Bank Negara Malaysia sets out requirements to be met by financial advisers
30 May 2022
On 26 April 2022, Bank Negara Malaysia (“BNM”) issued new policy documents relating to financial advisory business and Islamic financial advisory business, namely on:
- application procedures to carry on financial advisory business and Islamic financial advisory business (“Application PD”); and
- prudent and professional conduct by financial advisers (“Conduct PD”).
The Application PD, which applies to (i) any person intending to carry on a financial advisory business under the Financial Services Act 2013 (“FSA”) or an Islamic financial advisory business under the Islamic Financial Services Act 2013 (“IFSA”), (ii) an approved financial adviser under the FSA, or (iii) an approved Islamic financial adviser under the IFSA, sets out:
- BNM’s considerations under the law in assessing an application in relation to new approval or renewal of approval to carry on financial advisory business and Islamic financial advisory business (“Approval(s)”);
- documents and information to be submitted to BNM in relation to the application for the Approval(s); and
- submission procedures to obtain the Approval(s).
The Conduct PD, on the other hand sets out the requirements that must be met by an approved financial adviser on an on-going basis, as follows:
- An approved financial adviser must maintain capital funds of at least RM50,000 and a Professional Indemnity (“PI”) insurance or takaful cover with a minimum limit of indemnity of RM200,000 net of deductibles for any claim. Notwithstanding these limits, the Board of Directors (“Board”) must ensure that the amount and scope of PI insurance or takaful are commensurate with the volume, nature, and risk of business of the approved financial adviser.
- Further, at least two directors must be appointed and one of the directors must be the approved financial adviser’s appointed financial adviser representative.
- The Board is responsible for promoting the sustainable growth and financial soundness of the approved financial adviser and ensuring fair dealing without undue influence from any party.
- Suitable product options that meet clients’ needs must be provided by an approved financial adviser from at least three different licensed insurers or takaful operators for each class of insurance and takaful business.
- An approved financial adviser is prohibited from recommending insurance or takaful products for the sole purpose of securing a sale.