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The investment or mutual fund business
is a new activity which has been promoted in Labuan. The
activity is expected to pick up with the recent introduction
of LOSIA which came in to effect on 1 April 1998. The LOSIA
provides the necessary legal framework for the creation and
management of Offshore investment funds, including Islamic
funds as well as the provision of fund administration
services. The Act also allows for the setting-up of the
Labuan International Financial Exchange (LFX) which can be
used for the listing of mutual funds and other permitted
offshore instruments. As investment opportunities in the
South East Asian region are extremely attractive, Labuan
offers an attractive domicile to foreign funds seeking to
undertake investments in the region.
The main features of the LOSIA are
described below:
(ii) Two types of funds can be
established under LOSIA, namely, a private and a public
fund. A private fund is defined as a fund which has either
not more than 100 subscribers whose each first time
investment is not less than RM100,000 or any number of
subscribers whose each first time investment is not less
than Rm5000,000. On the other hand, a public fund is a fund
in which its shares are offered for subscription to the
general public.
(ii) While both type of funds need to
be registered with LOFSA in accordance with the procedures
provided under the Act, private funds are accorded more
flexibility. Minimal requirements are imposed for
establishing private funds in Labuan. For example, private
funds need not apply to LOFSA for approval of their
prospectus fund manager and fund administrator.
(iii) LOSIA only allows a person who is
licensed or registered with LOFSA to manage or administer a
fund duly registered under the Act. However, in certain
circumstances, LOFSA may allow a fund manager outside Labuan
and licensed in recognized country to manage or administer
any fund established in Labuan.
(iv) The offshore banks and Labuan
trust companies are allowed to be the custodian of any fund
launched in Labuan. LOSIA also provides that only a Labuan
trust company may appointed as the trustee of the fund.
However, LOSIA allows an authorized trustee under the laws
of any recognised country or jurisdiction to carry out
similar functions in Labuan.
(v) A public fund is statutorily
required to keep proper accounting records and prepare
annual financial statements. These documents must be kept in
Labuan and may be inspected by LOFSA, potential investors or
the public.
(vi) No public fund shall be offered to
the public unless a prospectus pertaining to the fund has
been published and filed with the Authority. This would
ensure that potential investors have adequate information
about the fund.
(vii) The Act provides that if a person
has subscribed to a fund and the fund did not comply with
the provisions of LOSIA, the person may rescind the
subscription contract or claim damages from the fund
operator. It is an offence under LOSIA to issue any
misleading prospectus
(viii) Any public fund which conducts any
business outside Labuan is required to file with LOFSA a
certificate to be issued by a competent Authority who is
responsible for the regulation and supervision of the conduct of
its business in that recognized country or supervision. The
certificate shall state the fund is carrying on or engaged in a
lawful business.
(ix) LOSIA provides for the establishment of
Labuan International Financial Exchange (LFX). The purpose of the
establishment of LFX is to provide listing facilities to a fund
launched in Labuan or abroad.
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General Section
