Skip to content
mylaw.myby aturio
In forceAs enactedRead it in Bahasa Malaysia
Contents

Amendment Act

Development Financial Institutions (Amendment) Act 2015

Feedback & supportAmends the Development Financial Institutions Act 2002

Official textFrom Laws of Malaysia Online, unchanged

(1)

This Act may be cited as the Development Financial

Institutions (Amendment) Act 2015.

(2)

This Act comes into operation on a date to be appointed by the Minister by notification in the Gazette.

s 2General amendment

The Development Financial Institutions Act 2002 [Act 618], which is referred to as the “principal Act” in this Act, is amended by substituting for the words “credit facility” and “credit facilities”

wherever appearing the words “financing facility” and “financing facilities” respectively.

DEVELOPMENT FINANCIAL INSTITUTIONS

(AMENDMENT) ACT 2015

s 3Amendment of section 3

Section 3 of the principal Act is amended—

(a)

in subsection (1)—

(i)

by inserting after the definition of “related” the following definition:

‘ “books” includes any register or other record of information and any accounts or accounting records, however compiled, recorded or stored;’;

(ii)

by substituting for the definition of “specify” the following definition:

‘ “specify” means specify in writing by way of standards or any other forms;’;

(iii)

by substituting for the definition of “Governor”

the following definition:

‘ “Governor” and “Deputy Governor” mean the Governor and Deputy Governor of the

Bank respectively;’;

(iv)

by substituting for the definition of “property”

the following definition:

‘ “property” means any movable or immovable property, whether tangible or intangible and includes—

(a)

any right, interest, title, claim, chose in action, power or privilege, whether present or future, or whether vested or contingent, in relation to any property, or which is otherwise of value;

(b)

any conveyance executed for conveying, assigning, appointing, surrendering, or otherwise transferring or disposing of immovable property of which the

Development Financial Institutions (Amendment)

5

person executing the conveyance is the proprietor or has possession or in which he is entitled to a contingent right, either for the whole interest or for any less interest;

(c)

any security, including any stock, share, debenture and fund;

(d)

any negotiable instrument, including any bank note, bearer note, Treasury bill, dividend warrant, bill of exchange, promissory note, cheque and negotiable certificate of deposit;

or

(e)

any mortgage or charge, whether legal or equitable, guarantee, lien or pledge, whether actual or constructive, letter of hypothecation, trust receipt, indemnity, undertaking or other means of securing payment or discharge of a debt or liability, whether present or future, or whether vested or contingent;’;

(v)

by inserting after the definition of “prescribed institution” the following definition:

‘ “Shariah committee” means the Shariah committee established under section 33f;’;

(vi)

by substituting for the definition of “credit facility”

the following definition:

‘ “financing facility” means—

(a)

an advance, loan or other facility, in whatever form or by whatever name called, by which the customer has access, directly or indirectly, to the funds of the prescribed institution and includes a financing facility which is made in accordance with Shariah;

and

(b)

the giving of a guarantee, credit insurance or takaful cover in relation to a financing facility;’;

(vii)

by inserting after the definition of “Chief Executive

Officer” the following definition:

‘ “computer” has the same meaning as in the Evidence Act 1950;’;

(viii)

by inserting after the definition of “liabilities”

the following definition:

‘ “Shariah Advisory Council” means the

Shariah Advisory Council established under the

Central Bank of Malaysia Act 2009 [Act 701];’;

(ix)

by inserting after the definition of “Minister” the following definitions:

‘ “person” includes an individual, any corporation, statutory body, local authority, society, trade union, co-operative society, partnership and any other body, organization, association or group of persons, whether corporate or unincorporate;

“computer output” means a statement or representation, whether in written, printed, pictorial, film, graphical, acoustic or other form—

(a)

produced by a computer;

(b)

displayed on the screen of a computer;

or

(c)

accurately translated from a statement or representation so produced;’;

(x)

by inserting after the definition of “officer” the following definition:

‘ “senior officer”, in relation to a prescribed institution, means a person, other than the Chief

Executive Officer or a director, having authority

Development Financial Institutions (Amendment)

7

and responsibility for planning, directing or controlling the activities of a prescribed institution including the chief operating officer, members of decision-making committees and other persons performing key functions such as risk management, compliance, internal audit or other functions as may be specified by the

Bank under section 41, but shall not include a member of a Shariah committee;’;

(xi)

in the definition of “office”, by inserting after the words “limited period only” the words

“, an electronic terminal”;

(xii)

in the definition of “controller”—

(A)

by deleting the word “or” at the end of paragraph (b);

(B)

by substituting for the comma at the end of paragraph (c) the words “; or”; and

(C)

by inserting after paragraph (c) the following paragraph:

“(d) in accordance with whose directions, instructions or wishes the directors, chief executive officer or senior officers of the institution are accustomed or under obligation, whether formal or informal, to act,”;

(xiii)

by inserting after the definition of “controller”

the following definition:

‘ “chairman”, in relation to a prescribed institution, means chairman of the board of directors;’;

(xiv)

by substituting for the definition of “relative” the following definition:

‘ “relative”, in relation to an individual, subject to subsection (1a), means—

(a)

the spouse of the individual;

(b)

the brother or sister of the individual, or of the spouse of the individual;

(c)

any lineal ascendant or descendant of the individual, or of the spouse of the individual;

(d)

the spouse of any individual referred to in paragraph (b) or (c);

(e)

any lineal descendant of an individual referred to in paragraph (b) or (d);

(f)

any uncle, aunt or cousin of the individual, or of the spouse of the individual; or

(g)

any spouse, or any lineal ascendant or descendant, of an individual referred to in paragraph (f);’;

(xv)

in the definition of “associate”, by substituting for the word “thirty” in paragraph (d) the word

“twenty”;

(xvi)

by inserting after the definition of “associate”

the following definition:

‘ “standards” includes any obligation or requirement as specified by the Bank under this Act and such standards may contain any interpretative, incidental, supplemental, consequential and transitional provisions;’;

(xvii)

in the definition of “capital funds”, by inserting after the word “sections” the words “33c,”;

(b)

by inserting after subsection (1) the following subsection:

“(1a)  For the purpose of the definition of “relative”

in subsection (1)—

(a)

the adoption of any person by another under any written law of Malaysia or any country, territory or place outside Malaysia, or under any custom recognized by any class of persons

Development Financial Institutions (Amendment)

9

in Malaysia or in any country, territory or place outside Malaysia, shall be treated as creating between the adopter and the adopted person the same natural relationship as the adoptive relationship, and other relationships in relation to it shall be determined accordingly;

and

(b)

references therein to a relationship include, where relevant, a relationship by half-blood.”;

(c)

in subsection (2)—

(i)

in paragraph (a)—

(A)

by substituting for the words “have entered into an agreement or arrangement” the words

“, pursuant to an agreement, arrangement or understanding, co-operate”; and

(B)

by deleting the words “by means of interests in shares of that corporation already held by them jointly or severally”; and

(ii)

in paragraph (b)—

(A)

by deleting the word “or” at the end of subparagraph (iv);

(B)

in subparagraph (v), by substituting for the full stop at the end of the subparagraph the words “; or”; and

(C)

by inserting after subparagraph (v) the following subparagraph:

“(vi) a person who owns or controls twenty per cent or more of the voting shares of a corporation falling within subparagraph (i) and any relative of such person, or any related trusts together with one or more persons falling within subparagraph (i).”;

and

(d)

by inserting after subsection (4) the following subsection:

“(5)  Any reference in this Act to the power of the

Minister or the Bank to impose or specify conditions shall include the power of the Minister or the Bank, as the case may be, to amend or revoke any existing conditions or impose any new conditions.”.

s 4Amendment of section 4

Section 4 of the principal Act is amended—

(a)

in subsection (2), by inserting after the word “authorize”

the words “a Deputy Governor or”;

(b)

by inserting after subsection (2) the following subsection:

“(2a)  The Bank may establish and authorize a committee consisting of members as the Bank may determine to perform any or all of its functions under this Act on behalf of and in the name of the Bank.”;

and

(c)

in subsection (3), by inserting after the words “any or all of its functions” the words “on behalf of and in the name of the Bank”.

s 5Substitution of section 5

The principal Act is amended by substituting for section 5

the following section:

s 5“Board of directors

(1)

The business and affairs of a prescribed institution shall be managed under the direction and oversight of its board of directors, subject to this Act and any other written law which may be applicable to the prescribed institution.

(2)

Without prejudice to the generality of subsection (1), the board of directors shall—

(a)

ensure that the strategies pursued by the prescribed institution are consistent with its constituent documents and any specification made by the Bank pursuant to

Development Financial Institutions (Amendment)

11

subsection 28(1), and that the prescribed institution has the capacity and capability to manage such strategies;

(b)

set and oversee the implementation of business and risk objectives and strategies, and in doing so, shall have regard to the long term viability of the prescribed institution and reasonable standards of fair dealing;

(c)

ensure and oversee the effective design and implementation of sound internal controls, compliance and risk management systems commensurate with the nature, scale and complexity of the business and structure of the prescribed institution;

(d)

oversee the performance of the senior management in managing the business and affairs of the prescribed institution;

(e)

ensure that there is a reliable and transparent financial reporting process within the prescribed institution;

and

(f)

promote timely and effective communications between the prescribed institution and the Bank on matters affecting or that may affect the safety and soundness of the prescribed institution.

(3)

In carrying out its functions and duties under this section, the board of directors of a prescribed institution shall have regard to the interests of the customers and depositors of the prescribed institution.”.

s 6New section 5a

The principal Act is amended by inserting after section 5 the following section:

“Duties of directors 5a.  (1)  A director of a prescribed institution shall at all times—

(a)

act in good faith in the best interests of the prescribed institution;

(b)

exercise reasonable care, skill and diligence with—

(i)

the knowledge, skill and experience which may reasonably be expected of a director having the same responsibilities; and

(ii)

any additional knowledge, skill and experience which the director has;

(c)

only exercise powers conferred on him for the purposes for which such powers are conferred;

(d)

exercise sound and independent judgment; and

(e)

comply with any standards specified by the Bank which are applicable to a director.

(2)

Subsection (1) has effect in addition to, and not in derogation of, any written law or rule of law relating to the duty or liability of a director.

(3)

Any director who contravenes paragraph (1)(c) commits an offence and shall on conviction be liable to imprisonment for a term not exceeding eight years or to a fine not exceeding twenty-five million ringgit or to both.”.

s 7Substitution of section 6

The principal Act is amended by substituting for section 6

the following section:

s 6“Appointment of Chief Executive Officer and directors

(1)

Except with prior written approval of the Minister, no prescribed institution shall appoint or reappoint any person as its Chief Executive Officer or director.

(2)

The prescribed institution shall only submit an application for approval under subsection (1) after seeking and obtaining the Bank’s verification that the person has complied with the criteria set out in the First Schedule.

(3)

No prescribed institution shall appoint or reappoint any person as its Chief Executive Officer or director and no person shall accept any appointment or reappointment as a

Development Financial Institutions (Amendment)

13

Chief Executive Officer or director of a prescribed institution, unless such person has been verified by the Bank as having complied with the criteria set out in the First Schedule.

(4)

A prescribed institution shall notify the Bank of the appointment or reappointment of its Chief Executive Officer or directors within fourteen days from the date of the appointment or reappointment, as the case may be.”.

s 8New section 6a

The principal Act is amended by inserting after section 6 the following section:

“Compliance with criteria in First Schedule 6a.  A chairman, director, Chief Executive Officer or senior officer of a prescribed institution shall at all times comply with the criteria set out in the First Schedule.”.

s 9Amendment of section 7

Section 7 of the principal Act is amended by deleting subsection (2).

s 10Amendment of section 8

Section 8 of the principal Act is amended—

(a)

by substituting for the shoulder note the following shoulder note:

“Cessation of office”;

(b)

by substituting for subsection (1) the following subsection:

“(1)  Where—

(a)

a Chief Executive Officer or director of a prescribed institution becomes disqualified by virtue of subsection 7(1); or

(b)

a chairman, director, Chief Executive Officer or senior officer of a prescribed institution no longer complies with any of the criteria set out in the First Schedule, he shall immediately cease to hold office and cease to act in such capacity.”;

(c)

by inserting after subsection (1) the following subsections:

“(1a)  The prescribed institution shall immediately—

(a)

in the case of paragraph (1)(a), terminate the appointment of such Chief Executive Officer or director; or

(b)

in the case of paragraph (1)(b), remove the chairman, director, Chief Executive Officer or senior officer from such office.

(1b)

Notwithstanding anything contained in any contract of service or any other agreement relating to his appointment, such Chief Executive Officer or director terminated under paragraph (1a)(a) shall not be entitled to claim any compensation for such termination.”;

(d)

by substituting for subsection (2) the following subsection:

“(2)  Subject to section 123b and notwithstanding subsections (1) and (1a), the Bank, with the concurrence of the Minister, may direct the prescribed institution—

(a)

to terminate the appointment of the Chief

Executive Officer or director who becomes disqualified by virtue of subsection 7(1); or

(b)

to remove the Chief Executive Officer or director who no longer complies with any of the criteria as set out in the First Schedule, and the prescribed institution shall comply with such direction to terminate the appointment of that person in such capacity or remove that person from

Development Financial Institutions (Amendment)

15

such office, as the case may be, and notwithstanding anything contained in any contract of service or any other agreement relating to his appointment, the

Chief Executive Officer or director terminated under paragraph (a) shall not be entitled to claim any compensation for such termination.”; and

(e)

by deleting subsection (4).

s 11Amendment of section 10

Section 10 of the principal Act is amended—

(a)

in subsection (1), by substituting for the words “Chief

Executive Officer or director” the words “chairman, director, Chief Executive Officer or senior officer”;

and

(b)

by deleting subsection (2).

s 12Amendment of section 11

Section 11 of the principal Act is amended—

(a)

by substituting for subsection (1) the following subsection:

“(1)  A director of a prescribed institution who has an interest, directly or indirectly, in a transaction or arrangement with the prescribed institution, or in any matter being or about to be considered by the prescribed institution, shall, as soon as practicable, disclose to the board of directors of the prescribed institution the nature and extent of his interest.”;

(b)

by deleting subsections (2) and (4);

(c)

in subsection (5), by substituting for the words “After the disclosure has been made and recorded, the director shall, in relation to that matter” the words “Whether or not a disclosure under subsection (1) has been made, the director shall, in relation to that transaction, arrangement or matter”; and

(d)

by deleting subsection (6).

s 13Amendment of section 12

Section 12 of the principal Act is amended by substituting for subsection (3) the following subsection:

“(3)  Any person who contravenes subsection (1) or (2)

commits an offence and shall on conviction be liable to imprisonment for a term not exceeding ten years or to a fine not exceeding fifty million ringgit or to both.”.

s 14Amendment of section 13

Section 13 of the principal Act is amended by deleting subsection (2).

s 15Amendment of section 14

Section 14 of the principal Act is amended by substituting for subsection (2) the following subsection:

“(2)  Any person who contravenes subsection (1) commits an offence and shall on conviction be liable to imprisonment for a term not exceeding ten years or to a fine not exceeding fifty million ringgit or to both.”.

s 16Amendment of section 15

Section 15 of the principal Act is amended by substituting for subsection (2) the following subsection:

“(2)  Any prescribed institution that contravenes subsection (1) commits an offence and shall on conviction be liable to imprisonment for a term not exceeding ten years or to a fine not exceeding fifty million ringgit or to both.”.

s 17Amendment of section 16

Section 16 of the principal Act is amended by deleting subsection (6).

Development Financial Institutions (Amendment)

s 18Amendment of section 18

Section 18 of the principal Act is amended by substituting for subsection (3) the following subsection:

“(3)  Any person who contravenes subsection (1) or any prescribed institution that contravenes subsection (2) commits an offence and shall on conviction be liable to imprisonment for a term not exceeding eight years or to a fine not exceeding twenty-five million ringgit or to both.”.

s 19Amendment of section 19

Section 19 of the principal Act is amended—

(a)

by substituting for subsection (6) the following subsection:

“(6)  Any person who fails to comply with any modification or condition imposed by the Minister under subsection (5) commits an offence and shall on conviction be liable to a fine not exceeding ten million ringgit.”; and

(b)

in subsection (8), by substituting for the word “one” the word “ten”.

s 20Amendment of section 21

Section 21 of the principal Act is amended—

(a)

by substituting for subsection (2) the following subsection:

“(2)  Any person who fails to comply with an order under subsection (1) commits an offence and shall on conviction be liable to imprisonment for a term not exceeding one year or to a fine not exceeding five million ringgit or to both.”; and

(b)

by substituting for subsection (4) the following subsection:

“(4)  Any person who fails to comply with an order under subsection (3) commits an offence and shall on conviction be liable to imprisonment for a term not exceeding one year or to a fine not exceeding five million ringgit or to both.”.

s 21Amendment of section 22

Section 22 of the principal Act is amended by substituting for subsection (4) the following subsection:

“(4)  Any person who contravenes subsection (3) commits an offence and shall on conviction be liable to imprisonment for a term not exceeding one year or to a fine not exceeding five million ringgit or to both.”.

s 22Amendment of section 24

Section 24 of the principal Act is amended by substituting for subsection (2) the following subsection:

“(2)  Any person who fails to comply with the direction under subsection (1) commits an offence and shall on conviction be liable to imprisonment for a term not exceeding one year or to a fine not exceeding five million ringgit or to both.”.

s 23Amendment of section 25

Section 25 of the principal Act is amended—

(a)

in the shoulder note, by inserting after the word

“subsidiaries” the words “or acquisition or holding of material interest in corporations”;

(b)

in subsection (1), by inserting after the word “Malaysia”

the words “, or acquire or hold any material interest in any corporation”;

(c)

by deleting subsection (2);

(d)

in subsection (3), by inserting after the word “subsidiary”

the words “, or acquire or hold any material interest in any corporation,”;

Development Financial Institutions (Amendment)

(e)

by substituting for subsection (4) the following subsection:

“(4)  Every prescribed institution shall at all times comply with any condition as may be specified by the Bank under subsection (3).”; and

(f)

by inserting after subsection (4) the following subsection:

“(5)  The Bank may specify what constitutes

“material interest” for the purposes of subsection (1)

and paragraph 26(1)(d).”.

s 24Amendment of section 26

Section 26 of the principal Act is amended—

(a)

in the shoulder note, by inserting after the word “subsidiary”

the words “or material interest in corporations”;

(b)

in subsection (1)—

(i)

by deleting the word “or” at the end of paragraph (b); and

(ii)

by substituting for the full stop at the end of paragraph (c) the words “; or”, and inserting after that paragraph the following paragraph:

“(d) dispose of all or any of its interest in its subsidiary or corporation in which it holds a material interest.”;

(a)

is consistent with the business carried on by the prescribed institution; or

(b)

directly or indirectly affect the safety and soundness of the prescribed institution.”;

and

(c)

by inserting after subsection (1) the following subsection:

“(1a)  In determining the interest of a prescribed institution under subsection (1), the Bank shall take into consideration matters that the Bank considers relevant including whether the activities of that subsidiary or corporation in which the prescribed institution holds a material interest—

(d)

by deleting subsection (3).

s 25Amendment of section 27

Section 27 of the principal Act is amended by deleting subsections (2) and (4).

s 26Amendment of section 28

Section 28 of the principal Act is amended—

(a)

by deleting subsection (2);

(b)

in subsection (3)—

(i)

by substituting for the word “No” the words

“Unless otherwise specified by the Bank, no”;

(ii)

in paragraph (a), by substituting for the words

“an accountant, advocate, architect, estate agent, doctor or any other” the word “any”;

(iii)

by inserting at the end of paragraph (b) the word

“and”; and

(iv)

by deleting paragraph (c);

(c)

by inserting after subsection (3) the following subsection:

“(3a)  No prescribed institution shall grant any financing facility to any corporation in the shares of which any of its members, directors or officers has any interest which, in aggregate, is of an amount that is in excess of such percentage as the Bank may specify.”;

Development Financial Institutions (Amendment)

(d)

in subsection (4), by substituting for paragraph (b) the following paragraph:

“(b) where there is no such provision and the prescribed institution is satisfied that special or compassionate circumstances exist, a loan not exceeding such period as may be specified by the Bank.”; and

(e)

in subsection (5), by inserting after the words “of a director or officer” the words “, or any other person as may be specified by the Bank”.

s 27Amendment of section 29

Section 29 of the principal Act is amended—

(a)

by substituting for the shoulder note the following shoulder note:

“Single counterparty exposure limit”;

(b)

by substituting for subsection (1) the following subsection:

“(1)  Subject to subsection 28(1) and except as may be approved by the Minister on the recommendation of the Bank, no prescribed institution shall have an exposure to a single counterparty, whether in relation to its own funds or any trust fund it manages under section 43, which exceeds the limit as may be specified by the Bank.”;

(c)

by inserting after subsection (1) the following subsections:

“(1a) An exposure to a single counterparty referred to in subsection (1) shall include an exposure to any group of persons connected to such single counterparty but shall not include any exposure to, and any exposure explicitly guaranteed by, the Bank or the

Government.

(1b)

For the purposes of this section, the Bank may specify what constitutes “connected”, “counterparty”

or “exposure”.”; and

(d)

by deleting subsections (2), (3), (4), (5) and (6).

s 28Amendment of section 31

Section 31 of the principal Act is amended by deleting subsections (2) and (7).

s 29Amendment of section 32

Section 32 of the principal Act is amended by deleting subsections (2) and (5).

s 30Amendment of section 33

Section 33 of the principal Act is amended by deleting subsection (3).

s 31New Part IIIa

The principal Act is amended by inserting after section 33

the following Part:

“Part IIIa

ISLAMIC FINANCIAL BUSINESS

Division 1

Read on from Division 1

Division 2

Division 3

Division 4

Read on from Division 4

Schedules