In its efforts to further liberalise the fund management industry, the Securities Commission Malaysia (SC) announced that the regulations for setting up boutique fund management companies will be relaxed.

In its July 8 press release, the SC said parties with niche fund management expertise can now be licensed as boutique fund management companies. They would only require a paid-up capital of RM500,000, compared with RM2 million required for a full-fledged fund management licence.

Prior to this, there was no licence category available for boutique companies. Under the new licence, boutique fund management companies are allowed to manage assets of up to RM750 million, with a clientele of not more than 50 sophisticated investors.

In a recent technical briefing for the media, the SC explained that the relaxation of these rules is aimed at encouraging entrepreneurship in the industry from both local and foreign parties. In its press release, the SC also announced that the restricted dealing licences has now been broadened to include the offering of securities and over-the-counter bonds via online platforms, “giving investors wider access to the capital market through innovative business models driven by technology”.

Prior to this, the licence was restricted to the dealing of unit trust products. With this new ruling, online platform providers, for example, will be able to offer equities and retail bonds. Nevertheless, they will still be required to work with licensed intermediaries to execute clients’ orders.

In addition, the range of permissible activities for fund management companies will be broadened to provide investment advice to clients. With this, they will now be allowed to provide non-incidental investment advice to existing clients without the need for a separate investment advice licence. Previously, they were only allowed to provide investment advice services if it was incidental to the fund management activity. Under this new ruling, existing clients can ask fund managers for investment advice alone, without the latter having to execute it.

Marketing activities by licence holders will also be liberalised. Marketing, sales and client servicing activities by fund management companies can now be undertaken by representatives registered with the SC, in addition to the licensed representatives.

As at May, the total assets under management in Malaysia stood at RM662 billion, compared with 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% over the last five years.

This article first appeared in Personal Wealth, The Edge Malaysia Weekly, on July 13 - 19, 2015.