2)(a), it shall be the duty of such person to forthwith bring the matter to the notice of the Authority.

Subsection

subsection_1486

Subsection

(3) Any person who without reasonable excuse fails to comply with the requirements of subsection (1) or (2) commits an offence and shall, on conviction, be liable to a fine not exceeding one million ringgit or to imprisonment for a term not exceeding three years or to both.

Subsection

subsection_1487

Subsection

(4) All monies or property described in subsections (1) and (2) shall be forfeited to the Government and become its property absolutely. Examination and inspection of books and documents of licensed entities

Section

section_1488

Section

177. (1) The Authority may from time to time—

Paragraph

paragraph_1489

Paragraph

(a) examine and inspect the books or other documents, accounts and transactions of any licensed entity; or

Paragraph

paragraph_1490

Paragraph

(b) obtain from any licensed entity, require any licensed entity to provide access to the Authority to, or require any licensed entity to furnish, any information or copies of any records, books or other documents relating to the business of such licensed entity being carried on under this Act which, in the opinion of the Authority, are necessary to enable it to ascertain compliance with the provisions of this Act. Laws of Malaysia 172 Act 704

Subsection

subsection_1491

Subsection

(2) The Authority may approve the home supervisory authority of a licensed entity to conduct the activities referred to in paragraphs (1)(a) and (b).

Subsection

subsection_1492

Subsection

(3) Every director or officer of a licensed entity shall extend his co-operation and assistance to the Authority to facilitate any examination and inspection carried out under paragraph (1)(a). Secrecy

Section

section_1493

Section

178. (1) No person who for any reason has access to any record, book, register, correspondence or other document, material or information whatsoever relating to the affairs or accounts of the following persons, shall disclose to any other person, or make a record for any person of any such record, book, register, correspondence or other document, material or information:

Paragraph

paragraph_1494

Paragraph

(a) a mutual fund under Part III;

Paragraph

paragraph_1495

Paragraph

(b) any customer of a Labuan trust company or a Labuan private trust company under Part V;

Paragraph

paragraph_1496

Paragraph

(c) any customer of a bank licensee under Part VI;

Paragraph

paragraph_1497

Paragraph

(d) any policy owner under Part VII;

Paragraph

paragraph_1498

Paragraph

(e) an exchange established under Part IX;

Paragraph

paragraph_1499

Paragraph

(f) a self-regulatory organization established under Part X; and

Paragraph

paragraph_1500

Paragraph

(g) any licensed entity under this Act.

Subsection

subsection_1501

Subsection

(2) Subsection (1) shall not apply to—

Paragraph

paragraph_1502

Paragraph

(a) any disclosure lawfully required under section 28b of the Labuan Financial Services Authority Act 1996 or under section 22 of the Labuan Business Activity Tax Act 1990 [Act 445]; Labuan Financial Services and Securities 173

Paragraph

paragraph_1503

Paragraph

(b) any disclosure required under an order of the court made upon an ex parte application, provided that the person disclosing the relevant information shall notify the person affected by the order and upon receipt of such notification, the affected person may file in the necessary application to the court to contest the order or otherwise comply with the order accordingly;

Paragraph

paragraph_1504

Paragraph

(c) information relating to a mutual fund under Part III, with the prior consent of the mutual fund and its investors concerned;

Paragraph

paragraph_1505

Paragraph

(d) information relating to a customer of a Labuan trust company or a Labuan private trust company under Part V, with the prior written consent of the customer;

Paragraph

paragraph_1506

Paragraph

(e) information relating to a customer of a bank licensee under Part VI, with the prior written consent of the customer or his personal representative;

Paragraph

paragraph_1507

Paragraph

(f) information relating to a policy owner under Part VII, with the prior written consent of the policy owner or his personal representative or in the course of placement of reinsurance business;

Paragraph

paragraph_1508

Paragraph

(g) information relating to a licensed entity, with the prior written consent of the licensed entity.

Subsection

subsection_1509

Subsection

(3) No person who has any record, book, register, correspondence or other document, material or information which to his knowledge has been disclosed in contravention of subsection (1) shall in any manner howsoever disclose the same to any other person.

Subsection

subsection_1510

Subsection

(4) All proceedings, except criminal proceedings, relating to a contravention of this section shall be commenced in any Court under the provisions of this Act and any appeal therefrom shall, unless the Court otherwise orders, be heard in camera and no details of the proceedings shall be published by any person without leave of the Court. Laws of Malaysia 174 Act 704

Subsection

subsection_1511

Subsection

(5) Subject to subsection (6), nothing in this section shall limit any powers conferred upon the Court or a judge thereof by the Bankers’ Books (Evidence) Act 1949 [Act 33] or prohibit obedience to an order made under that Act.

Subsection

subsection_1512

Subsection

(6) Section 7 of the Bankers’ Books (Evidence) Act 1949 shall not apply to a bank licensee under Part VI, its directors or offers.

Subsection

subsection_1513

Subsection

(7) Any person who contravenes subsection (1) commits an offence and shall, on conviction, be liable to a fine not exceeding one million ringgit or to imprisonment for a term not exceeding three years or to both. Translation

Section

section_1514

Section

179. Where any instrument or document required to be lodged with the Authority is in a language other than in the national or English language, the instrument or document shall be accompanied by a verified or certified translation thereof either in the national or English language. Application of Labuan Financial Services Authority Act 1996

Section

section_1515

Section

180. Where there is any conflict or inconsistency with the provisions of this Act and the Labuan Financial Services Authority Act 1996, the provisions of Labuan Financial Services Authority Act 1996 shall prevail. Application of Labuan Islamic Financial Services and Securities Act 2010

Section

section_1516

Section

181. (1) A licensed entity who carries on or transacts or holds himself out as carrying on or transacting any Islamic banking business, Islamic investment banking business, takaful, retakaful or any other business under this Act which is syariah compliant, shall comply with the provisions of the Labuan Islamic Financial Services and Securities Act 2010 in matters where such syariah compliance are concerned, subject to such modifications as may be made by the Authority pursuant to guidelines. Labuan Financial Services and Securities 175

Subsection

subsection_1517

Subsection

(2) Where there is any conflict or inconsistency between the provisions of this Act and the Labuan Islamic Financial Services and Securities Act 2010 in matters where syariah compliance are concerned, the provisions of the Labuan Islamic Financial Services and Securities Act 2010 shall prevail. Application of *Exchange Control Act 1953

Section

section_1518

Section

182. (1) Subject to subsections (2) and (3), nothing in this Act shall affect the provisions of the *Exchange Control Act 1953 and in the application of any provision of this Act to a person or bank licensee, such provision shall apply subject to the provisions of the *Exchange Control Act 1953.

Subsection

subsection_1519

Subsection

(2) Where there is conflict or inconsistency between the provisions of this Act and the *Exchange Control Act 1953, the provisions of the *Exchange Control Act 1953 shall prevail.

Subsection

subsection_1520

Subsection

(3) The provisions of the *Exchange Control Act 1953 shall not apply in respect of any transactions exempted under that Act and any guidelines, circulars or notices issued thereunder. Application of Capital Markets and Services Act 2007

Section

section_1521

Section

183. (1) Subject to subsections (2) and (3), nothing in this Act shall affect the provisions of the Capital Markets and Services Act 2007 and in the application of any provision of this Act to any person, such provision shall apply subject to the provisions of the Capital Markets and Services Act 2007.

Subsection

subsection_1522

Subsection

(2) Where there is conflict or inconsistency between the provisions of this Act and the Capital Markets and Services Act 2007, the provisions of the Capital Markets and Services Act 2007 shall prevail.

Subsection

subsection_1523

Subsection

(3) The provisions of the Capital Markets and Services Act 2007 shall not apply to a licensed entity in respect of any licensed activity under this Act, when such licensed activity is carried on in Labuan or outside Malaysia. *NOTE—The Exchange Control Act 1953 [Act 17] has since been repealed by the Financial Services Act 2013 [Act 758] which comes into operation on 30 June 2013—see sections 271 and 272 of Act 758. Laws of Malaysia 176 Act 704 Application of Labuan Companies Act 1990 and *Companies Act 1965

Section

section_1524

Section

184. (1) In addition to, and not in derogation of, the provisions of this Act—

Paragraph

paragraph_1525

Paragraph

(a) the Labuan Companies Act 1990 shall apply to—

Paragraph

paragraph_1526

Paragraph

(i) a bank licensee that is not a Malaysian bank licensee; and

Subparagraph

subparagraph_1527

Subparagraph

(ii) an insurance licensee that is a Labuan company or a foreign Labuan company; and

Paragraph

paragraph_1528

Paragraph

(b) the *Companies Act 1965 shall apply to—

Paragraph

paragraph_1529

Paragraph

(i) a Malaysian bank licensee or a licensed entity licensed under section 90 which is an office of a Malaysian bank established under that Act; and

Subparagraph

subparagraph_1530

Subparagraph

(ii) an insurance licensee which is a branch of a Malaysian insurer.

Subsection

subsection_1531

Subsection

(2) Where there is any conflict or inconsistency between the provisions of this Act and the other Acts referred to in subsection (1) in their application to the respective licensed entities, the provisions of this Act shall prevail.

Subsection

subsection_1532

Subsection

(3) Where any difficulty or doubt arises in the application of subsection (1) in relation to any particular licensed entity or any particular matter or circumstance or in general, the Authority may resolve the same by issuing a direction on the issue. Non-application of certain laws

Section

section_1533

Section

185. (1) No bank licensee shall, in respect of any business carried on by such licensee, be subjected to any of the provisions of the **Banking and Financial Institutions Act 1989 and the ***Islamic Banking Act 1983. *NOTE—The Companies Act 1965 [Act 125] and has since been repealed by the Companies Act 2016 [Act 777] which comes into operation on 31 January 2017–see subsection 620(1) of Act 777 and P.U. (B) 50/2017. **NOTE—The Banking and Financial Institutions Act 1989 [Act 372] has since been repealed by the Financial Services Act 2013 [Act 758] which comes into operation on 30 June 2013— see sections 271 and 272 of Act 758. ***NOTE—The Islamic Banking Act 1983 [Act 276] has since been repealed by the Islamic Financial Services Act 2013 [Act 759] which comes into operation on 30 June 2013—see sections 282 and 283 of Act 759. Labuan Financial Services and Securities 177

Subsection

subsection_1534

Subsection

(2) No insurance licensee shall, in respect of any business carried on by such licensee under Part VII, be subjected to any of the provisions of the *Insurance Act 1996 and **the Takaful Act 1984.

Subsection

subsection_1535

Subsection

(3) For the purpose of Part IX—

Paragraph

paragraph_1536

Paragraph

(a) the provisions of the Capital Markets and Services Act 2007 shall not be applicable to the establishment, conduct, activity and business of any exchanges established under Division 2 of Part IX;

Paragraph

paragraph_1537

Paragraph

(b) section 7, subsection 21(2), sections 24, 85, subsections 87(2), 87(4), 87(5), 87(10), 93(2), 93(6) and 93(7) of the Labuan Companies Act 1990 shall not be applicable to any exchange established under Division 2 of

Part

Part IX; and

Paragraph

paragraph_1539

Paragraph

(c) the provisions of the Holidays Act 1951 [Act 369] shall not apply to any exchange established under Division 2 of Part IX and any exchange established under Division 2 of Part IX may carry on its business for twenty-four hours in each day on any and all days of each week subject to any limitation or restriction imposed by or pursuant to the by-laws or the rules, as the case may be.

Subsection

subsection_1540

Subsection

(4) The provisions of the Trust Companies Act 1949 [Act 100] shall not apply to a company registered as a Labuan trust company, a Labuan managed trust company or a Labuan private trust company. Immunity

Section

section_1541

Section

186. (1) No action, suit, prosecution or other proceedings shall lie or be brought, instituted or maintained in any Court or any tribunal against any of the following persons, that is—

Paragraph

paragraph_1542

Paragraph

(a) the Minister; *NOTE—The Insurance Act 1996 [Act 553] has since been repealed by the Financial Services Act 2013 [Act 758] which comes into operation on 30 June 2013—see sections 271 and 272 of Act 758. **NOTE—The Takaful Act 1984 [Act 312] has since been repealed by the Islamic Financial Services Act 2013 [Act 759] which comes into operation on 30 June 2013—see sections 282 and 283 of Act 759. Laws of Malaysia 178 Act 704

Paragraph

paragraph_1543

Paragraph

(b) the Authority;

Paragraph

paragraph_1544

Paragraph

(c) any member, officer, committee, servant or agent of the Authority; and

Paragraph

paragraph_1545

Paragraph

(d) any other person lawfully acting on behalf of, or in compliance with instructions of, the Authority, for or on account of, or in respect of, any act done or statement made or omitted to be done or made, or purporting to be done or made or omitted to be done or made, in pursuance or in execution of, or intended pursuance or execution of this Act, or any guidelines, directions, advisories or other thing whatsoever issued under this Act: Provided that such act or such statement was done or made, or was omitted to be done or made, in good faith.

Subsection

subsection_1546

Subsection

(2) Subsection (1) shall be in addition to, and not in derogation of, the Public Authorities Protection Act 1948 [Act 198], and for the purposes of that Act, every person mentioned in subsection (1) shall be deemed to be a public officer or a person engaged or employed in the performance of a public duty.

Subsection

subsection_1547

Subsection

(3) The Public Authorities Protection Act 1948 shall apply to any action, suit, prosecution or proceedings against the Authority or against any member of the Authority, any member of a committee, or any officer, servant or agent of the Authority in respect of any act, neglect or default done or omitted by it or him in such capacity. General penalty

Section

section_1548

Section

187. (1) A person who contravenes a requirement of this Act commits an offence.

Subsection

subsection_1549

Subsection

(2) A person who commits an offence against this Act for which no penalty is expressly provided shall be liable—

Paragraph

paragraph_1550

Paragraph

(a) in the case of a body, incorporated or unincorporated, to a fine not exceeding three million ringgit; or Labuan Financial Services and Securities 179

Paragraph

paragraph_1551

Paragraph

(b) in the case of an individual, to a fine not exceeding one million ringgit, and in the case of a continuing offence, shall, in addition, be liable to a daily fine not exceeding five thousand ringgit for each day the offence continues to be committed. Offences by body corporate

Section

section_1552

Section

188. (1) If a body corporate commits an offence under this Act or any regulations made under this Act, any person who, at the time of the commission of the offence, was a director or other similar officer or was purporting to act in any such capacity—

Paragraph

paragraph_1553

Paragraph

(a) may be charged severally or jointly in the same proceedings with the body corporate; and

Paragraph

paragraph_1554

Paragraph

(b) if the body corporate is found to have committed the offence, shall be deemed to have committed that offence unless, having regard to the nature of his functions in that capacity and to all circumstances, he proves—

Paragraph

paragraph_1555

Paragraph

(i) that the offence was committed without his knowledge, consent or connivance; and

Subparagraph

subparagraph_1556

Subparagraph

(ii) that he took all reasonable precautions and had exercised due diligence to prevent the commission of that offence. Annual and licence fees

Section

section_1557

Section

189. (1) The Authority may prescribe such annual, licence or registration fees by regulations in respect of the activities of a licensed or registered entity or other activities under this Act.

Subsection

subsection_1558

Subsection

(2) Such fees as may be prescribed shall be payable on or before 15 January of every year following the year in which any consent, licence or registration is granted. Laws of Malaysia 180 Act 704

Subsection

subsection_1559

Subsection

(3) An unpaid fees may be sued for by the Authority by action as a civil debt and in addition the Authority may require payment of a penalty for late payment up to an amount equivalent to twice the amount of the fees unpaid and costs of recovering the amount including but not limited to costs of legal proceedings. Fees and penalties to be paid into Fund

Section

section_1560

Section

190. (1) All fees and penalties paid to the Authority under this Act and all sums of money paid under this section shall be paid into and form part of the Fund established under section 29 of the Labuan Financial Services Authority Act 1996.

Subsection

subsection_1561

Subsection

(2) Notwithstanding subsection (1), all fees paid under section 140 of Part IX shall be paid into the fund of the Exchange or such other exchanges established pursuant to Part IX and may be used in accordance with the provisions of the by-laws of the Exchange or such other exchange. Procedure where none laid down

Section

section_1562

Section

191. In the event that any act or step is required or permitted to be done or taken under this Act and no form is specified or procedure laid down either in this Act or the regulations, application may be made to the Authority for directions as to the manner in which the same may be done or taken, and any act or step done or taken in accordance with such directions shall be a valid performance of such act or step. Misrepresentation

Section

section_1563

Section

192. A person who—

Paragraph

paragraph_1564

Paragraph

(a) willfully or recklessly makes a misrepresentation in any document or material or records required to be filed, supplied or delivered under this Act;

Paragraph

paragraph_1565

Paragraph

(b) makes any statement or gives any information required under this Act that he knows to be false or misleading; Labuan Financial Services and Securities 181

Paragraph

paragraph_1566

Paragraph

(c) knowingly fails to disclose any fact or information required to be disclosed under this Act; or

Paragraph

paragraph_1567

Paragraph

(d) being in charge of, or having alone or with another or others possession of or control over, any information, records, books or other documents referred to in the provisions of this Act refuses or willfully neglects to comply with any lawful direction given under such provisions, commits an offence and shall, on conviction, be liable to a fine not exceeding one million ringgit or to imprisonment for a term not exceeding three years or to both. Enforcement

Section

section_1568

Section

193. (1) Where—

Paragraph

paragraph_1569

Paragraph

(a) a licensed entity is insolvent or is likely to become unable to meet all or any of its obligations or is about to suspend payment to any extent;

Paragraph

paragraph_1570

Paragraph

(b) a licensed entity, its principal officer, officer or any other such similar person is carrying on business in a manner the Authority reasonably believes to be detrimental to the interest of its beneficiaries, investors, creditors or any other such similar interested parties; or

Paragraph

paragraph_1571

Paragraph

(c) a licensed entity, its principal officer, officer or any other such similar person has contravened any provision of this Act or any other written law for the time being in force, the Authority may—

Paragraph

paragraph_1572

Paragraph

(A) where applicable, impose new or additional terms, conditions, restrictions or limitations upon the operation of the licensed entity or vary or revoke any which have already been imposed;

Paragraph

paragraph_1573

Paragraph

(B) require the removal of any of the licensed entity’s principal officers, officers, or any other such similar person by another person approved by the Authority; Laws of Malaysia 182 Act 704

Paragraph

paragraph_1574

Paragraph

(C) appoint a person, on behalf of the Authority, to assume control of the affairs of the licensed entity; or

Paragraph

paragraph_1575

Paragraph

(D) apply to the Court for an order to take such action as the Authority considers necessary to protect the interests of beneficiaries, investors, creditors or any other such similar interested parties of the licensed entity.

Subsection

subsection_1576

Subsection

(2) The Authority may bring actions and institute proceedings for the enforcement of any provision of this Act or for the recovery of fees or other sums of money payable under this Act or expenses incurred by the Authority in the course of carrying out its obligations under this Act. Power to compound

Section

section_1577

Section

194. (1) The Authority may, with the written consent of the Public Prosecutor, in a case where he deems it fit and proper so to do, compound any offence committed by any person which is punishable under this Act by making a written offer to such person to compound the offence on payment to the Authority, within such time as may be specified in the offer, of an amount which shall not exceed fifty per centum of the amount of the maximum fine to which that person would have been liable if he had been convicted of the offence.

Subsection

subsection_1578

Subsection

(2) An offer under subsection (1) may be made at any time after the offence has been committed, but before any prosecution for it has been instituted.

Subsection

subsection_1579

Subsection

(3) Where the amount specified in the offer under subsection (1) is not paid within the time specified in the offer, or within such extended period as the Authority may grant, prosecution of the offence may be instituted at any time after that against the person to whom the offer was made.

Subsection

subsection_1580

Subsection

(4) Where an offence has been compounded under subsection (1), no prosecution shall be instituted after that in respect of such offence against the person to whom the offer to compound was made. Labuan Financial Services and Securities 183

Subsection

subsection_1581

Subsection

(5) Any monies paid into the Authority pursuant to subsection (1) shall be paid into and form part of the Fund established under section 29 of the Labuan Financial Services Authority Act 1996. Service of documents

Section

section_1582

Section

195. (1) Any document or notice required to be served by the Authority to a licensed entity, a mutual fund, a self-regulatory organization or an exchange under this Act may be served by leaving it at, or sending it by post to, the registered office of the particular licensed entity, mutual fund, self-regulatory organization or exchange.

Subsection

subsection_1583

Subsection

(2) Where the document or notice has been served in accordance with subsection (1), the document or notice is deemed to have been properly served on the particular licensed entity, mutual fund, self-regulatory organization or exchange. Power of the Minister to make regulations

Section

section_1584

Section

196. The Minister may, on the recommendation of the Authority, make regulations prescribing all matters and things required by this Act to be prescribed or provided, for the carrying out of, or giving full effect to, the provisions of this Act. Power of the Minister to issue directions

Section

section_1585

Section

197. (1) The Minister may, on the written recommendation of the Authority, in the public interest, issue, by notification in the Gazette, a direction—

Paragraph

paragraph_1586

Paragraph

(a) prohibiting the formation of any business or activities, including any class of the business or activities; or

Paragraph

paragraph_1587

Paragraph

(b) directing a licensed entity, to cease to carry on its business or part of its business either immediately or within such time as may be specified in the direction.

Subsection

subsection_1588

Subsection

(2) A direction made under this section may be revoked or varied by the Minister. Laws of Malaysia 184 Act 704 Power of the Minister to amend schedules

Section

section_1589

Section

198. (1) The Minister may, on the recommendation of the Authority, from time to time by order published in the Gazette, vary, delete, add to, substitute for, or otherwise amend any of the schedules to this Act and upon publication of the order, such schedule as varied, deleted, added to, substituted for or otherwise amended, shall come into full force and effect and shall be deemed to be an integral part of this Act as from the date of such publication, or from such later date as may be specified in the order.

Subsection

subsection_1590

Subsection

(2) The Minister in varying, deleting or substituting any of the schedules referred to in subsection (1) may impose such terms and conditions as he thinks necessary. Power of the Minister to grant exemptions

Section

section_1591

Section

199. The Minister may, on the recommendation of the Authority, exempt a Labuan licensed entity from any of the provisions of this Act and may, in granting such exemption, impose such terms and conditions as the Minister thinks fit. Publication of notification, Gazette

Section

section_1592

Section

200. Without prejudice to any other provisions of this Act, the Authority shall, either as expressly provided in the provisions or where no time frame is specified, as soon as practicable, publish the notification, including notification of Gazette, but any delay in publishing such notification shall not in any manner affect the validity of the notification or the content or order made therein. Repeal, savings and transitional

Section

section_1593

Section

201. (1) For the purposes of this section, “effective date” means the date appointed by the Minister under section 1.

Subsection

subsection_1594

Subsection

(2) The Labuan Trust Companies Act 1990 [Act 442], Offshore Banking Act 1990 [Act 443], Offshore Insurance Act 1990 [Act 444] and Labuan Offshore Securities Industry Act 1998 (the “repealed Acts”) are repealed with effect from the effective date. Labuan Financial Services and Securities 185

Subsection

subsection_1595

Subsection

(3) Notwithstanding subsection (1)—

Paragraph

paragraph_1596

Paragraph

(a) all—

Paragraph

paragraph_1597

Paragraph

(i) regulations, orders, directions, notifications, exemptions and other subsidiary legislation, howsoever called; and

Subparagraph

subparagraph_1598

Subparagraph

(ii) all approvals, directions, decisions, notifications, exemptions and other executive acts, howsoever called, made, given or done under or in accordance with, or by virtue of the repealed Acts shall be deemed to have been made, given, or done under, or in accordance with, or by virtue of, the corresponding provisions of this Act, and shall continue to remain in full force and effect in relation to the persons to whom they applied until amended, repealed, rescinded, revoked or replaced under, in accordance with or by virtue of, the corresponding provisions of this Act;

Paragraph

paragraph_1599

Paragraph

(b) every direction, notice, guideline or circular issued by the Authority or the Minister under the repealed Acts before the effective date and in force immediately before the effective date, shall be deemed to have been lawfully issued under this Act in relation to the particular provision of this Act corresponding to the matter dealt with in the direction, notice, guideline or circular and shall remain in full force and effect until it is amended, rescinded or repealed under this Act;

Paragraph

paragraph_1600

Paragraph

(c) any application for an approval or consent, or for any other purpose whatsoever, or any appeal relating to such application, made by any person to the Minister or to the Authority under the repealed Acts before the effective date, and pending immediately before the effective date, shall, if there is a corresponding provision in this Act, be dealt with as if it was made under that provision and, if there is no such corresponding provision in this Act, such application or appeal shall lapse on the effective date; and Laws of Malaysia 186 Act 704

Paragraph

paragraph_1601

Paragraph

(d) all transactions or dealings lawfully executed or entered into, and all business lawfully done, under or in accordance with the repealed Acts by a person who is approved or registered under the repealed Acts, with any other person, shall be deemed to have been lawfully and validly executed, entered into, or done, under and in accordance with this Act, and accordingly, any right or liability under such transactions or dealings, immediately before the effective date, shall be deemed to continue to be lawful and valid under this Act.

Subsection

subsection_1602

Subsection

(3) Where a reference is made in any written law to the “Labuan Offshore Securities Industry Act 1998”, the “Offshore Trust Companies Act 1990” the “Offshore Banking Act 1990”, and the “Offshore Insurance Act 1990”, on and after the appointed date, such reference shall be construed as a reference to the relevant Parts of this Act.

Subsection

subsection_1603

Subsection

(4) Without prejudice to the generality of the above, the Labuan International Financial Exchange that was established by the Minister under section 30 of the repealed Labuan Offshore Securities Industry Act 1998 that was approved and recognized immediately before the effective date shall be deemed to have been approved under the corresponding provisions of this Act.

Subsection

subsection_1604

Subsection

(5) Any condition or restriction imposed by the Minister on the Labuan International Financial Exchange and in force immediately before the effective date shall be deemed to be a condition or restriction to which its approval or recognition under this Act is subject.

Subsection

subsection_1605

Subsection

(6) Without prejudice to the generality of subsection (2) and subject to the provisions of this Act, any person who holds any of the following licences or is granted registration, as the case may be, immediately before the effective date shall, from that date, be deemed to be licensed under this Act in respect of the activity which that person was carrying on under the first-mentioned licence:

Paragraph

paragraph_1606

Paragraph

(a) a manager’s licence granted under the repealed Labuan Offshore Securities Industry Act 1998; Labuan Financial Services and Securities 187

Paragraph

paragraph_1607

Paragraph

(b) an administrator registered under the repealed Labuan Offshore Securities Industry Act 1998;

Paragraph

paragraph_1608

Paragraph

(c) a trust company registered under the repealed Labuan Trust Companies Act 1990;

Paragraph

paragraph_1609

Paragraph

(d) an offshore banking licence and an offshore investment banking licence granted under the repealed Offshore Banking Act 1990;

Paragraph

paragraph_1610

Paragraph

(e) an offshore insurance licence granted under the repealed Offshore Insurance Act 1990.

Subsection

subsection_1611

Subsection

(7) Any condition or restriction to which any licence or registration referred to in subsection (6) was subject immediately before the effective date, to the extent that it is consistent with the provisions of this Act, shall be deemed to be a condition or restriction to which the corresponding licence referred to in subsection (6) is subject. Continuance of other rights, liabilities, etc., under the repealed Acts

Section

section_1612

Section

202. (1) Nothing in the repealed Acts or this Act shall affect any person’s liability to be prosecuted or punished for offences or breaches committed under the repealed Acts before the effective date or any proceedings brought, sentence imposed or action taken before that day in respect of such offence or breach.

Subsection

subsection_1613

Subsection

(2) Any right, privilege or obligation or liability acquired, accrued or incurred before the effective date or any legal proceedings, remedy or investigation in respect of such right, privilege, obligation or liability shall not be affected by this Act and shall continue to remain in force as if this Act had not been enacted. Laws of Malaysia 188 Act 704 First Schedule [Subsection 2(1); definition of “director”] First Column (person) Second Column (director) Third Column (established) Fourth Column (participant) Corporation Co-operative society Statutory body Partnership Limited partnership Limited liability partnership a person occupying the position of director of the corporation, by whatever name called, and includes a person in accordance with whose directions or instructions the directors of the corporation are accustomed to act and an alternate or substitute director a member of the board or other governing body, howsoever called, of the co-operative society a member of the board, committee, council or other governing body, howsoever called, of the statutory body a partner the general partner (or person holding such similar role) the designated partner (or person holding such similar role) incorporated registered, incorporated or otherwise coming into legal existence as a co-operative society its coming into existence under the law establishing, appointing or constituting it its formation its formation or where registration or other form of recording or recognition is required before activities or business can lawfully be commenced, its registration, recording or legal recognition under the law applicable its formation or where registration or other form of recording or recognition is required before activities or business can lawfully be commenced, its registration, recording or legal recognition under the law applicable a shareholder a member a shareholder or, where the statutory body has no share capital, a person wholly, severally or jointly with other persons owning the statutory body a partner a partner a limited partner Labuan Financial Services and Securities 189 First Column (person) Second Column (director) Third Column (established) Fourth Column (participant) Sole-proprietorship Any other body, a s s o c i a t i o n o r group of persons whether corporate or unincorporated the sole proprietor any person having direction or control of the management of its affairs or business where registration or other form of recording or recognition is required before activities or business can lawfully be commenced, its registration, recording or legal recognition under the law applicable where registration or other form of recording or recognition is required before activities or business can lawfully be commenced, its registration, recording or legal recognition under the law applicable the sole proprietor a member, howsoever called, of such body, association or group Second Schedule [subsection 2(1)] Recognized Professional Associations in relation to the qualifications of actuaries The Institute of Actuaries in England The Faculty of Actuaries in Scotland The Society of Actuaries in the United States of America The Canadian Institute of Actuaries The Australian Institute of Actuaries Such other associations as may be approved by the Authority Laws of Malaysia 190 Act 704 Third Schedule [sections 99 and 111] Financial information and statistics and information to be submitted to the Authority Part A: Bank licensee Financial statements Within six months after the close of each financial year of a bank licensee, or such further period as the Authority may approve, a bank licensee shall submit to the Authority, in respect of its entire business operations, two copies each of its latest audited annual balance sheet, profit and loss account, a statement setting out the sources, allocation and utilization of its funds and the report of the auditor. Statistics and information

Subsection

subsection_1614

Subsection

(1) Every bank licensee, at such frequency as may be specified by the Authority from time to time, submit to the Authority a statement showing the assets and liabilities of the bank licensee in relation to its Labuan banking business or Labuan investment banking business, as the case may be.

Subsection

subsection_1615

Subsection

(2) A statement to be submitted under paragraph (1) shall include—

Paragraph

paragraph_1616

Paragraph

(a) a statement specifying the total amount of credit facilities granted by the bank licensee to such customers of the bank licensee as may be specified by the Authority;

Paragraph

paragraph_1617

Paragraph

(b) a statement specifying the class, category or description of credit facilities given and the business or industry in which the customers of the bank licensee are involved;

Paragraph

paragraph_1618

Paragraph

(c) a statement showing that the bank licensee has complied with the requirements imposed upon it by section 100; and

Paragraph

paragraph_1619

Paragraph

(d) such other statements, information, documents, statistics or returns as the Authority may specify.

Subsection

subsection_1620

Subsection

(3) Notwithstanding paragraph (2), the Authority may publish any consolidated statement, in respect of any category, class or description of bank licensees as the Authority deems appropriate, aggregating the figures in the returns submitted under paragraph (1): Provided that nothing in this paragraph shall authorize the Authority to designate any particular bank licensee to constitute a category, class or description of bank licensees for the purposes of this paragraph. Labuan Financial Services and Securities 191

Subsection

subsection_1621

Subsection

(4) Where any person is required by or under this Part to submit, produce or provide to the Authority any information, statistics, return or document, the Authority may specify that the same shall be submitted, produced or provided in such form and manner and within such period or at such intervals or times, not inconsistent with any provision of this Part or any regulations made under this Act, as the Authority may set out in the specification; and such person shall not submit, produce or provide as true or accurate any information, statistic, return or document which he knows, or has reason to believe, to be false, inaccurate or misleading. Part B: Insurance licensee Financial statements

Subsection

subsection_1622

Subsection

(1) Every Labuan insurer shall, within six months after the close of each financial year or such further period as the Authority may approve, submit to the Authority, in respect of its entire Labuan insurance operations, four copies each of its audited annual balance sheet, profit and loss account, revenue account and, in respect of its life insurance business, a report setting out the actuarial valuation of its assets and liabilities as approved in accordance with its constituent documents.

Subsection

subsection_1623

Subsection

(2) Every Labuan insurer shall submit to the Authority four copies each of the documents mentioned in paragraph (1) as approved in accordance with its constituent documents as soon as practicable after such approval.

Subsection

subsection_1624

Subsection

(3) Every Labuan insurer which is a foreign Labuan company shall, in addition to the financial statements which are required to be submitted to the Authority under paragraph (1), also submit each year a certified copy of its latest audited annual balance sheet in respect of its entire operations both in and outside Labuan within three months of its being filed with the regulatory authorities in its country of establishment or origin.

Subsection

subsection_1625

Subsection

(4) Every licensed Labuan insurance manager, licensed Labuan underwriting manager and licensed Labuan insurance broker shall, within six months after the close of each financial year or such further period as the Authority may approve, submit to the Authority four copies each of its audited annual balance sheet and profit and loss account.

Subsection

subsection_1626

Subsection

(5) Notwithstanding any provision in this Act, the Authority may require an insurance licensee to submit to the Authority any document relating to its operation in such manner as may be specified in writing by the Authority.

Part

Part C: Additional conditions

Content

content_1628

Content

Notwithstanding the above, the Authority may impose new or additional requirements for matters set out in this Schedule. Laws of Malaysia 192 Act 704 Act 704 LIST OF AMENDMENTS Amending law Short title In force from Act A1654 Labuan Financial Services and Securities (Amendment) Act 2022 01-01-2019 Labuan Financial Services and Securities 193 Act 704 LIST OF SECTIONS AMENDED Section Amending authority In force from 8 Act A1654 01-01-2019 101 Act A1654 01-01-2019 114 Act A1654 01-01-2019