Malaysia to slash timeframe for retail fund approvals

Malaysia’s securities regulator plans to roll-out a simplified and faster approval process for retail products in order to significantly reduce the time needed to launch in the market.

The move would be an extension of the “lodge and launch” framework the regulator introduced for professional investors’ products last month.

It comes amid a spate of financial reforms in Malaysia, with the regulator last week authorising the creation of boutique fund houses for the first time.

The Securities Commission Malaysia (SC) last month introduced a new approval process for wholesale funds, structured products, bonds, sukuk and asset-backed securities aimed at professional investors.

The new framework aims to shorten time to market by allowing products to be launched once the required information is lodged with the SC through an online submission. Potentially a product could be launched within one day, if all requirements are met, compared to the current official approval timeframe of 14-21 days.

While the programme presently applies only to products aimed at professional investors, the SC is looking at extending this to retail funds by the end of the year, said Chan Ai Mei, chief marketing officer at Affin Hwang Asset Management.

Chan said the lodge and launch programme was introduced in response to the industry’s desire to expedite the approval process for investment products. Although the current approval timeframe is officially within a month, in reality this can turn into months or even a year in order to satisfy the requirements of the regulator.

“With the lodge and launch programme, asset managers are being empowered to put controls in place to protect investors,” said Chan. The SC has said that with this liberalisation, “it will increase its focus on conduct regulation and product surveillance to ensure that the players involved discharge their due diligence and disclosure obligations.”

This programme is one of the recent initiatives launched by the regulator in an attempt to enhance the competitiveness of Malaysia’s asset management industry.

In fact, the regulator is conducting a survey to gain more insights on the industry, asking market players about all aspect of the business, including revenue and costs. The SC will be meeting with industry players in the coming weeks. Chan viewed these moves as preparing the industry for fiercer competition in light of new trends such as the expansion of cross-border fund distribution.

Just this month, the SC issued rules allowing the establishment of boutique fund management companies through a more facilitative structure.

Fund managers with paid-up capital of RM500,000 ($131,500) can now obtain a licence to operate as a boutique fund house. The required capital for a fully fledged fund management licence is RM2 million.

Boutique fund management companies can manage assets worth up to RM750 million with a clientele of not more than 50 sophisticated investors.

“In line with SC’s regulatory philosophy that advocates proportionality of regulation, licensing requirements are tiered according to the size and scale of business and clientele,” the SC said in a statement.

Affin Hwang’s Chan said this new regulation provided options to investors but would not compete with fully fledged fund managers.

“We don’t see this as a threat. It is difficult to disrupt the market share of the big players who have the infrastructure to compete for market share,” she said.

Malaysia's total AUM as of May 2015 stood at RM662 billion, up from RM377 billion in 2010. The fund management industry is the fastest-growing segment in the capital market, registering a compound annual growth rate of more than 10 per cent over the last five years, according to the SC.