GUIDELINES FOR FUTURES BROKERS AND FUTURES BROKER S REPRESENTATIVES UNDER THE FUTURES INDUSTRY ACT 1993

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1 GUIDELINES FOR FUTURES BROKERS AND FUTURES BROKER S REPRESENTATIVES UNDER THE FUTURES INDUSTRY ACT 1993 Revised Date 28 October 2004

2 1.0 INTRODUCTION 1.1 The Futures Industry Act 1993 (FIA) provides that the Securities Commission is responsible for the licensing and regulation of Futures Brokers. These Guidelines have been formulated with the objective of setting out pre-licensing requirements to facilitate applications for a Futures Broker s licence under Section 16 of the FIA and a Futures Broker s Representative s licence under Section 18 of the FIA. These Guidelines also set out various continuous requirement and conditions to be complied with by Futures Brokers and Futures Broker s Representatives. 1.2 An applicant shall also fulfill any additional requirements under any legislation, regulations or guidelines applicable to it or in respect of its activities. 2.0 DEFINITIONS For the purposes of these Guidelines: Futures Broker or Futures Broking Company means a company licensed under Section 16 of the FIA to carry out futures broking activities; Exchange means Bursa Malaysia Derivatives Berhad; Securities Laws has the same meaning as assigned to that expression in the Securities Commission Act FUTURES BROKER S LICENCE REQUIREMENTS 3.1 Minimum financial requirement The applicant shall fulfill the minimum financial requirement required under the Futures Industry Regulations 1995 and the Rules of the Exchange. 3.2 Shareholding composition A Futures Broker is encouraged to maintain a shareholding composition that is in accordance with the economic policy of Malaysia.

3 3.3 Approval in Principle from the Exchange The applicant shall obtain an approval in principle from the Exchange to be a Trading Participant. 3.4 Readiness Report from the Exchange The applicant shall obtain a readiness report from the Exchange, which covers its risk management system, financial credibility, management appraisal and capital adequacy. 3.5 Compliance Officer A Futures Broker is required to have a Compliance Officer to ensure compliance with the relevant laws, regulations, rules and guidelines. 3.6 Compliance Department A Futures Broker is required to set up a compliance department within the company. 3.7 Board of Directors Composition A Futures Broker is encouraged to maintain a Board of Directors composition that is in accordance with the economic policy of Malaysia. 3.8 Futures Broker s Representatives Composition A Futures Broker is encouraged to maintain a futures broker s representative composition that is in accordance with the economic policy of Malaysia. 3.9 Employee composition A Futures Broker is encouraged to maintain an employee composition that is in accordance with the economic policy of Malaysia Licensed Person The following categories of persons in a Futures Broker need to be licensed as a Futures Broker s Representative: Executive Directors; and

4 Any person who is in the employment of, or acting for or by arrangement with, a Futures Broker and performs for that Futures Broker any of the functions of a Futures Broker, other than work ordinarily performed by accountants, clerks or cashiers Appointment of Futures Broker s Representative An application for a Futures Broker s licence shall be submitted together with at least one (1) application for a Futures Broker s Representative s licence Local Participants Local Participants are not required to be licensed but shall be registered with the Securities Commission Dual licences Dealer s Representatives who are licensed under the Securities Industry Act 1983 are also allowed to hold a Futures Broker s Representative s licence under the FIA. However, unless otherwise permitted by the Securities Commission, a Dealer s Representative will only be considered for a dual licence if: The Dealer with which the Dealer s Representative is attached with has merged with at least one other entity pursuant to the stockbroking consolidation policy and is licensed as a Futures Broker; or The sponsoring futures broking company is: (i) A subsidiary of the holding company of the Dealer; or (ii) A separately incorporated company held by the individual shareholders of the Dealer. A Dealer s Representative who is granted a Futures Broker s Representative s licence is allowed to trade in futures contracts, including advising customers on futures contracts and to accept and execute orders for customers on futures contracts Locally Incorporated The applicant shall be locally incorporated.

5 3.15 Fit and Proper Criteria The applicant shall be a fit and proper person. 4.0 FUTURES BROKER S LICENCE - PROCEDURES FOR APPLICATION OF LICENCE 4.1 Form 1- Application for Futures Broker s Licence An applicant is required to file a duly completed Form 1 Application for Futures Broker s Licence with the following documents attached: A copy of the director s report on the financial standing, affairs, current assets and contingent liabilities of the company to be signed by a director and a company secretary. If the company has been in operation for more than six (6) months prior to the date of the application for licence, a copy of the latest profit and loss account and balance sheet of the applicant which have been audited by an independent auditor and certified by a director and a company secretary should be enclosed; (c) (d) (e) (f) (g) (h) (i) Approval in principle from the Exchange to be a Trading Participant; References from two (2) individuals for all principal officers*; A certified true copy of certificates evidencing academic and/or professional qualification for each principal officer; A certified true copy of the identity card (for Malaysian citizens) or passport (for non-malaysian citizens) of each principal officer; A detailed Curriculum Vitae for each principal officer; A recent passport-sized coloured photograph of each principal officer; A statutory declaration filed by all principals officers as prescribed in Appendix I; A copy of the applicant s Memorandum and Articles of Association;

6 (j) Forms 9, 24 and 49 of the Companies Act 1965; (k) (l) (m) (n) (o) (p) (q) Form 13 or 32A of the Companies Act 1965 if there is any change to the name or transfer of shares of the company; An application for registration of a Compliance Officer; A copy of the documents to be forwarded to clients pursuant to section 53(1) and of the Futures Industry Act 1993; A copy of the applicant s Operational and Compliance manual; A copy of the applicant s profile and organisational structure depicting related, subsidiary, associate and holding companies with the percentage of shareholding in each category; A list of employees employed by the applicant; and A processing fee of RM50.00 payable to the Securities Commission. 4.2 Licensing Fee *Where specified, principal officers mean a director and secretary of the company, and an officer who occupies or acts in a managerial position in the company as defined under Regulation 2 of the Futures Industry Regulations A licensing fee of RM2,000 shall be made payable to the Securities Commission upon approval of an application. 4.3 Registration with the Exchange Once the Futures Broker s licence is granted, the applicant shall register as a Trading Participant with the Exchange and notify the Securities Commission (Licensing Department) accordingly. 5.0 FUTURES BROKER S REPRESENTATIVE S LICENCE - REQUIREMENTS 5.1 Qualification and Experience The applicant shall possess:

7 (c) (d) a degree from an institution recognised by the Government of Malaysia; a diploma in the relevant field of study, including finance, economics, accounting or commerce, from an institution recognised by the Government of Malaysia; a diploma in fields other than those in paragraph 5.1 above, with two (2) years relevant working experience in the capital market; or five (5) years direct and relevant experience in the capital market and been licensed in a recognised jurisdiction to undertake futures broking for at least three (3) years. 5.2 Age In exceptional circumstances, the Securities Commission may consider an applicant with the Sijil Pelajaran Malaysian (SPM)/Malaysian Certificate of Education (MCE) or its equivalent, if the applicant has at least four (4) years relevant working experience in the capital market. The applicant shall be at least 21 years old. 5.3 Fit and proper criteria The applicant shall be a fit and proper person. 5.4 Industry Examination The applicant shall pass Modules 1, 13 and 14 of the Securities Industry Development Centre (SIDC) examinations, or any other examination as determined by the Securities Commission from time to time. 5.5 Approval in principle from Exchange The applicant shall obtain an approval in principle for registration with the Exchange. 6.0 FUTURES BROKER S REPRESENTATIVE S LICENCE - PROCEDURES FOR APPLICATION OF LICENCE 6.1 Form 3 Application for Representative s Licence

8 An applicant is required to file a duly completed Form 3 Application for Representative s Licence with the following documents attached: References from two (2) individuals; A certified true copy of certificates evidencing academic and/or professional qualification of the applicant; (c) A statutory declaration filed by the applicant as prescribed in Appendix I; (d) (e) (f) (g) (h) (i) A certified true copy of the applicant s identity card (for Malaysian citizens) or passport (for non-malaysian citizens); A recent passport-sized coloured photograph of the applicant; A copy of the letter from the Exchange granting approval in principle for the registration of the applicant as a futures broker s representative; A copy of the applicant s industry examination results; A detailed Curriculum Vitae of the applicant; and A processing fee of RM50.00 made payable to the Securities Commission. 6.2 Licensing Fee A licensing fee of RM200 shall be made payable to the Securities Commission upon approval of an application. 7.0 COMPLIANCE OFFICER - REQUIREMENTS 7.1 Qualification and Experience The applicant shall possess: A relevant degree or professional qualification from an institution recognised by the Government of Malaysia and a minimum of three (3) years relevant experience in the capital market; or A relevant diploma from an institution recognised by the Government of Malaysia and a minimum of five (5) years relevant experience in the capital market.

9 7.2 Age The applicant shall be at least 21 years old. 7.3 Fit and proper criteria The applicant shall be a fit and proper person. 7.4 Industry Examination The applicant who is seeking registration as a Compliance Officer is required to pass Modules 1, 11, 13 and 14 of the SIDC s examinations or any other examination as determined by the Securities Commission from time to time. 8.0 COMPLIANCE OFFICER PROCEDURES FOR REGISTRATION 8.1 No person shall be appointed as a Compliance Officer of a Futures Broker unless the Commission s prior approval has been obtained. For this purpose, the applicant is required to submit an application to the Securities Commission with the following documents attached: References from two (2) individuals; A certified true copy of certificates evidencing academic and/or professional qualification of the applicant; (c) A statutory declaration filed by the applicant as prescribed in Appendix I; (d) (e) (f) (g) (h) A certified true copy of the applicant s identity card (for Malaysian citizens) or passport (for non-malaysian citizens); A recent passport-sized coloured photograph of the applicant; A copy of the applicant s industry examination results (if applicable); A letter of approval in principle from the Exchange to be registered as a Compliance Officer; and A detailed Curriculum Vitae of the applicant.

10 8.2 Registration with the Exchange Once approval for the appointment has been granted by the Securities Commission, the applicant shall proceed to register with the Exchange. 9.0 LOCAL PARTICIPANT - REQUIREMENTS 9.1 Qualification and Experience The applicant shall possess: A relevant degree or professional qualification from an institution recognised by the Government of Malaysia and a minimum of three (3) years relevant experience in the capital market; or A relevant diploma from an institution recognised by the Government of Malaysia and a minimum of five (5) years relevant experience in the capital market. 9.2 Age The applicant shall be at least 21 years old. 9.3 Fit and proper criteria The applicant shall be a fit and proper person. 9.4 Industry Examination The applicant who is seeking registration as a Local Participant is required to pass Modules 1, 13 and 14 of the SIDC s examinations or any other examination as determined by the Securities Commission from time to time. 9.5 Application through Exchange An application for registration as a Local Participant shall be submitted to the Securities Commission through the Exchange.

11 10.0 LOCAL PARTICIPANT PROCEDURES FOR REGISTRATION No person shall be a Local Participant unless the Commission s prior approval has been obtained. For this purpose, the applicant is required to submit an application to the Securities Commission with the following documents attached: References from two (2) individuals; A certified true copy of certificates evidencing academic and/or professional qualification of the applicant; (c) A statutory declaration filed by the applicant as prescribed in Appendix I; (d) (e) (f) (g) (h) A certified true copy of the applicant s identity card (for Malaysian citizens) or passport (for non-malaysian citizens); A recent passport-sized coloured photograph of the applicant; A copy of the applicant s industry examination results (if applicable); A letter of approval in principle from the Exchange to be registered as a Local Participant; and A detailed Curriculum Vitae of the applicant CONTINUING PROFESSIONAL EDUCATION (CPE) PROGRAMME All Futures Broker s Representatives shall accumulate 20 CPE points a year in order to renew their licences GENERAL 12.1 Interview Where necessary, the Securities Commission may require applicants for a Futures Broker s Representative s licence and applicants seeking registration as a Compliance Officer or a Local Participant as well as persons licensed as a Futures Broker s Representative or registered as a Compliance Officer or a Local

12 Participant, to attend an interview to demonstrate credibility and knowledge of the capital market Exemption From SIDC Examination Applicants falling under any of the following categories may apply to the Securities Commission for an exemption from the relevant examination modules: (c) Individuals with tertiary qualification from recognized institutions, which meet the content requirement of the relevant examination modules; Individuals with distinguished service in the securities industry with a minimum of ten (10) years relevant working experience in the capital market at the appropriate level. Evaluation of relevant working experience will take into account experience, expertise, leadership and achievements; or Individuals in a managerial capacity for at least five (5) years in a regulatory body and with the relevant working experience in the capital market. An application for exemption shall be accompanied by all relevant supporting documents. An applicant shall be notified by the Securities Commission upon approval or rejection of the application. The decision of the Securities Commission shall be final Notification of change in information submitted Any material change in the information submitted to the Securities Commission shall be notified to the Securities Commission within fourteen (14) days from the occurrence of the change in information Submission of additional information Where necessary, the Securities Commission may require other relevant or additional information to be submitted Continuous compliance A Futures Broker and a Futures Broker s Representative shall comply with the requirements of these Guidelines at all times. In addition, a Futures Broker and a Futures Broker s Representative shall comply with all relevant provisions in the

13 securities laws and the licensing conditions in relation to the activities of a Futures Broker Exemption or variation of requirements The Securities Commission may, where it deems appropriate, allow any exemption and variation from the requirements of these Guidelines based on the merits of the case, whether on a permanent basis or for a specified period of time Submissions All enquiries, applications and information as required pursuant to these Guidelines shall be submitted to the Securities Commission at the following address: The Head Licensing Department Securities Commission No. 3 Persiaran Bukit Kiara Bukit Kiara Kuala Lumpur Tel: (603) Fax: (603)

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