Labuan Securities Licensee
Print ready version

The Guidelines on the establishment of Labuan Securities Licensee including Islamic Securities Licensee issued by the Labuan Financial Services Authority (“FSA”) took effect on 1 January 2014.

Labuan securities licensee refers to a person who for valuable consideration provides investment advice or administrative services in respect of securities for purpose of investment and dealing in securities. For a Labuan Islamic securities licensee, its operations shall comply with Shariah principles.

The Labuan fund manager is differentiated with Labuan securities licensee, through the provision of management services, which is its principal activity. In addition, Labuan securities licensee is not allowed to hold clients’ monies or assets.

A. Permitted Activities under Labuan Securities Licensee

The permitted activities of a licensed Labuan securities licensee may include

  1. Investment advices
    • 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.
    • Conducting analysis and making recommendations relating to investment based on client’s investment objectives and financial situation.

  2. 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 Labuan Financial Services Authority Act 1996 (LFSAA) / Labuan Islamic Financial Services and Securities Act 2010 (LIFSSA) and the Labuan Companies Act 1990 (LCA).

  3. 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 or a stock exchange, issued by, belonging to or on behalf of clients.
    • Other activity permitted under section 2 of LFSSA or LIFSSA.

  4. Any other activity which may be permitted by Labuan FSA from time to time.
B. Eligibility

The eligible applicant to carry on business as a Labuan securities licensee in Labuan IBFC includes:

  1. An individual who holds a relevant degree or professional qualification to carry on activities of a securities licensee. Labuan FSA may also consider an applicant with at least minimum qualification of diploma holder and 3 years’ relevant experience in capital market or direct experience in the permitted activities of a securities licensee as specified under item A (Permitted Activities) of this document; or
  2. A licensed/approved individual who undertakes such services as specified under item A (Permitted Activities), from relevant regulatory and supervisory Authority or a jurisdiction who is a member of the International Organization of Securities Commission (IOSCO).
  3. A person who does not fulfill the above item B(1) and B(2) may also be considered, provided that the securities licensee business is run and managed by suitably qualified and experienced individuals.

Labuan FSA would also consider the below additional factors in assessing the application for Labuan securities licensee:-

  • 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
  • The soundness and feasibility of the business plans of the applicant for the future conduct and development of the business.
  • The business will be operated responsibly by adequate human resources with the competence and experience suitable to undertake such services as stipulated under item A (Permitted Activities) of this document.
  • The nature and sufficiency of the financial resources of the applicant as a source of continuing financial support for the business.
  • For Islamic securities licensee, the aims and operation of the business which is desired to be carried on will not involve any element which is contrary to Shariah principles.

Upon receiving approval from Labuan FSA, the applicant is required to establish a Labuan company incorporated or registered under the LCA. An application for Islamic securities licensee is required to undertake full-fledged Islamic securities licensee business.

C. Operational Requirements
  1. Maintain a minimum paid-up capital unimpaired by losses of RM150,000 equivalent in any foreign currency throughout its operation. In addition, based on the securities licensee’s risk management assessment, additional capital may need to be injected to commensurate its risk profile as well as the nature and complexity of its business.
  2. Maintain a professional indemnity insurance policy with coverage of not less than RM1,000,000 or its equivalent in any foreign currency throughout its operations.
  3. Maintain a registered office in Labuan and ensure that the business must be carried on in, from or through Labuan. For Labuan securities licensee that plans to establish a marketing office at Kuala Lumpur and/or Iskandar Malaysia, the Guidelines for Establishment of Marketing Office in Kuala Lumpur and Johor Bahru issued by Labuan FSA should be observed.
  4. Ensure that the applicant for the Labuan securities licensee, the director(s) and principal officer including any other relevant person; meet the requirement of the Guidelines on Fit and Proper Person issued by Labuan FSA.
  5. Establish an adequate internal policies and procedures for its operations, compliances, internal controls, corporate governance and risk management including the business continuity plan. These have to be regularly reviewed to ensure that they remain appropriate, relevant and prudent.
  6. Conduct its business in any foreign currency other than Ringgit Malaysia unless permitted under Section 7(4) of LCA.
  7. Conduct its business with due diligence and sound principles, maintain adequate and proper records and books of accounts in Labuan in line with the Directive on Accounts and Record-keeping Requirement for Labuan Entities issued by Labuan FSA and indicate clearly its name and license or registration number on its letterhead, stationery and other documents.
  8. Appoint an approved auditor to carry out an annual audit of its accounts in respect of the business operations pursuant to section 174 of LFSSA and section 135 of LIFSSA.
  9. Appointment of qualified person* to its internal Shariah advisory board for Islamic Securities Licensee is required to ensure that its management and operation are in compliance with Shariah principles. In this regard, the Directive on Islamic financial business in Labuan IBFC shall also be observed.
    * Includes a corporation having in its employment at least one individual that possesses the necessary qualifications and expertise in Islamic commercial law and Islamic jurisprudence in line with section 2 of LIFSSA
  10. Obtain prior approval from Labuan FSA for any appointment of director(s) and change of shareholder(s).
  11. Notify Labuan FSA in writing for the following:
    • Any amendment or alteration to any of its constituent documents within thirty (30) days of the changes being affected including its business plan.
    • For Islamic securities licensee, notification is required within thirty (30) days from the appointment of its internal Shariah advisory board.
  12. Comply with relevant laws and regulations of the jurisdiction where it intends to operate in including obtaining the necessary approval.
  13. Comply with the relevant guidelines, directive, prudential and reporting requirements issued by Labuan FSA from time to time.

D. Market Conduct and Practices

The Labuan securities licensee shall adhere with the following requirements to promote market integrity and investors’ confidence:-

  1. Integrity and fair dealing
    • Conduct its business with integrity and fair dealing to avoid misleading and deceptive acts or representation.
    • Conduct its business in a manner that promotes a fair and orderly market.
    • Avoid any conflict of interest arising or, where a conflict arises, should ensure just treatment to all their clients by disclosure, internal rules on confidentiality or other accepted practices as deem fit.

  2. Skills, care and diligence
    • Conduct its business with due care, skill and diligence.
    • Act competently and diligently in regard to all transactions between themselves and their clients.
    • Demonstrate that the advice provided, or exercise of discretion, are appropriate for the clients.

  3. Acting in client’s interest
    • Act in the best interest of its clients and must not jeopardise or prejudice clients’ interests.
    • Provide relevant information to its clients in a manner that is fair, accurate and timely.

  4. Complaints Management
    • Have procedures in place, to deal with clients’ complaints effectively and fairly through a simple and equitable process. These procedures should be well disclosed and easily accessible.
    • Details of the complaints, responses and any action taken must be recorded and maintained by Labuan securities licensee

  5. Compliance
    • Establish proper compliance function pursuant to the Labuan FSA’s Guidelines on Compliance Function for Labuan Licensed Entities dated 6 November 2013 to ensure its business complies with the relevant directive, guidelines and reporting requirements issued by Labuan FSA from time to time.
    • Ensure compliance with the Anti-Money Laundering and Anti-Terrorism Financing Act 2001 and Guidelines on Anti-Money Laundering and Counter Financing of Terrorism which is relevant to Labuan IBFC dated 4 January 2007.
    • Ensure proper policies and procedures are in place to ensure a sound compliance framework which safeguards clients’ interests.
    • Take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management and supervisory system.


E. Reporting requirement

The Labuan securities licensee is required to submit to Labuan FSA the following:

  1. A copy of its audited financial statements to the Supervision and Enforcement Department (sed@labuanfsa.gov.my) within six (6) months after the closure of each financial year, either in hardcopy or digital format; and
  2. Other statistics and information as Labuan FSA may require from time to time.


F. Application for Labuan securities licensee
  1. Submit a duly completed application form (Form LSCM) and all the relevant supporting documents as stipulated in the Form LSCM.
  2. Provide the following documents:-
    • a business plan covering inter-alia:
      • Business intentions / objectives for establishment of business in Labuan
      • Types of services to be provided
      • Target market, industry / sector
      • Minimum 3 years revenue projections
      • Minimum 3 years expected profit and loss
      • Manpower – proposed organization chart of the Labuan company
      • Group equity structure including percentage of shareholding
    • Business Code of Conduct and Policies & Procedures system that covers all the requirements to ensure compliances with Anti-Money Laundering and Anti-Terrorism Financing Act 2001
    • Supporting documents for individual directors:
      • Certified true copy of NRIC (Malaysian) or passport (non-Malaysian)
      • Certified true copy of relevant academic and professional certificates
      • Two (2) referral letters from institutions and/or professional bodies (not applicable for appointment within the group of companies)
    • Supporting documents for shareholders:
      • Individual -
        • Certified true copy of NRIC (Malaysian) or passport (non-Malaysian)
        • Comprehensive Resume
        • Certified true copy of relevant academic and professional certificates
        • Two (2) referral letters from institutions and / or professional bodies
        • Net worth statement by qualified accountant or certified true copy of bank statements indicating the latest amount of funds available
      • Corporate -
        • Certified true copy of Certificate of Incorporation and Certificate of Name Change (if applicable)
        • Certified true copy of Memorandum & Articles of Association
        • Certified true copy of three (3) years audited financial statements / Annual Report
        • Certified true copy of board resolution or minutes of general meeting which approved the setting up of the Labuan company
  3. Demonstrate the existence of both adequate financial resources and insurance coverage as specified under item C(1) and C(2) of this document.
  4. Subject to the merit of each application, the applicant may be required to provide additional information to Labuan FSA for the purpose of processing the application.

G. Licensing Fees

License processing fee (once-off) RM1,000
Annual license fee RM5,000

The annual license fee is payable when the license is approved by Labuan FSA and remains valid until 31 December of the year of approval. Subsequent annual license fee is payable on or before 15 January of each calendar year


H. Favourable Labuan Tax Structure
  • Tax on Labuan trading activities (including income derived from activities of a licensed Labuan securities licensee) upon election annually :-
    • 3% of net profits as per audited accounts; OR
    • RM20,000/-

  • Withholding tax exemption on payments made to non-residents

  • No stamp duty on all instruments relating to offshore business activities including share transfer

  • No foreign exchange controls

  • No capital gain tax / inheritance tax

  • Double Tax Agreements between Malaysia and over 70 countries

  • 50% tax abatement for expatriate professionals and managers employed under Labuan companies

  • 100% exemption for director’s fees received by non-citizen directors of Labuan companies


Click Here To Contact Us For Further Discussion

The information in this document is not advice of any kind but general information only and should not be relied on as legal advice. Kensington Trust Group recommends seeking professional advice on legal or tax issues affecting you before relying on it. While Kensington Trust Group tries to ensure that the content of this document is accurate, adequate or complete, it does not represent or warrant, express or implied, its accuracy, correctness, completeness or use of any of the information. Kensington Trust Group does not assume legal liability for any loss suffered as a result of or in relation to the use of this document. To the extent permitted by law, Kensington Trust Group excludes any liability for negligence, for any loss, including indirect or consequential damages arising from or in relation to the use of this document.