Money broking is defined as the business of arranging transactions between buyers and sellers in money with brokers acting as an intermediary in consideration of brokerage fees paid or to be paid, but does not include the buying or selling of foreign currencies by the broker as a principal in such markets.
Companies with money broking business may only transact business in foreign currency and not deal in Malaysian Ringgit except for the purpose of defraying administrative and statutory expenses. Labuan money brokers are prohibited from dealing with residents other than authorised dealers under the Exchange Control Act 1953.
The submission should include, but is not restricted to, the following:
Maintain a paid-up capital unimpaired by losses of at least RM500,000 or its equivalent in any foreign currency. Labuan FSRP may also exercise its discretion to require additional capital to commensurate with the business operations of the Labuan money brokers, taking into account the risk profile as well as nature, scale, complexity and diversity of their business activities.
Maintain an operational office in Labuan. The operational office should be used for business purposes only and must be appropriately furnished with office equipment.
Ensure that the persons in controls, directors and principal officer meet the fit and proper person requirements as specified in the Guidelines on Fit and Proper Requirements issued by Labuan FSRP. It is expected that the employees employed to transact in the money broking business are competent and possess sound knowledge of the services offered.
Ensure that the counterparties, i.e. principal broker and liquidity provider are regulated by a recognised supervisory or regulatory authority.
Labuan money broking business is intended to serve the institutional investors and high-net worth individuals. In this regard, the Labuan money broker is expected to impose a maximum leverage limit of 100:1 on its clients’ trading transactions that would translate to a minimum of 1% margin deposit to enable the opening of a trade position. For illustration purpose, assuming that the transacted volume is USD100,000, the minimum margin requirement will be equivalent to USD1,000.
For Labuan money broker’s business model/customer interface which is exclusively or substantially electronic, proper management of technology risk must be in place:
data/system security and arrangements for IT systems maintenance, resilience and support must be supported by a dedicated IT staff;
notify Labuan FSRP as soon as possible, upon discovery of any incident of system malfunction and intrusion; and
a root cause and impact analysis report must be submitted to Supervision and Monitoring Department within 14 days or such longer period as the Authority may allow, from the discovery of the incident. The report shall contain:
an executive summary of the relevant incident;
an analysis of the root cause and the description of the impact of the relevant incident to the money broking business; and
a description of the remedial measures taken to address the root cause and consequences of the relevant incident.
For Labuan money broker that undertakes Islamic money broking business, is required to appoint a qualified person to its internal Shariah advisory board to ensure that its management and operation are in compliance with Shariah principles. In this regard, the Directive on Islamic Financial Business in Labuan FSRP shall also be observed.
The LCA requires a Labuan company to employ the services of a trust company to act as its incorporation agent. The services offered by a trust company include, but are not limited to, the following:
Provides the registered office and resident secretary.
Performs the secretarial duties of the Labuan company including lodgement of any documents required under the LCA.
Makes available any of its trust officers for appointment as resident director and resident secretary.
Labuan Financial Services Regulatory Provider. All Rights Reserved.