The fund and asset management sector is legislated primarily under the new Labuan Financial Services and Securities Act 2010 (LFSSA) which allows for the structuring of mutual funds as companies, partnerships or unit trusts, a protected cell company, or a foundation.
A mutual fund is a company, partnership, protected cell company, foundation or unit trust which engages in the following activities:-
- Collection and pooling of funds for the purpose of collective investment
- Issuing interest which entitles the owners to redeem their investments within a specified period that is agreed upon the parties, and receive an amount corresponding to the owner's proportionate interest in the assets of the fund.
The rules relating to the establishment and the administration of mutual funds in Labuan are set ot under LFSSA and for the purpose of the LFSSA, mutual funds are classified into two types of funds: private and public.
Private funds are defined as those funds whose shares are:-
- not offered to the general public, are owned by not more than 50 investors, and where the first time investment of said investors is not less than MYR250,000 or its equivalent in any foreign currency, or
- owned by any number of investors, where the first time investment of each of the investors is not less than MYR500,000 or equivalent in foreign currency. Any funds designated by the Prime Minister as being private also falls into this category. Funds managers and fund administrators who carry out these functions relating to a private fund only do not require to be licensed.
Public funds are those whose shares are offered for subscription to the general public. The Minister of Finance in Malaysia also has the discretion to designate a funds as a public fund. A public fund usually offers its shares for sale or subscription to the general public by means of a prospectus or any other means.
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