Malaysia has long positioned itself as a strategic gateway for international investors seeking access to Southeast Asia’s growing capital markets. The marketing of foreign funds in Malaysia, however, is subject to a rigorous regulatory framework that balances investor protection with the need for capital market development. This framework is primarily governed by the Capital Markets and Services Act 2007 (“CMSA”), which establishes licensing, product registration, and disclosure obligations for entities promoting or distributing foreign funds within the country.
This article provides an overview of the key legal requirements applicable to the marketing of foreign funds in Malaysia, focusing on licensing obligations, product registration, and prospectus-related compliance under the CMSA.
Licensing requirements under the CMSA
Pursuant to section 58(1) of the CMSA, no person shall, whether as a principal or agent, carry on a business in any regulated activity or hold himself out as carrying on such business unless such person is a holder of a Capital Markets and Service Licence (“CMSL”) for the relevant regulated activity or is a registered person (e.g. licensed banks and financial institutions).
Among the regulated activities specified in Schedule 2 of the CMSA are dealing in securities and fund management. These are defined as follows:
| “Dealing in securities” means, whether as principal or agent: (a) acquiring, disposing of, subscribing for, or underwriting securities; or (b) making or offering to make with any person, or inducing or attempting to induce any person to enter into or to offer to enter into: (i) any agreement for or with a view to acquiring, disposing of, subscribing for or underwriting securities; or (ii) any agreement, other than a derivative, the purpose or avowed purpose of which is to secure a profit to any of the parties from the yield of securities or by reference to fluctuations in the value of securities. |
| “Fund management” means undertaking on behalf of any other person the management of: (a) a portfolio of securities or derivatives or a combination of both, by a portfolio fund manager, whether on a discretionary authority or otherwise; or (b) an asset or a class of asset in a unit trust scheme by an asset fund manager. |
Crucially, section 58(1) also captures “holding out” as a trigger for licensing. Although the term is not expressly defined in the CMSA, both the Securities Commission Malaysia (“SC”) and Malaysian courts may interpret it broadly to include marketing activities such as advertising, direct marketing, or soliciting investment interest—even if such activities are conducted from offshore but received by persons in Malaysia. These may include telephone calls, email communications, online marketing, and physical meetings within Malaysian jurisdiction.
As such, foreign fund managers seeking to market investment products to Malaysian investors must assess whether their marketing activities trigger any licensing restrictions under the CMSA, or whether the activities fall within any applicable exceptions or exemptions, which must be reviewed carefully on a case-by-case basis.
Product registration requirements
In addition to licensing requirements, foreign funds marketed in Malaysia may also be subject to product registration requirements under section 212(5) of the CMSA.
This section provides that any person intending to make available, offer for subscription or purchase, or issue an invitation to subscribe for or purchase unlisted capital market products1 including unlisted Islamic securities but excluding units in a unit trust scheme, shall:
- seek authorisation of the SC or in the case of a foreign securities or capital market product, recognition by the SC; and
- register with the SC, a disclosure document containing prescribed information and particulars.
Accordingly, the marketing or promotion of a foreign fund—depending on its structure and investor targeting—may trigger the product registration requirements under the CMSA, unless a specific exemption applies.
Prospectus requirements
Further, section 232 of the CMSA governs prospectus requirements for offerings of securities in Malaysia. Under this provision, a person shall not issue, offer for subscription or purchase, make an invitation to subscribe for or purchase or in the case of an initial listing of securities, make an application for the quotation of the securities on a stock market of a stock exchange, unless a prospectus in relation to the securities has been registered by the SC and the prospectus complies with the requirements of the CMSA.
In instances where a foreign fund offer is exempted from the prospectus requirement, the offering document used in Malaysia will be deemed as an information memorandum. In such cases, the document must be lodged with the SC within seven (7) days of its issuance in Malaysia. This is not an approval but merely a deposit of documents with the SC.
Conclusion
The marketing of foreign funds in Malaysia must be approached with careful consideration of the licensing, product recognition, and disclosure rules under the CMSA. Regulatory focus is placed not only on the conduct of regulated activities but also on the way these activities are “held out” to Malaysian investors, meaning that even preliminary or indirect marketing efforts may fall within the SC’s jurisdiction.
Foreign fund managers seeking to access the Malaysian market should undertake a detailed legal review of their proposed marketing and distribution strategies, ensure compliance with all applicable requirements, and where appropriate, seek clarification or approval from the relevant authorities. Tailored structuring solutions may be available to facilitate lawful market access while mitigating regulatory risk.
The information provided here is for information purposes only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.
- Under the CMSA, “capital market products” is defined as “(a) securities; (b) derivatives; (c) a private retirement scheme; (d) a unit trust scheme; (e) any product or arrangement which is based on securities or derivatives, or any combination thereof and (f) any other product which the Finance Minister may prescribe as a capital market product”. ↩︎
