Technical Note No.1/2021 - Categories of High-Net Worth Individuals and High-Net Worth Entities Under Schedules 6 and 7 of the Capital Markets and Services Act 2007

17 August 2021

This Technical Note should be read together with the revised Schedules 6 and 7 of the Capital Markets and Services Act 2007 (CMSA) as amended by the Capital Markets and Services (Amendment of Schedules 5, 6 and 7) Order 2021.

Part 1 – Clarification on the statutory bodies that the Securities Commission Malaysia (SC) may determine not to be high-net worth entities (HNWEs) for the purpose of Paragraph 14, Part I of Schedules 6 and 7 of the CMSA (Paragraph 14)

1.	The intention of Paragraph 14 is to include as HNWEs, statutory bodies established pursuant to Federal Legislation or State Enactment whose function or mandate include investment in capital market products.
2.	Entities such as a “joint management body” established under section 17 of the Strata Management Act 2013 may also fall within the meaning of a “statutory body” for the purposes of Paragraph 14, and thus may qualify as a HNWE.
3.	Given that the function or mandate of a “joint management body” established under the Strata Management Act 2013 does not include investing in capital market products, such entity is specified by the SC as not qualifying to be a “statutory body” for the purposes of Paragraph 14 and should not therefore be treated as a HNWE.
4.	The SC may, from time to time, update this Technical Note to include other types of statutory bodies that SC has determined not to be a HNWE for purposes of Paragraph 14.

Part 2 - Clarification on Paragraph 16(d), Part I of Schedules 6 and 7 of the CMSA (Paragraph 16(d))

Calculation of “net personal investment” and “net joint investment”
1.	Paragraph 16(d) categorises as a HNWI, an individual whose total net investment portfolio (whether personally, or jointly with his or her spouse), in any capital market products exceeds RM1 million or its equivalent in foreign currencies.
2.	In this regard, the SC wishes to clarify that the phrases “total net personal investment portfolio” and “total net joint investment portfolio” in Paragraph 16(d) refer to an individual’s total personal or total joint investments (with his / her spouse), in capital market products, less any liabilities related to such investments. Accordingly, an individual’s total net investment portfolio would be the total investments in any capital market products less any borrowings under any margin account for and/or any other borrowings taken for the capital market products in which the individual has invested.
Source of funds for investments in capital market products
3.	For purposes of Paragraph 16(d), an individual must have total net investments (whether personally, or jointly with his/her spouse) in capital market products which exceeds RM1 million or its equivalent in foreign currencies in order to be deemed as a HNWI.
4.	The SC wishes to clarify that in this regard, the source from which the funds used for such investments is immaterial as long as the individual’s total net investments in capital market products exceeds RM1 million.
5.	Accordingly, in order to be deemed as a HNWI, an individual may invest in capital market products using, for example, the funds in his/her EPF Account 1, personal savings and/or any other source of funds as long as his/her total net investments exceeds RM1 million. Illustration 1: Mohamad withdraws RM500,001 from his EPF Account 1 and adds an additional RM500,001 from his personal savings to invest in a unit trust fund. Mohamad would be deemed to be a HNWI since his total net investments exceeds RM1 million. Illustration 2: Mohamad would also be deemed to be a HNWI if he withdraws RM1.1 million from his EPF Account 1 and invests the same in the unit trust fund. Illustration 3: Where Mohamad has invested: RM600,000 from his EPF Account 1 in a unit trust fund; RM300,000 of his personal savings for the subscription of shares in Company A; and an additional sum of RM200,000 sourced from a personal bank loan for the acquisition of shares in companies listed on Bursa Malaysia Securities Berhad; Mohamad will not be deemed to be a HNWI notwithstanding that his total investments in capital market products exceeds RM1 million. This is because Mohamad’s total net investment portfolio in capital market products would only amount to RM900,000 (being his total investments of RM1.1 million less the RM200,000 personal bank loan).