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Malaysian securities regulator introduces robo-advisor framework

By Securities Commission Malaysia (SC)

The Securities Commission Malaysia (SC) today introduced the Digital Investment Management framework, setting out licensing and conduct requirements for the offering of automated discretionary portfolio management services to investors.

Digital investment management is a fund management business which incorporates innovative technologies into discretionary portfolio management services.

The framework, which is part of the SC’s digital agenda for the capital market, aims to provide investors with a more convenient, affordable and accessible channel to manage and grow their wealth. To reinforce investor protection, specific conduct requirements that commensurate with the distinctive characteristics of this new business model have been set out. This includes the requirement for the board to be accountable for the governance of the digital investment management business by ensuring that:

The requisite technology capabilities are in place including identification of competent person within the company who has sufficient understanding of the risks and rules of the algorithm applied;
The risk management framework is sufficiently robust to manage risks associated with the offering of automated discretionary portfolio management services including cyber security resilience;
The outcomes produced by the algorithm are consistent with the digital investment manager’s strategy; and
Written policies are in place to monitor and regularly test the algorithm employed.

Licensed portfolio management companies may provide digital investment management services if they satisfy all the requirements in the updated Licensing Handbook and relevant guidelines. Those who wish to offer digital investment management services may apply for the new licence effective 9 May 2017.

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