Canada    FinTech Guide    Chapter 3    Malaysia


3. Consulting and Broking Services / Robo-Advisory / Auto-Trading
Malaysia  Malaysia

It is understood that the regulators are receptive of the innovation within this segment however investors generally feel skeptical in entrusting their wealth with a robotic money management service. Nonetheless, looking at the trend in global markets, the investors should soon embrace this alternative.



Legal Affairs


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 principal must also submit at least two applications for a capital market services representative license (“CMSRL”) for every regulated activity as defined under Schedule 2 of the Capital Markets and Services Act 2007) (“Regulated Activity”) which is to be carried out.

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 in 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.

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:


  1. 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;
  2. 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;
  3. contribution towards attracting investments, enhancing market linkages and promoting vibrancy in the capital market;
  4. ability in developing strategic or nascent sectors in the capital market; or
  5. the degree and significance of participation of Malaysians in the capital market.


Economic Conditions


In July 2017, shariah-compliant robo-advisory platform, Algebra, was launched in Malaysia’s only offshore financial hub - Labuan and is currently regulated by the Labuan Financial Services Authority. Algebra is operated by Singapore’s Farringdon Asset Management and uses a machine-learning strategy in its investment strategy. As Farringdon Group is located in Labuan, their transactions are performed in US dollars. It has yet to obtain a licence to offer ringgit-denominated investments in Malaysia.

According to local news reports as at the first quarter of 2018, there are currently three other robo-advisors which are looking to provide Malaysian investors with robo-advisory products and services. They are: Malaysian-based Main Street Capital Sdn Bhd, Singapore-based Smartly Pte Ltd and India-based Valuefy Solutions. It appears that the three are currently preparing to apply for a licence from SC to run their respective platforms in Malaysia .



Contributing Authors

Lee Hishammuddin Allen & Gledhill

Adlin Abdul Majid
Kuala Lumpur, Malaysia


Andrew Ean Vooi Chiew
Kuala Lumpur, Malaysia

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Chapter Index:


1. Payment Services / Mobile Payment

2. Asset and Portfolio Management

3. Consulting and Broking Services / Robo-advisory / Auto-trading

4. Trading Platforms / Social Trading Platforms / Signal Following

5. Crowdfunding / Crowdinvesting / Crowdlending

6. Virtual Currency - Bitcoin

7. Loan Services / Factoring / Loan Broking / Finetrading

8. Online Banking Services

9. Analytics and Research / Data Management / Risk Management

10. Accounting

11. Identification

12. Online-pawning

13. InsurTech

14. RegTech

15. Initial Coin Offerings (ICOs)

Disclaimer:
The information in this guide provides a general overview at the time of publication and is not intended to be a comprehensive review of all legal developments nor should it be taken as opinion or legal advice on the matters covered. It is for general information purposes only and readers should take legal advice from a Multilaw member firm.

Publication Date: 1 May 2018