THE Securities Commission Malaysia (SC) has tightened oversight of trust companies involved in investment-related activities, stating that firms whose operations extend beyond traditional trust services must obtain a capital markets services licence.
In a Practice Note issued on 22 May and effective immediately, the regulator drew a sharper line between conventional trust businesses — typically focused on estate administration, succession planning and legacy management — and investment-style trust structures that resemble capital market products in practice.
Under the revised framework, trust companies may continue to offer investment-related services without a Capital Markets Services Licence (CMSL) only where such activities are “solely incidental” to their core trust functions.
However, the Commission emphasised that where investment activity becomes a substantive component of a business model rather than a supporting function, full licensing under capital markets law will be required.
“In light of the above, all trust companies are encouraged to engage the SC as to whether their trust business will require a licence from the SC,” it said.
The regulator clarified that conventional trust arrangements, such as family education trusts or estate administration structures, may still include financial planning, investment advisory and fund management services without triggering licensing requirements, provided these are strictly aimed at preserving trust assets.
By contrast, trust structures that actively promote projected investment returns, pool beneficiaries’ funds, and primarily deploy capital into capital market instruments fall within regulated activity and must be licensed under CMSL requirements.
The SC further noted that certain arrangements fall outside its regulatory scope where they do not involve capital market products, including structures limited to fixed deposits, real estate holdings, investment-linked insurance or gold-based investments.
The updated framework is issued under Paragraph 1 of Schedule 3 of the Capital Markets and Services Act, which grants the regulator authority to define “specified persons” exempt from licensing or registration requirements.
The move follows expanded regulatory powers granted to the Commission from 1 January, enabling it greater discretion in determining which trust companies and activities may operate without capital markets licensing under amendments to the Capital Markets and Services Act 2007.
Previously, cash trust schemes were regulated through trust companies registered with the Companies Commission of Malaysia (Companies Commission of Malaysia) under the Trust Companies Act 1949, alongside governance provisions under the Trustee Act 1949.
The tightening of rules forms part of broader government efforts to strengthen oversight of the trust industry.
Deputy Domestic Trade and Cost of Living Minister Datuk Dr Fuziah Salleh said in February that a new Trust Companies Bill is being prepared, aimed at defining permitted activities, enforcing mandatory registration, enhancing beneficial ownership disclosure requirements, strengthening governance standards, and setting clearer procedures for winding up or dissolving trust entities. - June 4, 2026