Conditions for Establishment and Operations

The applicant company :

• requires a one-time approval from Labuan FSA if it intends to invest in Malaysia, however subsequent sales and purchases of the investments do not require further approval
• which manages several funds as a group may not have subscription of more than 15 per cent in the total issued and outstanding shares of each fund
• or its affiliates or directors and subscribers who own more than 10 per cent of the issued and outstanding shares of a fund company may not buy or sell the securities of the investment fund or grant or receive loans to or from it, and 
• may carry out its activities from an office in Labuan, or from outside Labuan subject to approval from Labuan FSA. For fund managers from recognised jurisdictions to operate in Labuan, it must also register under Labuan Companies Act 1990.
• must have least MYR300,000 in any foreign currency as its paid up capital.  
• may be required by Labuan FSA to provide financial data, statistics and other information.
  

Business Ethics & Reporting Requirements

• All fund managers must conduct its business with due diligence and sound principles, maintain adequate and proper records and books of accounts as well as indicate clearly its names and license or registration number on its letterhead, stationery and other documents;
• The firm must obtain approval of Labuan FSA for any change of business plan; and

Licensing Requirements

• The parent company or holding company of the applicant must have a sound track record in fund management activities
• An applicant company should submit, where applicable, audited annual accounts for the 3 years immediately preceding the application
• The applicant must show proven performance record with consistent returns on equity and assets. It is required to show a profit within 3 years of operations after obtaining a licence.
• The directors and the Chief Executive Officer must be deemed fit and proper persons and prior written approval from Labuan FSA is required before such appointments can be made. The applicant must have or have available to him sufficient knowledge, expertise, resources and facilities for the proper management or administration of a fund
• The applicant is to submit a business plan for the first two consecutive years of operations in Labuan IBFC, this plan should include initiatives towards promoting Labuan as an international business and financial centre 
• The directors of company must provide a signed declaration on confidentiality and secrecy
• It applicant company must be managed by sufficient number of staff
• The applicant is required to submit a fund manager’s business code of conduct, and 
• There must be no adverse report from any reliable sources such as the relevant home authority on the applicant, directors and/or any members of senior management of the company.
  

Operational Requirements

• The applicant company must maintain a registered office in Labuan and all dealings by the fund must be done through the registered office in, from or through Labuan
• Transactions conducted by the applicant must be in currencies other than the Malaysian Ringgit, except as permitted by the relevant legislations and authorities
• The applicant company shall provide services to non-residents only
• The applicant company shall appoint an approved auditor
• The applicant company must notify Labuan FSA of any amendment or alteration to any of its constituent documents; and 
• The applicant company must be active in its operations, and this will be judged from the performance and number of funds managed in each year.
  

Application Requirements

All applications for setting up a fund management entity should be directed to the Director General, Labuan FSA and should include, amongst others the following:

• The application may be made by a company incorporated or registered under the Labuan Companies Act 1990;
• Written permission sought pursuant to Section 40 of Labuan Financial Services and Securities Act 2010 to conduct fund management business by completing Form 3/FM, ‘Application for a Fund Manager’s Licence/Registration’. 
• Once approved, the fund manager’s details shall be entered into the register detailed under Section 52 of the Labuan Financial Services and Securities Act 2010;
• Permission to set up shall be given in writing by Labuan FSA to a fund management company licensed or qualified in a recognised country or jurisdiction as detailed below.

List of recognised countries/jurisdiction:

• OECD countries, including European countries applying the Undertaking for Collective Investment in Transferable Securities (UCITS);
• Asian countries comprising:
  a)    Singapore
  b)    Hong Kong
  c)    Malaysia
  d)    Philippines
  e)    Brunei
  f)    Thailand
  g)    Indonesia
  h)    Taiwan
  i)    Bahrain
  
• Established Financial Centres :
  a)    Jersey
  b)    Guernsey
  c)    Isle of Man
  d)    Bermuda
  e)    Cayman Islands
  

Annual Fees

The payable annual fees are :

• For fund management companies which operate from outside Labuan: MYR10,000
• For fund management companies which operate from within Labuan: MYR5,000.

In 2010, five notifications were submitted to Labuan FSA for the establishment of private funds (2009: 1). One private fund ceased its operation during the year under review bringing the total number of registered funds to 42 (2009: 38). However, the number of public funds remained at two. Under the new legal framework effective from February 2010, further flexibility was accorded to the Labuan mutual fund industry. Private funds were only required to notify Labuan FSA on their establishment. This is to enhance the ease of doing business in Labuan IBFC and is expected to further boost the mutual fund industry.

Labuan Islamic Private Funds

Two new Islamic private funds, with a combined fund size of USD103.0 million, were established during the year under review, bringing the total number to 19. However, one Islamic private fund ceased, reducing the total fund size by 5.8% to USD3.03 billion as at 31 December 2010 (2009: USD3.22 billion).  This led to a corresponding decrease in the market share of Islamic private funds against total private funds in Labuan to 32.1% (2009: 33.6%). Generally, the Islamic private funds in Labuan are invested in Shariah-compliant real estate and properties in the region as well as in the Middle East.

WHAT TYPES OF FUNDS ARE ALLOWABLE UNDER LABUAN REGULATIONS?

The Labuan Financial Services and Securities Act 2010 (LFSSA) makes provision for two types of funds; private and public. Private funds are defined as those funds whose shares are (a) not offered to the general public, are owned by not more than 50 investors, and where the first time investment of said investors is not less than MYR250,000 or its equivalent in any foreign currency, or (b) owned by any number of investors, where the first time investment of each of the given investors is not less than MYR500,000 or equivalent in foreign currency. Any fund designated by the Prime Minister as being private also falls into this category.

WHAT FEES ARE PAYABLE BY A FUND MANAGER?

The annual licence fee payable to Labuan FSA is as follows:

• For companies that operate from outside Labuan: MYR10,000
• For companies that operate from within Labuan: MYR5,000

ARE THERE ANY OTHER STIPULATIONS?

The paid-up capital of a fund manager carrying on fund management activities in relation to a public fund shall be at least an amount equivalent to MYR300,000 in any other currency.

A fund manager who is carrying on fund management activities in relation to a private fund only is not required to be licensed under the Labuan Financial Services and Securities Act 2010.

WHAT IS THE DEFINITION OF FUND MANAGEMENT COMPANIES?

Sections 40 to 44  of the Labuan Financial Services and Securities Act 2010, contains detailed requirements and prerequisites applicable to a Labuan fund management company.

The Act defines a fund management company or manager as a person, who for valuable consideration, provides management services and/or investment advice, or administrative services in respect of securities for the purposes of investment, investment advisory services, fund manufacturing services or such other activity as may be prescribed by Labuan FSA.

WHAT ARE THE REGISTRATION REQUIREMENTS FOR FUND MANAGEMENT COMPANIES?

All applications for setting up a fund management entity should be directed to the Director General, Labuan FSA and should include, amongst others the following:

• The application may be made by a company incorporated or registered under the Labuan Companies Act 1990;
• Written permission sought pursuant to Section 40 of Labuan Financial Services and Securities Act 2010 to conduct fund management business by completing Form 3/FM, ‘Application for a Fund Manager’s Licence/Registration’. 
• Once approved, the fund manager’s details shall be entered into the register detailed under Section 52 of the Labuan Financial Services and Securities Act 2010;
• Permission to set up shall be given in writing by Labuan FSA to a fund management company licensed or qualified in a recognised country or jurisdiction as detailed below.

Please click on Guidelines under Fund Management Companies to find out more details about any other requirements including the fees.

WHO MAY PROVIDE FUND MANAGEMENT SERVICES IN LABUAN IBFC?

Any bank licensee or trust company in Labuan may do so. Licensed fund management companies from recognised jurisdictions, or any company set up by individual fund managers who are licensed by the relevant home supervisory authorities may be permitted, provided they receive written approval from Labuan FSA.

HOW MAY FUNDS BE STRUCTURED?

Funds may be structured as Labuan companies or corporations incorporated under the laws of any other recognised country or jurisdiction, partnerships, protected cell company, foundation or unit trusts.