Name
Global FinTech Guide
Country _ Name
Malaysia
SectionTitle
Asset and portfolio management
Body
FinTechs belonging to this category offer asset and portfolio management services via an internet platform or software programs and usually manage and dispose of the assets of their customers long or short term according to their specifications without actually holding the property or the possession of those assets. FinTechs, which provide information about and access to overnight or time deposit accounts at national and foreign banks and which execute the transactions to these accounts, also belong to this category. Some FinTechs however only act on request of the customer.

Aside from that some FinTechs offer software or internet solutions enabling users to manage and plan their personal finances on their own by providing graphics, overviews and compilations of their financial data and sometimes indicating financial risks or opportunities, but without actually managing the assets.

Introduction

Attitude of the country towards modern asset and portfolio management services

The regulators are generally supportive of the development within this segment and accordingly have updated the licensing framework to reflect the ‘digitalisation’ of it. In recent years, the ‘digitalisation’ of this space has been more revolutionary than evolutionary, and the public’s perception seems to have changed compared to traditional means of asset and portfolio management. More companies in Malaysia are starting to use technology to lower investing costs and offer digital managed portfolio services to the masses.

Legal affairs

Obligations and requirements to provide asset and portfolio management, or ancillary services described above

FinTechs providing services as described above will be subject to the Capital Markets and Services Act 2007 (“CMSA”) which regulates matters relating to activities, markets, and intermediaries in the capital markets as well as all consequential matters. FinTechs seeking to carry out a regulated activity (as defined under Schedule 2 of Capital Market Services Act) (“Regulated Activity”) (which includes fund management activities) must obtain a capital market services license (“CMSL”) from the Securities Commission Malaysia (“SC”) and must be a locally incorporated company. In addition, the CMSL license holder must also submit at least two (2) applications for a capital market services representative license (“CMSRL”) (which entitles an individual to carry on any one or more regulated activities on behalf of its principal – i.e. the CMSL licence holder) for every Regulated Activity which is to be carried out.

As set out in the Licensing Handbook published by the SC, the annual license fee for any first Regulated Activity is RM2,000 (approximately USD460) and for any subsequent additional Regulated Activity is RM1,000 (approximately USD230). The annual license fee for a CMSRL is RM200 (approximately USD46). Furthermore, such FinTechs (which belong to the category of carrying out the Regulated Activity of “fund management”) must maintain a minimum paid-up capital and shareholders’ funds of RM2,000,000 (approximately USD460,000) at all times.

The Guideline on Compliance Function for Fund Management Companies issued by the SC sets out additional requirements that must be complied with to undertake digital investment management activities, which includes demonstrating that it has the technological capabilities and support system to undertake the digital investment management business as well in possessing a sound digital valu
e proposition.

Additional comments regarding the legal situation for asset and portfolio management services or what FinTech’s must be aware of in this business area

The Licensing Handbook and Guideline on Compliance Function for Fund Management Companies were updated as part of the Digital Investment Management framework launched in 9 May 2017 by the SC, which sets out the licensing and conduct requirements for the offering of automated discretionary portfolio management services to investors.

SC will only authorise (includes grant of the CMSL) an applicant if the application is in the ‘best interest’ of Malaysia. In determining what constitutes ‘best interest’, SC will give regard to any one or more of the following:

    a) the area of specialisation and level of expertise that can be offered to the capital market including the effect on productivity, transference of skills and efficiency and quality of capital market services;
    b) the risk posed on the systemic stability of the capital market including activities and conduct that will likely impact the orderly functioning of the capital market;
    c) contribution towards attracting investments, enhancing market linkages, and promoting vibrancy in the capital market;
    d) ability in developing strategic or nascent sectors in the capital market; or
    e) the degree and significance of participation of Malaysian in the capital market.

Prior to submitting a formal licensing application to the SC, applicants are encouraged to leverage on the SC’s aFINity engagement process which provides one-on-one engagement sessions between the SC and the applicant with the aim to delve into key aspects of the digital business proposition how the business model is intended to be operated.

Economic conditions

Market size for asset and portfolio management services and biggest companies in this business area

According to the SC’s Fund Management Statistics, last updated on 31 March 2022, the total assets under management in Malaysia amounted to RM 938.71 billion, though there has not been a significant increase in the number of fund management companies in recent years. Malaysia’s largest asset management companies include Principal Asset Management Bhd's (formerly known as CIMB-Principal Asset Management Bhd), Public Mutual Bhd, and Affin Bank Bhd.

Additional comments regarding the economic situation for asset and portfolio management services or what FinTech’s must be aware of in this business area

N/A.

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