The SC revamps the regime for offering of wholesale funds to sophisticated investors in Malaysia

MEMBER FIRM OF BAKER & MCKENZIE INTERNATIONAL Financial Services and Regulation Kuala Lumpur Client Alert July 2015 The SC Revamps the Regime for Offering of Wholesale Funds to Sophisticated Investors in Malaysia As part of ongoing efforts to enhance efficiencies and promote greater competition in the capital market, the Securities Commission ("SC") revamped the offering of unlisted capital market products through the introduction of the Guidelines on Unlisted Capital Market Products under the Lodge and Launch Framework ("New Guidelines"). The introduction of the lodge and launch framework ("LOLA Framework"), through the New Guidelines, aims to promote process efficiency, shorten time to market and provide certainty of product offering through online submission of information and documents required by the SC, prior to the launching of the product. The New Guidelines set out the requirements that must be observed for the purposes of making available unlisted capital market products (e.g. wholesale funds) to sophisticated investors in Malaysia. With the introduction of the New Guidelines, the SC repealed, amongst others, the Guidelines on Wholesale Funds. With effect from 15 June 2015, fund managers will no longer be required to seek the prior authorisation of, or recognition by, the SC for the offering of wholesale funds to sophisticated investors. Instead, a new online system has been put in place for fund managers to lodge the required information and documents with the SC. A wholesale fund can therefore be offered to sophisticated investors in Malaysia as soon as the required documents are lodged online, and as long as the fund is launched within 30 business days from the date the documents are lodged. This is a step forward for Malaysia - the time to market for wholesale funds is significantly reduced from the previous approval timeframe of 14 - 21 days from the date a full and complete set of information and documents are provided to the SC. Although the New Guidelines were issued in March 2015 and initially slated to come into effect on 1 June 2015, the effective date was pushed back to 15 June 2015 as a result of discussions with industry participants and the need for corresponding changes to the Capital Markets and Services Act 2007 ("CMSA") and other guidelines. The CMSA expressly recognises that the prior authorisation of, or recognition by, the SC is not required if the securities are offered in compliance with the LOLA Framework. The requirement to lodge a disclosure document however remains applicable. The Capital Markets and Services (Fees) Regulations 2012 was also amended to prescribe the fees payable in connection with lodgments made pursuant to the LOLA Framework. Consequential changes were also made to the Guidelines for the Offering, Marketing and Distribution of Foreign Funds. Financial Services and Regulation The proportionality of regulation embraced by the SC through its recognition of the maturity of the Malaysian capital market under the New Guidelines is a welcome improvement. The SC recognises that sophisticated investors are well-placed to understand and assess the risks associated with the investment in a wholesale fund - such investors have access to financial advisors or are otherwise equipped with specialist knowledge and experience. The liberalisation of the wholesale product regulatory approval process would enhance the product offerings in Malaysia, and crucially, develop the fund management industry in Malaysia. ©2015 Wong & Partners. All rights reserved. Wong & Partners is a member firm of Baker & McKenzie International, a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a "partner" means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an "office" means an office of any such law firm. www.wongpartners.com For further information please contact: Brian Chia +603 2298 7999 brian.chia@wongpartners.com Sue Wan Wong +603 2298 7884 suewan.wong@wongpartners.com Level 21, The Gardens South Tower, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur