What is a Labuan fund manager and what services can it provide?
A Labuan Fund Manager is an entity that is licensed to provide the following services: –
A) Management Services
– Acting or offering to act as portfolio manager on behalf of the clients for a portfolio of securities including funds
– Managing activities in the acquisition or disposal of a portfolio of securities including funds.
– Managing clients’ discretionary accounts including Labuan private funds.
B) Investment advice
– Conducting securities analysis and making investment recommendations based on client’s investment objectives and financial situation.
– Providing advice concerning securities including the issuance or promulgation of research report and analysis.
– Providing consultancy and advisory services relating to corporate finance and financial planning matters for corporate clients.
C) Administrative services
– Making submissions on behalf of clients to Labuan FSA in respect of securities including any other reporting requirements.
– Issuing any documents which are deemed to be a prospectus under the LFSSA/LIFSSA and the LCA.
D) Dealing in securities
– Quoting two-way prices and dealing in securities.
– Arranging for the sale or purchase of securities including that are not listed on a stock market of a stock exchange, issued by, belonging to or on behalf of clients.
– Underwriting of securities and placement out of such underwritten securities to be commensurate with the adequacy of its financial resource.
What are the eligibility criteria and application requirements for a Labuan fund manager license?
To obtain a Labuan fund manager license, the applicant need to meet the following eligibility criteria and application requirements:
– the key person of the applicant must be an individual who either
(1) holds a relevant degree or professional qualification to carry on fund management activities. Labuan FSA may also consider an applicant who is at least a diploma holder with three years of relevant experience in capital market or direct experience in fund management activities; or
(2) who is an approved fund manager under the regulations of a member of the International Organization of Securities Commission (IOSCO); or
(3) the fund management activities are run and managed by suitably qualified and experienced individuals.
– An applicant must submit an application form together with supporting documents such as business plan, financial projections, information memorandum or prospectus (if applicable), personal profile and declaration form for directors and shareholders (if applicable), certified true copies of academic qualifications and professional certificates (if applicable), certified true copies of passport or identity card for directors and shareholders (if applicable), letter of consent from home regulator (if applicable) and any other documents as required by Labuan FSA.
– Applicant is required to pay an application fee of RM5,000 (non-refundable) upon submission of application.
What are the conditions and requirements of maintaining a Labuan Fund Manager license?
A Labuan Fund Manager shall: –
– have a paid-up capital that is unaffected by losses of at least RM300,000 or its equivalent in any foreign currency throughout its operations
– maintain a registered office in Labuan to carry out business activities
– maintain the management requirements of having at least one shareholder, two directors, and three local employees (subject to the type of entity formed)
How long does it take to obtain a Labuan fund manager license and what are the governmental fees involved?
The time frame for processing an application for a Labuan fund manager license is approximately 30 to 45 working days, subject to the completeness of documents and information submitted. Typically priior to the commencement of application, client is advised to undertake a feasibility study on the application, which takes a bout 1 week to complete.
The governmental application fee for a Labuan fund manager license is RM5,000.00 (non-refundable) payable upon submission of application.
The annual license fee for a Labuan fund manager license is RM5,000.00 payable on or before 15 January of each year. If the Labuan fund manager operates a marketing office in Malaysia, an additional annual fee of RM7,500.00 is payable.
How can a licensed Labuan fund manager set up and manage different types of funds in Labuan IBFC?
A licensed Labuan fund manager can set up and manage different types of funds in Labuan IBFC, such as:
1. Private funds
– There is no approval needed for a Labuan fund manager to launch a private mutual fund with minimum investment sum of RM250,000.00 per unit, the fund manager is only required to serve notification on the creation of the fund
– If the investment sum per unit is RM250,000 – RM500,000.00, then maximum number of investors is 50;
– If the investment sum per unit is above RM500,000.00, then there is no limit on the number of investors
2. Public funds
– These are mutual funds whose securities are offered for subscription to any members of the public with no minimum investment sum required.
– A public fund needs to obtain approval from Labuan FSA before carrying on its business.
– The application shall be accompanied with a prospectus and should be lodged through a Labuan licensed entity.
3. Islamic funds
– These are mutual funds that operate in compliance with Shariah principles.
– They can be structured as private funds or public funds depending on their offering criteria.
– The fund needs a Shariah adviser who is registered with Labuan FSA to advise on all aspects of their operations
What are the operational and regulatory requirements for a licensed Labuan fund manager?
Some of the operational and regulatory requirements for a licensed Labuan fund manager are:
– Maintain a paid-up capital unimpaired by losses of at least RM300,000 or its equivalent in any foreign currency throughout its operations. Where the Labuan fund manager has assets under management (AUM) of more than RM150 million, it must maintain additional capital equivalent to 0.2% of the AUM in excess of RM150 million
– Maintain a professional indemnity insurance policy with a minimum coverage of RM1 million or its equivalent in any foreign currency throughout its operations
– Maintain proper accounting and other records for at least six years after completion of transactions
– Appoint an approved auditor to audit its accounts annually and submit them to Labuan FSA within six months after the end of each financial year
– Comply with relevant laws and regulations in Labuan IBFC and other jurisdictions where it operates or offers its services, such as anti-money laundering and counter-terrorism financing obligations, tax obligations, reporting obligations
– Comply with market conduct principles such as integrity and fair dealing, skills, care and diligence, acting in client’s interest, complaints’ policy and management, proper compliance function etc.
What are the tax implications and incentives for a licensed Labuan fund manager and its clients?
Some of the tax implications and incentives for a licensed Labuan fund manager and its clients are:
– A licensed Labuan fund manager is subject to a net profit corporate tax of 3% as per audited account. There will be no tax on the loss incurred, but auditing of the financial account is still required
– Dividends received from a Labuan fund manager are tax-exempt
– Interest received from a Labuan fund manager is subject to withholding tax at 15% unless reduced by a double taxation agreement (DTA)
– Capital gains derived from a Labuan fund manager are not subject to income tax
– A Labuan fund manager can enjoy various tax incentives under the Labuan Business Activity Tax Act 1990 (LBATA), such as stamp duty exemption on instruments relating to its operations, import duty exemption on raw materials and components used in its operations, sales tax exemption on goods manufactured or produced by it, etc.
– A Labuan fund manager can also benefit from Malaysia’s extensive network of DTAs with over 70 countries that provide relief from double taxation on income derived from cross-border activities
How can a licensed Labuan fund manager comply with anti-money laundering and counter-terrorism financing obligations?
A licensed Labuan fund manager can comply with anti-money laundering and counter-terrorism financing obligations by:
– Establishing and implementing an effective AML/CFT compliance programme that includes policies, procedures, systems and controls to prevent, detect and report any suspicious transactions or activities
– Conducting institutional risk assessment (IRA) to identify, assess and understand its ML/TF risks in relation to its customers, countries or geographical areas, products, services, transactions or delivery channels and other relevant risk factors
– Conducting customer due diligence (CDD) measures on its customers and beneficial owners before establishing a business relationship or conducting any transaction. This includes verifying their identity and source of funds, understanding their business nature and purpose, obtaining information on their risk profile and applying enhanced due diligence (EDD) measures for higher-risk customers
– Implementing ongoing monitoring of its business relationship with its customers to ensure that their transactions are consistent with their risk profile and updated information. This also includes reviewing the adequacy of CDD information at appropriate times
– Maintaining proper records of all transactions and CDD information for at least six years after completion of transactions or termination of business relationship
– Reporting promptly any suspicious transactions or activities to the Financial Intelligence Unit (FIU) of Bank Negara Malaysia using the Suspicious Transaction Report (STR) form
– Appointing a compliance officer who is responsible for overseeing the implementation of AML/CFT compliance programme and ensuring effective communication with FIU and Labuan FSA
– Providing regular training and awareness programmes for its directors, officers and employees on AML/CFT matters such as legal obligations, red flags indicators, reporting procedures etc.
– Conducting an independent audit on its AML/CFT compliance programme at least once every three years or more frequently depending on its ML/TF risk exposure
What are the dispute resolution mechanisms available for a licensed Labuan fund manager and its clients?
Some of the dispute resolution mechanisms available for a licensed Labuan fund manager and its clients are:
– Having a complaints’ policy and management system to handle any grievances or disputes from its clients in an effective and timely manner
– Referring any unresolved disputes to Labuan FSA for mediation or arbitration under the Labuan Financial Services Authority Act 1996 (LFSAA) or the Labuan Islamic Financial Services and Securities Act 2010 (LIFSSA)
– Seeking recourse to other alternative dispute resolution (ADR) mechanisms such as the Financial Mediation Bureau (FMB), the Kuala Lumpur Regional Centre for Arbitration (KLRCA) or any other recognised ADR bodies
– Pursuing legal action through the courts of law in Malaysia or any other jurisdiction where applicable
Does your law firm provide any services related to Labuan Fund manager license?
Yes, we do. We can assist you with the application process, compliance requirements, tax planning and other legal matters related to Labuan Fund manager license. Please contact us for further information and consultation.