Operational Requirements

Private Funds

Labuan Private Funds are governed by Section 28 to 30 of the Labuan Financial Services and Securities Act 2010, which provides that a private fund can carry on its affairs by giving notice in writing of its scope and nature of business to Labuan FSA.

This notification can be an information memorandum or such other offering document and should be lodged through a licensed entity. This document will be considered to be a prospectus and the regulator will enter the particulars into a register.

A private fund can be structured as Labuan company, a corporation incorporated under the laws of a recognised country or jurisdiction, a partnership, a protected cell company or a unit trust.  In addition, private funds are not required to also be licensed as a fund manager either in Labuan or any other jurisdiction and need not adhere to a minimum capital requirement.

Annual Fees
A one off lodgement Fee	MYR 2000

Public Funds

The applicant fund:

• Must appoint a fund manager, trustee, administrator and custodian who are approved by Labuan FSA
• Must maintain a registered office in Labuan. For a Labuan fund permitted to be managed by a fund manager from a recognised country or jurisdiction, at least one of the fund-related  businesses, such as custodian, trustee or fund administration, must be based in Labuan
• Which has been granted provisional acceptance is not allowed to accept subscription monies or make investments until granted registration. It is only allowed to use it’s provisional acceptance for promotional or marketing purposes
• Must transact in currencies other than the Malaysian Ringgit, except as permitted by the relevant legislations and authorities
• May be a multiclass fund, e.g. there may be various currencies and classes of assets present within a fund 
• Shall appoint an approved auditor
• Must notify Labuan FSA of any amendments or alteration to any of its constituent documents
• Must conduct its business with due diligence and sound principles, maintain adequate and proper records and accounts, while complying with local laws and regulations in the jurisdiction it services clients
• Must indicate clearly its name and licence number on its letterhead, stationery and other documents
• Must comply with the requirements with regard to its accounts and auditing
• Must obtain the approval of Labuan FSA for any changes in its business plan.

The applicant is also required to submit to Labuan FSA the following:

• A statement setting out the scope and nature of the business to be carried out in, from or within Labuan
• The instrument by which the applicant is constituted or such other proof required by the regulator that the applicant is lawfully constituted according to the Act or under the laws of any other recognized country or jurisdiction
• Names, addresses and relevant experience of the directors/general partners/trustees of the fund. 
• The person in control or director or chief executive officer of the applicant fund must be a fit and proper person, and the appointment of the Board of Directors and chief executive officer requires prior approval from Labuan FSA.
• A signed declaration by the directors/general partners of the applicant fund with regards to confidentiality and secrecy.
• A copy of the draft prospectus which should comply with requirements under Labuan Financial Services and Securities Act 2010, and shall contain at least the following information:
  a)    A general description of the proposed fund
  b)    The investment policies and objectives observed by the fund
  c)    The prospect for the fund, given its nature, investment policies and objectives, and   where applicable, an analysis of the risk by its nature and the risk of the country and region where the fund intends to invest
  d)    The proposed minimum subscription proceeds net of costs (e.g. underwriting fees related to the offer)
  e)    The names of all underwriters and amount proposed to be underwritten by each underwriter
  f)    The distribution policy of the fund
  g)    Details of taxes to be levied on income and/or capital of the fund and any taxes to be deducted from distributions to shareholders
  h)    A statement summarising the rights of investors.
• A key data page  giving a summary of the key features of the particular fund, which shall include at least the following information:
  a)    Issue price of the shares
  b)    Nature and significant expenses to be incurred by the fund
  c)    Statement of the potential risks of investing in the fund
  d)    Information on the securities to be offered by the fund
  e)    The extent to which it intends to invest in derivatives and unlisted securities, should the fund not invest in such investments, the prospectus must include an appropriate statement to that effect.
  f)    Information on the managers and custodian of the fund and their key personnel, full details of the experience of the managers and custodian, the terms of appointment and termination. The information shall also include particulars of:
  g)    Any shares held by them in the fund
  h)    Any borrowings given by them to the fund
  i)    Any other obligations of the fund to them.
  j)    All other information affecting the fund's business.

Annual Fees
Yearly Fee	MYR 2000

Please click here for Protected Cell Company structure.

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 Mutual Funds 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.