It is understood that the regulators are supportive of the development within this segment and accordingly have updated the legislation to reflect the ‘digitalisation’ of it. In view that the ‘digitalisation’ of this space is more evolutionary than revolutionary, the public’s perception would seem to be fairly unchanged as compared to traditional means of asset and portfolio management.
FinTechs providing services as described above must be locally incorporated companies and obtain a capital market services license (“CMSL”) from Securities Commission Malaysia (“SC”). In addition to the aforementioned, the CMSL license holder must also submit at least two applications for a capital market services representative license (“CMSRL”) for every regulated activity which is to be carried out (as defined under Schedule 2 of the Capital Markets and Services Act 2007) (“Regulated Activity”)).
The FinTechs must also demonstrate that, amongst others, it has the technological capabilities and support system to undertake the digital investment management business as well as possessing a sound digital value proposition.
The annual license fee for a CMSL for any first Regulated Activity is RM2,000-00 and for any subsequent additional Regulated Activity is RM1,000-00 each. The annual license fee for a CMSRL is RM200-00 , regardless of the number of Regulated Activities the CMSRL holder carry on for its principal. Furthermore such FinTechs (which belong to the category of “fund management” and “digital investment management company”) must maintain a minimum paid-up capital and shareholders’ funds of RM2,000,000-00 at all times .
According to SC, as at 31 March 2017, the total assets under management by the 74 fund management companies in Malaysia, is RM733.88 billion .
SC will only authorise (includes grant of license, registration or approval) 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:
- 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;
- 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;
- contribution towards attracting investments, enhancing market linkages and promoting vibrancy in the capital market;
- ability in developing strategic or nascent sectors in the capital market; or
- the degree and significance of participation of Malaysians in the capital market.