Labuan, Malaysia (Fund Management)

GENERAL INFORMATION

A Labuan Fund Management License holder is authorized to:

• Provide Fund Management Services: Manage investment funds and portfolios for clients.

• Offer Investment Advice: Provide recommendations and strategies regarding securities and investments.

• Administer Funds: Perform administrative duties such as regulatory filings and document preparation.

• Dealing in Securities: Engage in buying, selling, and underwriting of securities, including foreign securities.

• Establish Investment Funds: Create and manage mutual funds, private equity funds, and other types of investment vehicles.

• Operate Islamic Fund Management: Conduct fund management activities in compliance with Shariah principles (if applicable).

PRIOR EXPERIENCE REQUIREMENTS

Applicants must submit detailed information on the following:

• Experience: Directors: A minimum of three years of relevant experience in capital markets or fund management. Specific roles and responsibilities in portfolio management, securities dealing, or investment advice. Shareholders: While not mandatory for shareholders, those with an active role in management or significant ownership should provide details of their experience in fund management or related sectors.

• Track Record: Proven success in managing funds, including any previous fund management activities and outcomes.Demonstrated capability in handling diverse investment portfolios or securities, with a focus on compliance and risk management.

• Commitment:Evidence of long-term dedication to the fund management industry, such as continuous professional development or leadership roles in relevant organizations. A commitment to adhere to regulatory standards and ethical practices in all fund management activities.

REPORTING OBLIGATIONS

A Labuan fund manager must appoint an approved auditor to conduct an annual audit of its accounts. The audited financial statements must be submitted to the Labuan Financial Services Authority (Labuan FSA) within six (6) months after the end of each financial year. Additional statistics and information may be required by Labuan FSA from time to tim

REGULATORY MEETINGS

During the application process, Labuan Financial Services Authority (LFSA) will require company representatives to attend an in-person interview in Labuan (either face-to-face or via a zoom call). Prior to this meeting:

• We will provide detailed guidelines to help you prepare for LFSA’s questions.

• A local representative from our firm will accompany you to the interview.

LOCAL STAFF REQUIREMENTS

• The principal officer and key personnel involved in fund management must meet the fit and proper criteria set by Labuan FSA.

• The company must maintain a registered office in Labuan and ensure that its business is conducted from or through Labuan.

• If the fund manager plans to set up a marketing office in Kuala Lumpur or Iskandar Malaysia, it must comply with the Guidelines for Establishment of Marketing Office.

APPLICATION FOR FUND MANAGEMENT LICENSE

• Incorporation & Licensing Timeline:

  • The application process includes submitting Form LSCM, a business plan, supporting documents, and proof of financial resources.

  • The timeline depends on the completeness of the submission and Labuan FSA’s assessment.

• Minimum Paid-Up Capital:

  • RM300,000 (or equivalent in foreign currency) must be maintained throughout operations.

  • If the Assets Under Management (AUM) exceed RM150 million, an additional capital of 0.2% of AUM above RM150 million is required.

COMPANY STRUCTURE

• Shareholders:

  • The company must have at least one shareholder, which can be an individual or a corporate entity.

  • Any changes in ownership and shareholding require Labuan FSA's prior approval.

• Directors:

  • At least two (2) directors are required.

  • Directors must meet fit and proper criteria as per Labuan FSA’s guidelines.

  • Any new appointment of directors must be approved by Labuan FSA.

OFFICE

• The company must have a registered office in Labuan.

• The business must be conducted in, from, or through Labuan.

• If a marketing office is to be set up in Kuala Lumpur or Iskandar Malaysia, prior approval from Labuan FSA is required.

CONFIDENTIALITY

• Fund managers must adhere to strict confidentiality policies to protect client information.

• The Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) guidelines must be followed.

• Any conflict of interest must be disclosed and handled in a transparent manner.

OTHER REGULATORY REQUIREMENTS

• Secretary/Resident Agent:

  • A Labuan Trust Company must be appointed as the resident secretary or agent.

• Registered Office:

  • A registered office in Labuan is required for all fund managers.

• Key Staff:

  • The fund management team must have qualified and experienced professionals.

  • For Islamic fund management, a Shariah Advisory Board must be appointed.

BANK ACCOUNT OPENING

• The fund manager must open a corporate bank account with a licensed bank in Labuan or any offshore bank that meets regulatory requirements.

• Labuan FSA may require proof of adequate financial resources before approving the license.

TAXATION AND EXPENDITURE

• Labuan fund managers are subject to Labuan tax laws, which include:

  • 3% tax on net audited profits if electing to be taxed under the Labuan Business Activity Tax Act 1990 (LBATA).

  • Alternatively, fund managers may opt for a flat tax rate of RM20,000.

  • If no election is made, the company will be taxed under Malaysia’s Income Tax Act 1967 (24% tax rate).

• Expenses include license fees (RM5,000 annually), audit fees, office expenses, and regulatory compliance costs.