Act 759 Islamic Financial Services Act 2013

1 LAWS OF MALAYSIA Act 759 Islamic Financial Services Act 2013 Date of Royal Assent18 Mar 2013 Date of publication in the Gazette22 Mar 2013An Act to provide for the regulation and supervision of Islamic Financial institutions, payment systems and other relevant entities and the oversight of the Islamic money market and Islamic foreign exchange market to promote Financial stability and compliance with Shariah and for related, consequential or incidental matters. [30 June 2013, except paragraphs 1 to 10 and paragraphs 13 to 19 of Schedule 9.]

2 ] PU(B) 277/2013. ARRANGEMENT OF SECTIONS PART I PRELIMINARY 1. Short title and commencement 2. Interpretation 3. Prescription by Minister of additional business or activity 4. Prescription by Bank of additional agreement, dealing, transaction or person 5. Classification of, and construction of references to, takaful business PART II REGULATORY OBJECTIVES AND POWERS AND FUNCTIONS OF BANK 6. Regulatory objectives 7. Powers and functions of Bank PART III AUTHORIZATION Division 1 Page 1 of 187 Authorized business 8.

3 Authorized business to be carried on by authorized person 9. Application for authorization 10. Grant of licence by Minister 11. Approval by Bank 12. Requirements on minimum capital funds or surplus of assets over liabilities 13. Additional conditions of licence or approval 14. Persons approved under Financial Services Act 2013 to carry on Islamic Financial business Division 2 Restriction on dealings of authorized persons 15. Authorized person to carry on authorized business only 16. Licensed takaful operator to carry on family takaful or general takaful business Division 3 Representative office 17.

4 Requirements for representative office Division 4 Revocation, surrender or cessation of business or operations 18. Grounds for revocation of authorization 19. Surrender of licence or notification on cessation of business or operations 20. Effect of revocation, surrender, notification on cessation of business or operations, and expiry Division 5 General matters 21. Form of establishment 22. Establishment or relocation of office of authorized persons 23. Fees 24. Publication of names of authorized persons 25. Holding out as authorized person 26.

5 Acting on behalf of unlicensed person PART IV SHARIAH REQUIREMENTS Division 1 Shariah compliance 27. Interpretation Page 2 of 18728. Duty of institution to ensure compliance with Shariah 29. Power of Bank to specify standards on Shariah matters Division 2 Shariah governance 30. Establishment of Shariah committee 31. Appointment of Shariah committee member 32. Duties of Shariah committee and its members 33. Cessation as member of Shariah committee 34. Notice of cessation as member of Shariah committee 35. Information to be provided to Shariah committee 36.

6 Qualified privilege and duty of confidentiality Division 3 Audit on Shariah compliance 37. Appointment of person by institution to conduct audit on Shariah compliance 38. Appointment of person by Bank to conduct audit on Shariah compliance PART V PAYMENT SYSTEMS Division 1 Designation of payment systems and Islamic payment instruments 39. Designation and revocation of designation of payment systems 40. Operator of designated payment system 41. Designation of Islamic payment instruments Division 2 Requirements for operation of payment systems and issuance of designated Islamic payment instruments 42.

7 Application of this Act on payment systems 43. Power of Bank to specify standards for payment systems 44. Direction to participants of designated payment system 45. Operational arrangements 46. Power of Bank to inspect Division 3 Finality of payment and netting arrangement 47. Interpretation 48. Power of Bank to issue certificate of finality 49. Revocation of certificate of finality 50. Application of this Division Page 3 of 18751. Transfer order made after appointment of insolvency administrator 52. Finality of payment and netting arrangement 53.

8 Preservation of rights 54. Non-recognition of insolvency order by foreign court 55. Requirement to notify in event of insolvency, etc. PART VI PRUDENTIAL REQUIREMENTS 56. Interpretation Division 1 Standards on prudential matters 57. Power of Bank to specify standards on prudential matters 58. Institution, director and officer to comply with standards 59. Single counterparty exposure limit for licensed person 60. Restrictions on payment of dividend by licensed person 61. Maintenance of assets in Malaysia by licensed person Division 2 Corporate governance 62.

9 Interpretation 63. Chairman, directors and chief executive officer of institution 64. Requirements to be chairman, director, chief executive officer or senior officer 65. Functions and duties of board of directors 66. Duties of directors 67. Duty to disclose interests in material transaction or material arrangement 68. Disqualifications 69. Fit and proper requirements 70. Cessation from office 71. Notice of cessation from office Division 3 Transparency requirements 72. Interpretation 73. Maintenance of accounting records and information 74.

10 Compliance with approved accounting standards 75. Publication of Financial statements Division 4 Auditors 76. Appointment of auditor by institution Page 4 of 18777. Appointment of auditor by Bank 78. Duties of auditor 79. Notice of cessation as auditor 80. Information to be provided to auditor 81. Reporting obligations of auditor 82. Qualified privilege and duty of confidentiality Division 5 Appointed actuaries 83. Appointment of actuary by licensed takaful operator 84. Appointment of actuary by Bank 85. Duties of appointed actuary 86.