MOF clarifies that NBFIs are not subject to Malaysia's SC regulatory framework

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NBFI regulatory clarification

Highlights

The Ministry of Finance stressed that NBFIs such as LTAT, EPF, KWAP, SOCSO and Amanah Raya are not subject to the Securities Commission Malaysia's regulatory framework.
NBFI investments and transactions involving listed companies remain subject to SC regulatory requirements, including mergers, takeovers and mandatory acquisitions.
The EPF and Amanah Raya subsidiaries comply with SC laws and guidelines for capital market activities, while KWAP follows governance principles based on the Malaysian Code on Corporate Governance.

This article was translated from the original. Read the original version by our correspondent here.

Regulatory scope and institutional exemptions

As reported by The Edge Malaysia, the Ministry of Finance said that non-bank financial institutions, or NBFIs, do not fall under the Securities Commission Malaysia's regulatory framework. The corporate governance and management of these institutions are instead governed by their respective acts and applicable governance frameworks.

The ministry said the NBFIs in question include the Armed Forces Fund Board, Employees Provident Fund, Retirement Fund (Incorporated), Social Security Organisation and Amanah Raya Bhd. However, it said these institutions are encouraged to refer to the Malaysian Code on Corporate Governance and the Malaysian Code for Institutional Investors, which set out corporate governance principles based on international practices and globally accepted principles.

The clarification was given in response to a question from Datuk Seri Dr Wan Azizah Wan Ismail about measures to regulate corporate governance and prudential management among NBFIs through the Securities Commission Malaysia.

Impact on investment activity and investor protection

Although LTAT is not fully subject to the supervision of the Securities Commission Malaysia, the ministry explained that its investment activities and corporate transactions involving listed companies remain subject to the commission's regulatory requirements. These include takeovers, mergers and mandatory acquisitions. LTAT also works closely with the SC to ensure that relevant transactions comply with applicable laws and regulations.

As for the EPF, its investment activities in the domestic capital market are carried out in accordance with the laws, regulations and market standards set by the relevant authorities, including the Capital Markets and Services Act 2007 and SC guidelines. In the case of Amanah Raya, the SC's oversight is limited to the capital market activities of its subsidiaries, including AmanahRaya Trustees Bhd, AmanahRaya-Kenedix REIT Manager Sdn Bhd and AmanahRaya Investment Management Sdn Bhd.

The ministry added that the registration, licensing and compliance frameworks support prudential management, accountability and the protection of clients' and investors' interests. Meanwhile, KWAP has a comprehensive governance framework that also takes into account corporate governance best practices, including the principles set out in the Malaysian Code on Corporate Governance.

In our earlier coverage of the Budget debate 2027, we examined concerns that GLCs/GLICs could be used to finance non-commercial projects without a government repayment guarantee, potentially undermining their core mandates and the protection of contributors' and retirees' interests. The article also outlined proposals for government directives to be issued in writing, full costs to be calculated, and annual disclosures to be required to improve transparency and accountability for these commitments.

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