Financial Services Act 2013

The Financial Services Act 2013 (FSA) and Islamic Financial Services Act 2013 (IFSA) finally came into force effective yesterday, more than seven months after Parliament approved the Acts in December 2012. “The FSA and IFSA amalgamate several separate laws to govern the financial sector under a single legislative framework for the conventional and Islamic financial sectors respectively, namely, the Banking and Financial Institutions Act 1989, Islamic Banking Act 1983, Insurance Act 1996, Takaful Act 1984, Payment Systems Act 2003 and Exchange Control Act 1953 which are repealed on the same date,” said Bank Negara Malaysia (BNM) in a statement issued yesterday.

“The new laws will place Malaysia’s financial sector, encompassing the banking system, the insurance/takaful sector, the financial markets and payment systems and other financial intermediaries, on a platform for advancing as a sound, responsible and progressive financial system,” said BNM.

According to the statement, one of the key features of the new legislation is greater clarity and transparency in the implementation and administration of the law due to clearly defined regulatory objectives and accountability of BNM in pursuing its principle objective of safeguarding financial stability, transparent triggers for the exercise of BNM’s powers and functions under the law, and transparent assessment criteria for authorising institutions to carry on regulated financial business and for shareholder suitability.

The IFSA gives a clear focus on Syariah compliance and governance in the Islamic financial sector where it provides a comprehensive legal framework that is fully consistent with Syariah in all aspects of regulation and supervision, from licensing to the windingup of an institution.

A key feature mentioned is “strengthened business conduct and consumer protection requirements to promote consumer confidence in the use of financial services and products.” Paul P Subramaniam who is the Knowledge Management & Training Partner at Zaid Ibrahim & Co in a report published in April that FSA also specifies prohibited business conduct (Schedule 7 of the FSA) where contravention may result in imprisonment not exceeding five years and/or a fine of no more than RM10mil or both.

The report said institutions are expressly prohibited from exerting undue influence and pressure on consumers to make debt repayments and to accept unsolicited offers for financial products and services.

Subramaniam said the FSA also prohibited exerting undue pressure, influence or using or threatening to use harassment, coercion, or physical force in relation to the provision of or payment for financial services or products; and exerting undue pressure on, or coercing financial consumers to acquire financial services or products as a condition for acquiring another financial service or product.

Early this year The Malaysian Reserve broke a story on how insurance/takaful companies keep disregarding BNM guidelines on “Immediate Measure to Ensure Wider Access to Motor Cover and Prohibition on Force-Selling” issued on May 2011 which prohibits insurance companies and takaful operators to force the sale of personal accident and/or other non-motor products to their customers.

In a response then, BNM emphasised that it engaged with these insurers/ takaful operators to ensure full compliance with the guidelines. - See more at: