CFCL Investment regulation – Malaysia

Regulatory structure

Please refer to the CBL Investment regulation - Malaysia for the complete information about the regulatory structure.

Holding restrictions

Holding restrictions – CSD Market - Malaysia

Disclaimer

The information contained in the Holding Restrictions is based on the legal opinion obtained by CBL that was issued on 2 October 2023. CFCL believes the information to be correct as of that date but disclaims any responsibility as to the accuracy and completeness of the information after that date. In the case of discrepancy between the information provided by CFCL and the local laws and regulations, the latter shall prevail. The Holding Restrictions do not constitute legal advice and clients should seek advice from independent professional counsel.

Clients are responsible for ensuring compliance with the disclosure requirements and agree to indemnify and hold harmless CFCL, for any loss, expense, liability, damage or claims, whether direct or indirect, against or incurred by CFCL arising out of or resulting from such non-compliance.

Holding restrictions – Register Market - Malaysia

Market restriction

There is no statutory nominee concept under the laws of Malaysia for investment funds. CFCL will be recognised as the legal account holder of the fund units. Some beneficial interest of CFCL’s clients may be recognised in practice depending on the trust deed governing the unit trust fund.

Clients are advised to consult with appropriate counsel before holding fund units/shares through CFCL in Malaysia. By holding such securities, CFCL clients are deemed to be aware of any law, regulation, rules and policies applicable thereto.

Restrictions on clients

Certain funds may also impose specific restrictions on investor domicile. Clients must refer to and abide by the restrictions (if any) contained in the fund prospectus before entering into transactions.

In view of Bank Negara Malaysia regulations, CFCL cannot hold cash balances for Malaysian resident ultimate beneficial owners. Therefore, CFCL clients will have to ensure that ultimate beneficial owners residing in Malaysia transfer out their own local cash accounts within three days of the credit date. 

Restrictions on cash instructions

There are additional requirements and restrictions imposed on the MYR cash instructions. When instructing a redemption transaction, where there is no change in beneficial ownership, clients must specify in the narrative field of their instructions using the following format:

<NCBO><Redemption><Amount><Fund name>

Please refer to Cash services – Malaysia for more information. It is the responsibility of the client to ensure compliance with the requirements and restrictions.

Cash Services

Cash payments - restrictions on cash instructions

Incoming funds

• Incoming MYR (other than income or corporate action proceeds resulting from securities positions held with CFCL) must always be pre-advised.

Withdrawals of funds

Withdrawals of MYR are restricted to:

• No change of beneficial owner;
• Payments linked to securities-related transactions (SSDS-eligible securities) where these securities will be held with Clearstream Fund Centre.

For withdrawals not involving a change of beneficial owner (own account transfers), customers must input the wording “NCBO-<reason>" in the narrative of the withdrawal instruction, for example, “NCBO-Asset transition”.

For withdrawals related to payments linked to securities-related transactions (SSDS-eligible securities), where these securities will be held with Clearstream Fund Centre, customers must state the reason for payment in the narrative of the instruction, for example, “Purchase of x ISIN" where “x” is the quantity and “ISIN” is the ISIN of the SSDS-eligible security.

HSBC Bank might require further documentary proof that no change of beneficial owner is applicable or that the payments relate to an underlying legally valid reason. In this event, Clearstream Fund Centre will contact the customer directly.

Clearstream Fund Centre shall bear no responsibility for any misuse of the “no change of beneficial owner” designation in contravention of Malaysian regulations. Furthermore, Clearstream Fund Centre shall bear no responsibility for any failure or delay in the execution of the payment instruction due to incorrect or missing information.

Holding restrictions of funds

Clearstream Fund Centre’s MYR account is designated as a “foreign” cash account. Cash belonging to Malaysian residents must be transferred out within three days from credit date. Customers are responsible for ensuring compliance with these restrictions and agree to indemnify and hold harmless, Clearstream Fund Centre for any loss, expense, liability, damage or claims, whether direct or indirect, against or incurred by Clearstream Banking arising out of or resulting from such non-compliance.

Foreign exchange

Foreign exchange services for MYR are available to customers as an integral part of Clearstream Fund Centre’s Automatic FX service, the case-by-case and the FX service for securities settlement instructions. In compliance with Malaysian regulatory requirements, the MYR currency on customers’ instructions can be used only to purchase Malaysian securities or to cover charges incurred in MYR. Accordingly, customers’ instructions with MYR as the Buy currency are deemed by Clearstream Fund Centre to comply with these regulatory requirements.

Customers that need to buy MYR in order to settle a securities purchase (where these securities will be held in Clearstream Banking) from a Malaysian domestic counterparty are recommended to use the FX service for securities settlement instructions. To purchase MYR on a case-by-case basis, customers should instruct Clearstream Banking’s Treasury Desk directly.

Note: Before participating in any foreign exchange services for MYR with Clearstream Fund Centre, customers are required to submit the following one-time SWIFT MT599 free-format message to the Clearstream Fund Centre Treasury Desk. (One MT599 for multiple accounts can be accepted provided that all the accounts belong to the same entity.)

"Attn: Clearstream Fund Centre Treasury Desk

Clearstream Fund Centre Account Number(s):

We, (entity name), hereby unconditionally represent and warrant that we do not and will not conduct or transact in any offshore MYR non-deliverable forwards and / or offshore MYR foreign exchange derivatives contracts, as well as any future product of financial instruments of similar substance.

We, (entity name), agree to indemnify Clearstream Fund Centre and to hold Clearstream Fund Centre harmless for any claims, fines, penalties, damages or losses, whether direct or indirect, resulting from an untrue, incomplete or inaccurate representation."

Once the message is received and recorded by the Clearstream Fund Centre Treasury Desk, the Foreign Exchange service will be activated on the given account(s).

Restrictions on settlement

There is no general restriction on settlement on Malaysian investment funds through CFCL. However, certain funds may impose specific settlement/transfer restrictions. Clients must refer to and abide by the restrictions (if any) contained in the fund prospectus before entering into transactions.

Holding restrictions – CSD Market - Malaysia

In general, the foreign ownership limits (FOL) on shareholding in Malaysian companies are as follows:

The FOL can exceptionally be exceeded, in particular for companies that mainly produce goods for export.

Foreign investors can continue to buy and hold shares exceeding the FOL. In practice, such shares are considered as “restricted shares” and rank pari passu with non-restricted shares, but do not bear any voting rights.

Note: The level of foreign ownership may be disclosed by the company/issuer from time to time. A formal source of FOL information does not exist.

Disclosure requirements

Introductory information and categories

This section provides general information about the disclosure requirements for fund securities holdings with which Clearstream Fund Centre must, according to the information available at the time of the present publication, comply with each of the domestic markets and fund markets covered by the Disclosure Requirements.

Fund securities that are held remotely are usually not disclosed by CFCL. A disclosure request received by CFCL regarding such a holding will be forwarded to the relevant client without assessing its validity and the CFCL Client shall handle the request on a voluntary basis.

Disclosure Requirements are only available for those countries where CFCL has a link to the respective domestic market or direct access to local domiciled funds that are held in Clearstream’s name on the register.

For fund securities holdings where CFCL has no such link or direct access to the register, clients must be aware that local laws might provide for mandatory disclosure. A disclosure request in this regard will be forwarded to clients without assessing its validity. Clients commit not to unreasonably withhold their consent to such a request and agree to indemnify CFCL for damages resulting directly from non-compliance with mandatory local disclosure requirements.

In most cases, the obligation to disclose is based on the domestic equivalent of a Companies Act, relevant investment funds act or anti-money laundering act and covers all security types.

In some instances, the obligation to disclose is based on stock exchange laws or regulations and only applies to listed domestic and foreign securities.

The Disclosure Requirements do not constitute legal advice and the Clients should seek independent professional advice in relation to fund securities deposited with CFCL, especially as, for those jurisdictions in which no disclosure obligation falls on CFCL, there may be separate disclosure requirements that apply directly to clients of CFCL, shareholders and beneficial owners.

Please note that CFCL is not always given comprehensive information or advised of changes affecting local disclosure requirements.

It remains the sole responsibility of the Client to ensure compliance with local disclosure requirements. If a requirement is not met, it is the Client who will be liable to any related penalty. Clients are therefore advised to seek independent legal advice on the existence and interpretation of local disclosure requirements.

In the case of a discrepancy between the general information contained in this document and the information provided by CFCL for a specific market, as applicable (irrespective of whether this information has been obtained from an agent of Clearstream Fund Centre, or, as the case may be, a foreign regulator of a branch of CFCL), the information provided by CFCL for the specific market as applicable, shall prevail.

N.B.: In all countries, if it is suspected that a disclosure obligation has been breached (for example, that a threshold of holdings under custody has been crossed without being reported), the regulators and the authorities may have the power to investigate. Moreover, in all countries, disclosure obligations might be triggered by enforceable judgements of the competent jurisdiction of the country in question.

Disclosure categories

Clearstream Fund Centre classifies disclosure scenarios according to the following market categories:

Category 1

Markets where disclosure by Clearstream Banking as a custodian of Clearstream Fund Centre to issuers, investment fund managers and/or to regulators or market authorities is mandatory under applicable law;

Category 2

Markets where disclosure by Clearstream Banking as a custodian of Clearstream Fund Centre of account holders to issuers, investment fund managers and/or foreign regulators or market authorities is a legal obligation in respect of securities in specific circumstances;

Category 3

Markets where there is no obligation for Clearstream Banking as custodian of Clearstream Fund Centre to disclose account holders to issuers, investment fund managers and/or regulators, notwithstanding any disclosure requirement falling directly on clients of Clearstream Fund Centre, shareholders and/or beneficial owners or notwithstanding disclosure necessary to obey an enforceable judgement of the country in question.

Disclosure requirements – Register Market - Malaysia

Disclosure Category: 2

Clearstream Fund Centre S.A. (“CFCL”) may be required, under Malaysian laws and regulations to disclose the identity and holdings of clients and/or ultimate beneficial owners, upon request, for holding Malaysian investment funds.

Consent

In order to comply with the local legislation, clients holding Malaysian investment funds or entering into transactions in the Malaysian market must consent and are hereby deemed to consent to the required legal disclosure. Such consent includes the appointment of the requestor (for example, the Fund Manager, Transfer Agent, Regulator) as their attorney-in-fact, under power of attorney, to collect from CFCL the required information to be disclosed. Clients who do not grant such authority to CFCL cannot hold such investment funds or financial instruments in their accounts with CFCL.

Disclosure Requirement

In general, the management companies, the trustees of the unit trust schemes and the company secretary of a fund in corporate form are reporting institutions in Malaysia who are obligated under the AMLATFA and the 2007 Regulations to perform the required client due diligence measures. This may include the reporting institution seeking additional information and documentation from CFCL on CFCL’s clients and/or ultimate beneficial owners.

Background and legal basis

CFCL is not obliged, and cannot be compelled legally, to disclose the details of its clients and beneficial owners, even upon request by the investment fund. However, investment funds are obligated to conduct client due-diligence processes according to the following:

• Companies Act 2016;
• Central Bank of Malaysia Act 2009;
• Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLATFA);

Anti-Money Laundering and Anti-Terrorism Financing (Reporting Obligations) Regulations 2007 (2007 Regulations).

Disclosure requirements – CSD Market - Malaysia

Disclosure Category: 1

According to the Securities Industry (Central Depositories) (Exemption) Order 2005 in accordance with the Securities Industry (Central Depositories) Act 1991 ( “SICDA”) and Companies Act 2016, the Government Funding Act 1983 and Loan (Local) Act 1959, the Central Bank of Malaysia Act 2009 and the Financial Services Act 2013, Clearstream Banking S.A. (“CBL”) falls under a legal obligation of disclosure in the case of holdings of Malaysian listed securities and unlisted fixed income securities eligible in the scripless securities depository system (“SSDS”) and of deposits in Malaysian Ringgit (“MYR”). 

Consent

In order to comply with the legislation as mentioned above, customers holding Malaysian listed securities or unlisted fixed income securities (SSDS-eligible) or deposits in MYR or entering into transactions in the Malaysian domestic market must consent and are hereby deemed to consent to the required legal disclosure. Such consent includes the appointment of the requestor (for example, the issuer or its agent) as their attorney-in-fact, under power of attorney, to collect from CFCL the required information to be disclosed. Customers not willing to give this consent cannot hold such securities/financial instruments nor have such deposits in their accounts with CFCL.

Disclosure requirements

Customers are advised that, under local regulations, Bursa Malaysia Depository Sdn. Bhd. (“Bursa Depository” ), the Securities Commission (“SC”), Bursa Malaysia Securities Bhd. (“Bursa Securities”), Bank Negara Malaysia (“BNM” ), the issuing company and the registrar of companies (Companies Commission of Malaysia – “CCM”), is entitled to require CFCL, through its local custodian, on request and/or on a regular basis, to disclose information or documents relating to the ultimate beneficial owners of the listed securities and/or deposits in MYR held in CFCL omnibus and/or segregated accounts maintained with its local custodian.

Background and legal basis

Listed securities

The disclosure for listed securities is mandatory under the Securities Industry (Central Depositories) (Exemption) Order 2005 issued in accordance with Section 62A of the Securities Industry (Central Depositories) Act 1991 (“SICDA”) to Bursa Depository and is applicable to all securities listed on the Malaysian Stock Exchange.

Under Section 56 of the Companies Act 2016, the registrar of companies and the company itself each have a right to request the bare trustee (the nominee whose name appears in the company’s records as the registered shareholder of such shares in trust at the absolute disposal and for the benefit of another) or the end-investor/beneficial owner to disclose the beneficial owners of the holding.

Additionally, CFCL’s appointed custodian, as the registered holder, will have to provide the requested information (the identity and holdings of customers holding applicable positions and this may be up to ultimate beneficial owner level) to the issuer/Bursa Depository upon receipt of the information provided to CFCL by its customers.

Sanctions

CFCL will not be responsible for any penalties or sanctions or associated costs that could be imposed upon CFCL’s safekeeping account with its appointed custodian due to a customer's failure to comply with one or more disclosure requirements. Such penalties, sanctions or associated costs will be automatically passed on to the failing customer. The customer undertakes to hold CFCL harmless and to indemnify CFCL from any loss, claim, liability or expense asserted against or imposed upon CFCL as a result of the customer failure, whatever the failure, to comply with these disclosure requirements.

Listed securities

When a participant fails to comply with the disclosure requirements (including, but not limited to, late disclosure) of the Securities Commission for listed securities, Bursa Depository may take one or more of the following actions as appropriate under the Securities Industry (Central Depositories) (Exemption) Order 2005 in accordance with Section 62A of the Securities Industry (Central Depositories) Act 1991 ("SICDA"):

• Prohibiting the maintenance of any Exempt Authorised Nominee (as defined in the Securities Industries (Central Depositories) (Exemption) Order 2005) securities accounts for CBL held by CBL's appointed custodian; and/or
• Prohibiting the maintenance of any Exempt Authorised Nominee (as defined in the Securities Industries (Central Depositories) (Exemption) Order 2005) securities accounts for CBL with any other custodians/local brokers; and/or
• Specifying any or all securities accounts held by CBL's appointed custodian for CBL be suspended for such period as may be specified by Bursa Depository.

In addition to the above, Subsection 25A(3) of the Securities Industry (Central Depositories) Act 1991 provides that any violation of the above is punishable by a fine of up to MYR 3 million, a jail term of up to 10 years or both.

Obligation to report threshold crossings

Shareholding of 5% and above

Section 137 of the Companies Act 2016 imposes an obligation on individuals and corporations that have an interest in 5% or more of the voting shares of a Malaysian incorporated public company (whether listed or unlisted) to disclose that interest to the relevant public company and to the CCM.

Note: "Voting shares" means, for the purposes of these disclosure requirements, an issued share to which there is attached a right to vote.

According to Section 136 of the Companies Act 2016, a substantial shareholder is defined as:

• A person who has an interest in one or more voting shares in a company and the number or the aggregate number of such shares is not less than 5% of the total number of all the voting shares included in the company; or
• Being a company the share capital of which is divided into two or more classes of the shares, if the person has an interest in one or more voting shares include in one of those classes and the number or the aggregate number of such shares is not less than 5% of the aggregate number of the total number of all the voting shares included in that class of shares.

On the occasion of a transaction that changes a shareholder's status or interest as a substantial shareholder as defined in Sections 137-139 of the Companies Act 2016, the shareholder must use the appropriate form to notify the subject company (in the original) as follows:

• In the case of a company whose shares are quoted on a stock exchange, within three days after the person becomes a substantial shareholder (notwithstanding that the person has ceased to be substantial shareholder before the expiration of the notice period), acquires or disposes of voting shares, ceases to be a substantial shareholder in the company (Form 29-A); or
• In any other case, within five days after the person becomes a substantial shareholder, acquires or disposes of voting shares, ceases to be a substantial shareholder (Form 29-A);

sending copies of the notification, in each case, to the CCM, per Section 141 of the Companies Act 2016 at the following address:

Director
Registration Services Division
Companies Commission of Malaysia
Level 19, Menara SSM@Sentral
No 7, Jalan Stesen Sentral 5
Kuala Lumpur Sentral
50623 Kuala Lumpur

While the holder continues to own 5% or more of the voting shares before entering upon a new transaction, reporting is required for each change or cessation of substantial shareholdings within the time frame described above.

Please refer to Disclosure Requirements - Malaysia for complete information on disclosure requirements on Malaysia.

Disclaimer

The information contained in the Disclosure Requirements is based on the legal opinion obtained by CBL acting as a sub-custodian for CFCL that was issued on 2 October 2023. CFCL believes the information to be correct as of that date but disclaims any responsibility as to the accuracy and completeness of the information after that date. Where there is discrepancy between the information provided by CFCL and the local laws and regulations, the latter shall prevail. The Disclosure Requirements do not constitute legal advice and clients should seek advice from independent professional counsel.

Clients are responsible for ensuring compliance with the disclosure requirements and agree to indemnify and hold harmless CFCL, for any loss, expense, liability, damage or claims, whether direct or indirect, against or incurred by CFCL arising out of or resulting from such non-compliance.