Introduction
Have you ever received ads on social media promoting investment platforms? Some platforms push forex. Others promote stock and futures trading. Every now and then you’d find yourself receiving ads for cryptocurrency and digital assets trading platforms.
Are they legal? Are they genuine?
‘Legal’ and ‘genuine’ are two different characteristics. A legal platform is one that operates under the purview of Malaysian law. Genuine platforms, on the other hand, are platforms that actually facilitate transactions. You are receiving something – albeit in abstract form – in exchange for your money.
Who regulates investments in Malaysia?
In Malaysia, two key government entities are primarily involved in regulating and overseeing the investment landscape and financial ecosystem: the Securities Commission and Bank Negara Malaysia
The Securities Commission is the primary agency with oversight over the capital market. It draws its authority from various laws including the:
- Capital Market and Services Act 2007;
- Securities Commission Malaysia Act 1993;
- Securities Industry (Central Depositories) Act 1991;
- Demutualisation (Kuala Lumpur Stock Exchange) Act 2003;
- Securities Industry Act 1983; and
- Futures Industry Act 1993.
Bank Negara Malaysia, on the other hand, is responsible to promote monetary and financial stability. This includes overseeing the stability of Malaysia’s currency (the Malaysian Ringgit), security of payment systems, minting and printing of currency, as well as ensuring the soundness of the financial institutions. Among the laws from which Bank Negara Malaysia draws its authority include:
- Central Bank of Malaysia Act 2009;
- Financial Services Act 2013;
- Islamic Financial Services Act 2013;
- Money Services Business Act 2011;
- Anti-Money Laundering, Anti Terrorism Financing and Proceeds of Unlawful Activities Act 2001;
- Exchange Control Act 1953;
- Money Changing Act 1998; and
- Currency Act 2020.
These two statutory bodies often work together as some subject matters involve each other’s jurisdiction. Currency exchange, for instance, falls under the purview of Bank Negara Malaysia. But what about foreign exchange (FOREX) trading? The platform falls under the Security Commission’s supervision.
Take another example: the use of cryptocurrency. Cryptocurrencies are not legal tenders in Malaysia. Bank Negara Malaysia has jurisdiction over the use of currency as means of transactions. However, as an investment product, cryptocurrencies trading comes under the Securities Commission’s oversight.
Recognizing the rapid evolution of investments and fintech coupled with its growing complexities, both Bank Negara Malaysia and the Securities Commission collaborate with each other and hold annual bilateral meetings to discuss areas of mutual interests. This includes the ever-growing list of online investment options for Malaysians.
What Online Investment Options are available to Malaysians?
Online Investment Malaysia #1: Digital Investment Management
Digital Investment Management (DIM) is fund management that uses innovative technologies to give investors automated discretionary portfolio management services. The platform or app will help understand your needs and propose a solution. Based on your selection, the artificial intelligence (AI) will implement that solution for you while it monitors and adjusts the strategy for you.
Online Investment Malaysia #2: Equity Crowdfunding (ECF)
As an investor, you get to invest in small enterprises through online platforms which help these businesses to raise capital. These platforms publicize and facilitate the offers to investors. First-time investors interested in owning a small stake in these businesses may find ECF a palatable investment. The low minimum investment threshold helps them build their portfolio while keeping their exposures limited.
Online Investment Malaysia #3: Peer-to-Peer Financing (P2P)
Funding Societies, Southeast Asia’s largest SME Digital Financing platform, falls under the peer-to-peer financing (P2P) category. Investors pool together their capital to provide financing facilities to businesses. In return for the loan, investors receive interest payments and capital repayment. Unlike ECF, P2P financing investors do not own any equity in the borrowers’ businesses. These loans often cover short-term financing. The repayment of capital and interest will be based on the term of that loan.
Online Investment Malaysia #4: Digital Asset Exchange (DAX)
Digital Asset Exchange (DAX) sounds alien to many. These are the online investment platforms that facilitate digital assets trading. But what are ‘digital assets’? According to the Securities Commission, these currently include cryptocurrencies like Bitcoin (BTC), Ether (ETH), Ripple (XRP), Litecoin (LTC), and Bitcoin Cash (BCH).
Online Investment Malaysia #5: Digital Broker
Digital brokerage allows Malaysians to purchase stocks listed on Bursa Malaysia and selected international stock exchanges as well as Exchange Traded Funds (ETF). Depending on your risk appetite, you may use the brokerage to purchase and hold onto these stocks. Alternatively, you can tap into the day trading opportunities.
Conclusion
Fintech is continuously pushing the boundaries globally and in Malaysia. Never before do Malaysians have so much online investment options today than ever before. However, investing – like any personal finance undertaking – requires an understanding of the platforms and investment vehicles. Some investment options are suitable because of age or savings. It goes back to your personal finance goals which will dictate your strategy.
As you explore and educate yourself, it is important to understand the nuances involved, especially where ‘legal’ or ‘regulated’ and ‘genuine’ are concerned. Both the Securities Commission and Bank Negara Malaysia will update the list of regulated fintech players and institutions. In a similar vein, they will issue warnings and advisories on reported scams related to investments.
No doubt we may receive ads on social media and websites promoting a platform. The question you need to ask yourself when you click on these ads are: (1) are these platforms regulated and licensed in Malaysia? (2) Are these platforms and the items they sell genuine?
Investing is in itself a risky affair. Yet, you can manage the risk through your education, managing your exposure, adapting your investment strategy, reexamining your investment plans, and understanding the state of your personal finances.
Plan to diversify your investment portfolio? Click here to start your investment with Funding Societies Malaysia.
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Disclaimer: The information provided to you in this blog post is intended only for general information purposes only and does not constitute legal or other professional advice on any subject matter. The materials and the information provided are not intended to be and do not constitute an advertisement or solicitation. In no event will Funding Societies be liable to any party for any direct, indirect, incidental, special, consequential or punitive damages for use of such information by you or any unauthorized third party.