Technical Note No.1/2024 – Clarification on Offering of Capital Market Products to Persons Under Paragraphs 1(b) And 14(b) Of Schedule 5, and Paragraph 11 Of Schedules 6 and 7 of the Capital Markets and Services Act 2007 (CMSA) - Technical Notes, Practice Notes and Circulars

TECHNICAL NOTE NO.1/2024 – CLARIFICATION ON OFFERING OF CAPITAL MARKET PRODUCTS TO PERSONS UNDER PARAGRAPHS 1(b) AND 14(b) OF SCHEDULE 5, AND PARAGRAPH 11 OF SCHEDULES 6 AND 7 OF THE CAPITAL MARKETS AND SERVICES ACT 2007 (CMSA)

5 February 2024

This Technical Note should be read together with the revised Schedules 5, 6 and 7 of the CMSA as amended by the Capital Markets and Services (Amendment of Schedules 5, 6 and 7) Order 2024.

Clarification to Schedules 5, 6 and 7 of the CMSA on the RM250,000 investment ticket size for subsequent investment in the same product

Paragraphs 1(b) and 14(b) of Schedule 5, and paragraph 11 of the respective Schedules 6 and 7 provide an exemption from the requirements under sections 212 and 232 CMSA in relation to a person who acquires a capital market product, where the consideration for the acquisition of the capital market product is not less than RM250,000 or its equivalent in foreign currencies for each transaction.
This exemption is provided on the basis that a person who is able to invest RM250,000 should also be able to appoint a professional to advise on the transaction or should have the means to take the necessary action in the event the product no longer meets the investor’s investment objective.
The SC wishes to clarify that this exemption shall continue to apply to investment made by such person subsequent to the initial investment transaction even if the consideration for the subsequent investment is less than RM250,000 or its equivalent in foreign currencies (the Threshold Amount), subject to the following:

The person’s initial investment amount to acquire the product was for a consideration of not less than the Threshold Amount (first time purchase of the product);
Any redemption or disposal by such person prior to the subsequent investment does not result in the initial investment amount to fall below the Threshold Amount; and
The subsequent investment at less than the Threshold Amount is made with respect to the same product.

Note:
(1) The term “same product” in paragraph (c) is not applicable to a corporate bond with multiple tranches (under a programme).

(2) In the case of a wholesale fund, the term “same product” means the same fund that the person has initially invested in.

llustration 1:
Mohamad’s initial investment amount in wholesale fund A is RM250,000 and Mohamad does not make any redemption after the aforesaid initial investment. Mohamad subsequently wants to invest an additional RM10,000 to top up his investment in the wholesale fund A. Mohamad’s additional investment in wholesale fund A qualifies for the exemption under paragraph 1(b) of Schedule 5 and paragraph 11 of Schedules 6 and 7.

Illustration 2:
Mohamad’s initial investment amount in wholesale fund A is RM250,000 but thereafter he redeems RM100,000 from his initial investment amount.

Mohamad subsequently wants to invest an additional RM10,000 to top up his investment in the wholesale fund A. The exemption under paragraph 1(b) of Schedule 5 and paragraph 11 of Schedules 6 and 7 does not apply.

Illustration 3:
Mohamad initially invests RM250,000 in wholesale fund A. Mohamad subsequently wishes to invest in wholesale fund B but Mohamad is only able to invest RM100,000. Mohamad’s intended investment in wholesale fund B does not qualify for the exemption under paragraph 1(b) of Schedule 5 and paragraph 11 of Schedules 6 and 7.

Illustration 4:
Mohamad initially invests RM250,000 in wholesale fund C. Mohamad does not make any redemption of his initial investment in wholesale fund C, however due to market movement, the value/NAV of the wholesale fund C has dropped. He subsequently wishes to invest an additional RM100,000 in wholesale fund C. Mohamad’s additional investment in wholesale fund C qualifies for the exemption under paragraph 1(b) of Schedule 5 and paragraph 11 of Schedules 6 and 7.