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Act 2013
A Brief Overview of Malaysias Financial Services Act 2013
Introduction
The new regulatory and supervisory framework of Malaysia introduced by the Financial
Services Act 2013 (FSA) came into force on 30 June 2013, consolidating and
repealing:
This Act aims to provide the regulator with greater powers to counter future risks to
financial stability in the financial sector, increase consumer protection and promote
competition in the broader financial services sector, and is a step towards global trends
in financial regulations.
The early 1980s marked the inception of global convergence towards tighter capital
requirements, followed by supervisory standards, payment system standards, antimoney laundering and counter terrorist financing standards, accounting standards, and
recently Basel III on liquidity management standards.
In Malaysia, this was marked by the enactment of the Banking and Financial Institutions
Act (BAFIA) in 1989 which repealed the Banking Act 1973 and Finance Companies
Act 1969, to provide for integrated supervision of the Malaysian financial system, and
further enhance and modernize while streamlining the laws relating to banking and
other institutions. Prior to BAFIA, the legislative basis for supervision of Banks, Finance
Companies and Merchant Banks was legally separate. The BAFIA gave the regulator
authority to supervise all financial institutions, including those supervised on an
administrative basis under a single supervisory and regulatory regime.
Today, with this new Act, the Malaysian regulatory and supervisory framework enters a
new stage of its development. The FSA ensures the laws that govern the conduct and
supervision of financial institutions in Malaysia continue to be relevant and effective to
the financial service eco-system, while streamlining the regulation of financial
institutions (persons who are licensed under the FSA to carry on banking business,
insurance business or investment banking business).
The FSA seeks to streamline the regulation of financial institutions (excluding those
regulated by the Securities Commission under the Capital Markets and Services Act),
and in step with financial regulation worldwide, introduces measures designed to
promote financial stability in the financial sector.
1. Licensing
There has been no major change to the licensing regime and the requirement for a
person undertaking a banking business or an insurance business to obtain a licence.
These businesses continue to fall within the oversight of the Minister of Finance (MOF
) and Bank Negara Malaysia (BNM). The MOF remains the issuing authority for
licences to carry on a banking business, an insurance business and an investment
banking business.
Businesses such as financial advisory, money-broking and insurance broking will only
need to obtain an approval from BNM instead of the Minister before commencing with
their business operations, and others like adjusting businesses need only to register by
way of fulfilling certain requirements, submission of relevant documents and the
circulation of a notice to BNM.
Leasing and factoring businesses, as well as businesses granting hire - purchase
facilities, would no longer be subject to the supervision of BNM. However, the MOF
may on the recommendation of BNM specify an entity carrying on such business as a
prescribed financial institution (and hence subject to the FSA ) if its business activities
could pose a risk to financial stability. The FSA prescribes the general criteria that BNM
must consider in making any such decision.
Every authorized person is required to maintain at all times a minimum capital of funds
or a surplus of assets over liabilities during the course of carrying on its authorized
business. Failure to comply would constitute an offence, which upon conviction will be
liable to imprisonment for a term not exceeding eight (8) years or to a fine not exceeding
twenty-five million ringgit (MYR25,000,000) or to both imprisonment and fine.
These changes proposed in the FSA scale back the level of regulation undertaken by
BNM, while still retaining the flexibility to regulate any particular financial activity where
such activity poses a threat to systemic stability.
Example:
Under the FSA, only persons carrying on an insurance business will be required to be
licensed by the Minister. A licence granted under the IA shall be deemed to be a licence
granted under the FSA2 . The distinction between life business and general business in
the IA is preserved in the FSA.
The carrying on of an insurance broking business or financial advisory business now
requires the approval of BNM (previously a licensed business under the IA). A licence
granted to a person by BNM under the IA to carry on an insurance broking or financial
advisory business shall be deemed to be an approval granted under the FSA4 . An
adjusting business on the other hand would be a registered business under the FSA,
and is not a licensed business. An adjuster licensed by BNM under the IA to carry on an
adjusting business shall be deemed to be a registered person under the FSA5 .
Schedule 5 to the FSA sets out the factors in which the Minister and BNM would
consider in assessing the application for licence or approval sought under the FSA.
Schedule 3 to the FSA sets out in detail what will be considered interest in shares
under the FSA. Such an interest would include both direct and effective interests. The
concept of interest in shares under the FSA applies to banks as well. Prior to the coming
into force of the FSA, different definitions of interest in shares applied to insurance
companies and banks. The present restrictions under the FSA applying the concept of
interest in shares include:
Acquisition of interests:
(a) the BNMs prior written approval is required for a person to enter into an agreement
or arrangement to acquire any interest in shares of an insurance company which
agreement or arrangement would result in such person holding (together with any
interest in shares of that insurance company which are already held) an aggregate of
5% or more in the shares of the insurance company;
(b) the prior written approval of the Minister, on recommendation of BNM, is required for
a person to enter into an agreement or arrangement to acquire any interest in shares of
an insurance company which would result in such person holding an aggregate of more
than 50% of the interest in shares of the insurance company;
(c) any person who has obtained an approval of BNM or Minister for such acquisition
under paragraphs (a) and (b) above will require the prior written approval of BNM to
enter into any subsequent agreement or arrangement which would result in his holding
an aggregate interest in shares of an insurance company, or exceeding:
(i) any multiple of 5%; or
(ii) the percentage holding for a mandatory offer under the Malaysian Code on TakeOvers and Mergers prescribed under section 217 of the Capital Markets and Services
Act 2007; and
(d) a prior written approval of the Minister, on the recommendation of BNM, is required
for a person to have control over an insurance company. This restriction however is not
extended to: (i) a director or chief executive officer of an insurance company in respect
of the carrying out of the management duties and functions; and (ii) a person who has
obtained a prior written approval of the Minister to hold more than 50% of interest in
shares of the insurance company.
Disposition of interest.
The prior written approval of the Minister (on the recommendation of BNM) is required
for a person who has either more than 50% or 50% or less but has control over the
insurance company to enter into an agreement or arrangement to dispose his interest in
shares which would result in his holding an aggregate of interests in shares of less than
50% or ceasing to have control over the insurance company .
Maximum permissible holdings for individuals Under the FSA, an individual is only
allowed to hold up to 10% interest in shares of an insurance company.
The foreign equity participation in insurance companies was increased to a maximum
limit of 70% pursuant to liberalisation measures announced in 2009.
BNM has indicated that a higher foreign equity limit beyond 70% for insurance
companies will be considered on a case by-case basis for players who can facilitate
consolidation and rationalisation of the insurance industry.
3. Financial Holding Company
The FSA empowers the financial regulator, namely the Central Bank of Malaysia,
also commonly known as Bank Negara Malaysia (BNM), to exercise oversight over
financial groups by introducing the concept of a Financial Holding Company (FHC).
An FHC is defined as a company which holds an aggregate of more than 50 percent
interest in shares in a licensed entity, or holds an aggregate of less than 50
percent of shares but has control in a licensed entity. Further, the FHC must be
an entity that is approved by BNM to be an FHC.
take place. Amongst its vast powers, BNM has the power to remove directors, CEOs
and senior officers, reduce the share capital of institutions, appoint a receiver and
manager, and assume control of an institution in certain circumstances.
Where criminal offences are concerned, the FSA provides that imprisonment is only
available for individuals and for strict liability offences. Previously, imprisonment was
imposed for offences committed by individuals at senior management levels and
above. Now, this restriction is no longer applicable as it extended to anyone who
forms part of the decision making process. An offence committed by an institution is
considered to be committed by its directors, officers and anyone concerned with the
planning, coordinating, directing or decision making of the institution.
In Summary:
The new FSA and IFSA require financial holding companies (FHC) to submit an
application to BNM to be approved as a FHC. Key elements of the Act(s):
Why regulate?
Strengthen effective risk governance over the activities of financial groups to prevent
undue risks to the safety and soundness of financial institutions
Who should apply?
Any company which holds an aggregate interest in shares of:
50% or less in the licensed person but has control over the licensed person, if
BNM considers it necessary
A company may propose another company within its corporate group to be approved as
a FHC if it can be shown that the proposed company is in a position to have control over
the licensed person and its proposed financial group.
BNM may require:
Any other company within the corporate group of the applicant to be approved as
a FHC if it is of the opinion that neither the applicant nor the proposed company
should be approved as a FHC
More than one company within a corporate group of the applicant to be approved
as a FHC
BNM may:
i. Prohibit a FHC to carry on any business other than the business of holding
investments directly or indirectly in corporations which are primarily engaged in
financial services or in other services in connection with such financial services
ii. Specify standards on prudential matters to the FHC and its subsidiary, if it is of
the opinion that the activities of such FHC and its subsidiary may pose risks to
the licensed person or its financial group
iii. Issue a written direction to a FHC, subsidiary or its chief executive officer to
cease or refrain from committing an act or pursuing a course of conduct or to do
any act, in relation to its business, affairs or property
iv. Remove a director or the chief executive officer of a FHC if it is of the opinion that
he/she no longer fulfils the fit and proper requirements as specified by BNM
Consequences for non-compliance
Removal of a director or the chief executive officer of a FHC who has failed to comply
with a direction of BNM or an enforceable undertaking accepted by BNM or, by action or
negligence, has contributed to the breach or contravention of any provisions of the
Act(s)
A FHC, subsidiary or its director or chief executive officer who fails to comply with a
BNM issued direction commits an offence and shall, on conviction, be liable to:
Or both
The concept of financial groups is introduced in Part VII of the FSA and Part VIII of the
IFSA. BNM is empowered to exercise oversight over financial groups for the purposes
of promoting the safety and soundness of a licensed person.
One of the key features of these Parts is that any company which seeks the Ministers
approval to hold an aggregate interest in shares of more than 50% in a licensed person
is required to apply to BNM to be approved as a financial holding company.
A financial holding company is prohibited from carrying on any business other than that
of holding investments in corporations which are primarily engaged in financial services
or other services in connection with, or for the purpose of, such financial services. A
financial holding company is subject to the same prudential requirements as those
imposed on a licensed person. It is worth noting that BNM may require more than one
company within a corporate group to be approved as a financial holding company.
Guidelines issued by BNM are incorporated into law to require FIs to ensure
that their internal policies and procedures reflect BNMs standard on
prudential requirements.
Actions can be taken by BNM against both corporations and individuals that
fail to comply with the provisions of the Act and also take civil action on behalf
of any corporations and individuals. ( Individual = may also include senior
management or anyone who forms part of the decision making process.)
In a situation where it is of the opinion of BNM that the financial stability of the financial
institution is at risk, BNM is empowered under the FSA to assume control over the
whole or part of the business, affairs or property of the financial institution, to manage it
or appoint any person to manage it on the behalf of BNM.
BNM can, pursuant to the FSA designate a bridge institution (body corporate
established or acquired by the Bank, and designated as a bridge institution under
subsection 176 (1)) to be vested with the business, assets and liabilities of a licensed
person, if the licensed person is deemed to be in breach or contravention of any
provision of FSA, or the assets of the licensed person are not sufficient to give adequate
protection to its depositors, policy owners, participants, users or creditors, as the case
may be.
Under the Act, a bridge institution will be allowed to operate and would not have to
comply with being licensed under the FSA, in addition to also being sheltered against
any legal proceedings, enforcement of any judgment, or an award or legal order. The
Act also authorizes BNM to provide financial assistance to the bridge institution.
The Act enhances the duties of directors and places a more stringent
requirement on transparency on the part of directors of licensed persons and
the holding companies. Under section 58, directors are required to disclose to
the board of directors, the nature and extent of any direct or indirect interest in
a material transaction or material arrangement with the institution. Following
such disclosure, the interested director will have to recuse himself from the
board meeting. A number of these requirements were previously catered for
under BNM Guidelines on Corporate Governance for Licensed Institutions,
the FSA codifies these requirements, which means any breaches may attract
statutory penalties where applicable.
iii.
This would align Malaysian insurers with their counterparts in various developed
countries, and will have the effect of facilitating mergers-and-acquisitions (resulting in a
further consolidation) amongst insurers. Failure to comply would constitute an offence
which upon conviction will be liable to imprisonment for a term not exceeding eight (8)
years or to a fine not exceeding twenty-five million ringgit (MYR25,000,000) or to both
imprisonment and fine.
7. Payment Systems
Generally, there are no substantive changes to the regulation of the operational aspects
of carrying on of a payment system business and the business of issuing payment
instruments. Numerous provisions of the Payment Systems Act 2003 have been
retained and carried over into the FSA. By way of example, the FSA continues to
require that an operator of a payment system or approved issuer of a designated
payment instrument must establish rules, procedures and requirements delineating the
rights, liabilities or other obligations of the operator and the participants, and also put in
place measures to ensure the safety, security and operational reliability of the payment
system or payment instrument. Thus, there would not be a need to overhaul the existing
infrastructure and systems utilized by an operator of a payment system or issuer of a
payment instrument.
However, streamlining of the licensing and approval procedures for all participants in the
financial sector under the FSA have a consequential effect on businesses that intend to
operate a payment system or issue designated payment instruments ("Operators").
Under the FSA, the criteria by which any applicant for a licence from the MOF (i.e.
banks and insurers) or an applicant for an approval from BNM (i.e. an Operator) would
be assessed are the same. An applicant will need to, amongst others, provide sound
and feasible plans for the conduct of the business, evidence of financial resources and
justify how its participation would be in the best interest of Malaysia.
The FSA has also extended the application of prudential requirements to the Operators.
Prudential requirements have hitherto generally applied only to financial institutions. The
approval of BNM must now be sought for the appointment, election, re-appointment and
re -election of the chairman, directors, chief executive officer and auditors of the
Operators. Financial statements of the Operators will also have to be published and
therefore made generally available to the public.
These changes acknowledge that Operators play a crucial role and can have an impact
on the stability of the financial sector. Accordingly, the FSA gives power to BNM to
assume control over the whole or part of the business, affairs or property of the
Operators, manage it and/or appoint any person to do so on behalf of BNM, in a
situation where it considers that the financial stability of the Operator is at risk (which
would consequentially detrimentally affect the participants, users, creditors of the
Operator or the general public). As with financial institutions, BNM can alternatively
choose to designate a bridge institution to be vested with the business, assets and
liabilities of the distressed Operator. The bridge institution will then be granted reprieve
from compliance with certain provisions of the FSA pending the regularization of the
business of the Operator.
There are no substantive changes to the regulation relating to operational aspects of
carrying on of payment systems business and that of issuing payment instruments. A
number of provisions of the Payment Systems Act 2003 have been retained and carried
over to the FSA.
The FSA streamlines the regulation and supervision of licensed and approved persons,
thus the criteria by which any application to carrying on payment systems business
would be assessed in the same way as an application to carry on licensed business. An
applicant would be assessed upon the factors listed in Schedule 5, among other things:
The character and integrity of the applicant or, if the applicant is a body corporate, its
reputation for being operated in a manner that is consistent with the standards of good
governance and integrity etc.
8. Exchange Control
Over the course of the last decade, the exchange control regime in Malaysia has been
gradually liberalised. The FSA takes a further step in this direction by further simplifying
the regime.
BNM is empowered to safeguard the balance of payments position and the value of the
currency of Malaysia. No person shall undertake or engage in any transaction set out in
Schedule 14, unless he has obtain a written approval from BNM, this will include any
proposed transaction falling within borrowing or lending of Ringgit Malaysia between
non-residents, retaining or using the Ringgit Malaysia by a non-resident, giving or
obtaining any guarantee in respect of any debt or liability, importing into or exporting
from Malaysia of the Ringgit Malaysia, foreign currency, gold or other precious metals.
In granting any approval, BNM has the discretion to impose any requirement, restriction
or condition.
BNM is empowered to safeguard the balance of payments position and the value of the
currency ofMALAYSIA . No person shall undertake or engage in any transaction set out in
Schedule 14, unless he has obtain a written approval from BNM, this will include any proposed
transaction falling within borrowing or lending of RinggitMALAYSIA between non-residents,
retaining or using the Ringgit Malaysia by a non-resident, giving or obtaining any guarantee in
respect of any debt or liability, importing into or exporting from Malaysia of the Ringgit Malaysia,
foreign currency, gold or other precious metals. In granting any approval, BNM has the
discretion to impose any requirement, restriction or condition.
Conclusion
The FSA (together with the changes under the Islamic Financial Services Act) will bring
far -reaching changes to the regulatory regime for financial institutions. These changes
are ineluctably the most significant to have been introduced in the last 20 years.
Increased prudential regulation is the central thrust of the FSA, providing for powers of
BNM that in many instances go beyond even those of other regulators of more mature
financial markets. At the same time, some of the provisions of the FSA are intended to
reduce the costs of compliance, by deregulating leasing and factoring businesses, for
example, and providing for a more flexible scheme of regulation.
The breadth and depth of the changes under the FSA certainly achieve the stated aims
of BNM to strengthen the legal framework for the financial sector, to enhance BNMs
capacity to manage risks from financial intermediation activities that occur outside the
banking system and to provide enhanced powers for timely intervention actions. A
challenge that it faces is to convince market participants that the new regime will not
result in undue costs of compliance.
The introduction of under section 33 and 34 of IFSA, on the other hand, enables the
Central Bank to continuously be updated by the institution of its Shariah Committee
members. In order to maintain its aim of ensuring that only those who really qualifies
entitled to be the members, the provision set out the clause relating to the cessation of
the members including situations which would disqualifies from becoming Shariah
committee members.
By setting out a more precise rules and features of the Shariah committee members,
the IFSA 2013 under section 35 has made it compulsory for management in charge of
the company to provide information to the Shariah committee in exercising its task and
duties. While the Act did not mention the type and degree of information required, it can
be assumed that the Shariah Committee is authorised to obtain regardless of any kind,
if such information would assist them in carrying out their duties.
In addition, section 36 marks the trust which has been given by the legislation over the
Shariah Committee to hold any type of information including the confidential ones
provided such information is not being relayed to the other persons. While maintaining
the duty of confidentiality, the Shariah committees are also vested with the protection
under the qualified privilege which prevents them from being taken a legal action by the
Islamic financial institution, if it can be proven that such duties was conducted in good
faith.
The provision clauses as to the Shariah governance is one of the major features being
introduced under the IFSA 2013 which contributes to the boost of authorities as well as
roles of the Shariah Committee, thus ensuring the activities of the Islamic financial
institution to be under Shariah compliance thus maintaining a sound and robust Shariah
governance framework in Islamic financial industry in Malaysia.
Compare to the provision under section 46 of the Islamic Banking Act 1983 which only
set penalties on directors and managers of an Islamic bank who fails to take all
reasonable steps to secure compliance with the requirements of this act as well as
section 50 which provides a fine not exceeding fifty thousand ringgit, this is a clear cut
display of the regulators intention in addressing the matter in a more serious manner. In
the other words, the new Act highlights the duty of institution to ensure stricter Shariah
compliance and imposed a more severe punishment under the law for the financial
institutions who infringes it.
Additionally, introduction on power of the Central Bank to specify standards on Shariah
matters is being made available under section 29 of the IFSA 2013 which states that,
Islamic financial institution is required to comply with Shariah standards issued by the
Central Bank in accordance with the advice of the Shariah Advisory Council. The
requirement to abide by the standards issued by the Central Bank is also imposed on
the directors of the financial institutions, the chief executive officer, senior officers
and members of the Shariah Committee of the financial institutions. Again, the same
penalty clause as the above is enforced for failure to comply with any standards
specified, which shall be liable for imprisonment for a term not exceeding eight years or
to a fine not exceeding twenty-five million ringgit or both.
Shariah compliance and Shariah governance provisions under the Shariah Advisory
Council is among the latest features being made available under the IFSA 2013 which
empower the authorities of Shariah Advisory Council itself as well as posing a more
diverse practicality over the main aspects in Islamic financial institution while
maintaining the status as the highest supervision power over the Islamic financial
institutions in Malaysia.
Apart from the principal objective of the IFSA discussed above, the IFSA also aims to
promote compliance with Shariah principles. To achieve this, it entrenches BNMs role
as Shariah regulator, imposes stringent requirements on Shariah governance
mechanisms and caters to the specificities of Islamic financial products and operations
which are based upon various types of Shariah contracts.
Shariah governance and compliance. The IFSA intends to strengthen the foundations
for end-to-end Shariah governance and compliance, support the effective application of
Islamic contracts in the offering of Islamic financial products and services, from entering
into a contract to the resolution of a failed Islamic financial institution, and align legal
and regulatory principles with Shariah precepts and promote greater legal and
operational certainty.
The main distinction between the FSA and the IFSA lies in the IFSAs extensive
requirements on Shariah governance and ensuring Shariah compliance. The IFSA
statutorily enforces management of Shariah non-compliance risk and requires Islamic
financial institutions to ensure that their aims, operations, business, affairs and activities
are in compliance with Shariah principles at all times. Specifically, the IFSA: (i)
entrenches the role of BNM as Shariah regulator; (ii) embeds Shariah principles and
BNM Shariah Advisory Council (SAC) rulings; (iii) strengthens Shariah governance and
compliance requirements; (iv) makes it an offence for IFIs to carry on Shariah noncompliant activities and imposes heavy penalties in relation to Shariah compliance
matters; and (v) gives BNM wide powers to assess, intervene, direct and penalise IFIs
in relation to offences and breach of IFSA provisions.
Tutorial 7
1. Weekly Report.
2. Discuss the impact of FSA on the following:
i.
Acquisition and Disposal of Interest
ii.
Financial Holding Company
3. Discuss the impact of FSA on the following:
i.
Extension of BNM powers
ii.
Directors Duty of Disclosure
4. Discuss the impact of IFSA on Islamic banking industry.
Article 1:
Ong said BNM may institute civil proceedings if there is non-compliance with the
provisions of the Act, provisions of any regulations issued under the Act, directions
issued by BNM under the Act and standards, condition, restriction, specification,
requirement or code issued under the Act.
"BNM may impose administrative order, for example administrative monetary penalty,
order to do certain act and order to mitigate the effect of breach. Any failure to comply
with BNM's administrative orders may also result in the institution of civil actions to
enforce the orders.
Besides, the prosecution may commence criminal proceedings when the Act is
contravened. The criminal penalties that follow for breach of each offence differ and are
stipulated clearly within the Act.
"For example, an authorised business must be carried out by an authorised person
under Section 8 of the FSA. If this is not adhered, a person may be liable to
imprisonment or fine. Penalties for each offence are expressly stipulated in the FSA."
By way of comparison, criminal penalties have also been set out for some of the
offences under Bafia. For other offences, penalties are governed under the General
Penalty clause.
The General Penalty clause does not exist in the FSA.
"The FSA is an important piece of legislation as it promotes greater level of stability,
accountability, governance and transparency amongst the financial institutions in
Malaysia," Ong said.
He said guidelines and preemptive measures themselves may not be sufficient to
achieve the objectives of the Act because it is not binding in the Courts of Malaysia.
An interesting feature of the FSA, is its recognition of "financial groups" and "financial
holding company" for the purposes of regulation and supervision. Under the FSA, BNM
is empowered to exercise oversight over financial groups for promoting the safety of any
member of the group who is an authorised person licensed to carry on banking,
insurance or investment banking business.
A financial group would be required to propose a member of its corporate group to be
the "financial holding company" and this is subject to the approval of BNM. BNM may
require more than one company in the corporate group to be a financial holding
company.
Extensive powers are also given to BNM to issue directions to the financial holding
company, its subsidiaries and officers to cease or refrain from committing an act or
pursue a course of conduct in relation to its business, affairs or property.
Article 2
By Azli Jamil
KUALA LUMPUR: The Financial Services Act 2013 (FSA) and Islamic Financial Services Act
2013 (IFSA) finally came into force effective yesterday, more than seven months after
Parliament approved the Acts in December 2012.
The FSA and IFSA amalgamate several separate laws to govern the financial sector under a
single legislative framework for the conventional and Islamic financial sectors respectively,
namely, the Banking and Financial Institutions Act 1989, Islamic Banking Act 1983, Insurance
Act 1996, Takaful Act 1984, Payment Systems Act 2003 and Exchange Control Act 1953 which
are repealed on the same date, said Bank Negara Malaysia (BNM) in a statement issued
yesterday.
The new laws will place Malaysias financial sector, encompassing the banking system, the
insurance/takaful sector, the financial markets and payment systems and other financial
intermediaries, on a platform for advancing as a sound, responsible and progressive financial
system, said BNM.
According to the statement, one of the key features of the new legislation is greater clarity and
transparency in the implementation and administration of the law due to clearly defined
regulatory objectives and accountability of BNM in pursuing its principle objective of
safeguarding financial stability, transparent triggers for the exercise of BNMs powers and
functions under the law, and transparent assessment criteria for authorising institutions to carry
on regulated financial business and for shareholder suitability.
The IFSA gives a clear focus on Syariah compliance and governance in the Islamic financial
sector where it provides a comprehensive legal framework that is fully consistent with Syariah in
all aspects of regulation and supervision, from licensing to the windingup of an institution.
A key feature mentioned is strengthened business conduct and consumer protection
requirements to promote consumer confidence in the use of financial services and products.
Paul P Subramaniam who is the Knowledge Management & Training Partner at Zaid Ibrahim &
Co in a report published in April that FSA also specifies prohibited business conduct (Schedule 7
of the FSA) where contravention may result in imprisonment not exceeding five years and/or a
fine of no more than RM10mil or both.
The report said institutions are expressly prohibited from exerting undue influence and pressure
on consumers to make debt repayments and to accept unsolicited offers for financial products
and services.
Subramaniam said the FSA also prohibited exerting undue pressure, influence or using or
threatening to use harassment, coercion, or physical force in relation to the provision of or
payment for financial services or products; and exerting undue pressure on, or coercing financial
consumers to acquire financial services or products as a condition for acquiring another financial
service or product.
Early this year The Malaysian Reserve broke a story on how insurance/takaful companies keep
disregarding BNM guidelines on Immediate Measure to Ensure Wider Access to Motor Cover
and Prohibition on Force-Selling issued on May 2011 which prohibits insurance companies and
takaful operators to force the sale of personal accident and/or other non-motor products to their
customers.
In a response then, BNM emphasised that it engaged with these insurers/ takaful operators to
ensure full compliance with the guidelines.