DEVELOPMENT FINANCIAL INSTITUTIONS ACT 2002

LAWS OF MALAYSIA ONLINE VERSION OF UPDATED TEXT OF REPRINT Act 618 DEVELOPMENT FINANCIAL INSTITUTIONS ACT 2002 As at 6 October 2023 This text is ONLY AN UPDATED TEXT of the Development Financial Institutions Act 2002 by the Attorney General’s Chambers. Unless and until reprinted pursuant to the powers of the Commissioner of Law Revision under subsection 14(1) of the Revision of Laws Act 1968 [Act 1], this text is NOT AN AUTHENTIC TEXT. 2 DEVELOPMENT FINANCIAL INSTITUTIONS ACT 2002 … … … ... 29 January 2002 Date of publication in the Gazette … … … ... 7 February 2002 Latest amendment made by P.U. (A) 300/2023 which came into operation on … … … ... 6 October 2023 Date of Royal Assent PREVIOUS REPRINTS First Reprint … … … … … 2004 Second Reprint … … … … … 2006 Third Reprint … … … … … 2008 3 LAWS OF MALAYSIA Act 618 DEVELOPMENT FINANCIAL INSTITUTIONS ACT 2002 ARRANGEMENT OF SECTIONS PART I PRELIMINARY Section 1. Short title and commencement 2. Application 3. Interpretation 4. Functions of the Bank PART II MANAGEMENT, OWNERSHIP AND CONTROL 5. Board of directors 5A. Duties of directors 6. Appointment of Chief Executive Officer and directors 6A. Compliance with criteria in First Schedule 7. Disqualification of Chief Executive Officer and director 8. Cessation of office 9. Exemption from disqualification 10. Notice of cessation of office 11. Disclosure of interest 12. Acquisition of interest in shares 13. Report of acquisition to the Bank 4 Laws of Malaysia ACT 618 Section 14. Change in control, amalgamation and merger 15. Transfer of business 16. Application to High Court for transfer of business 17. Transfer of immovable property 18. Own shares or shares of holding company as collateral 19. Application to the Bank 20. Defence relating to contravention 21. Effect of contravention 22. Preliminary order by the Bank 23. Confirmation of preliminary order 24. Direction to give effect to order PART III RESTRICTIONS ON BUSINESS 25. Control of establishment or acquisition of subsidiaries or acquisition or holding of material interest in corporations 26. Direction in respect of subsidiary or material interest in corporations 27. Restriction or prohibition of business 28. Prohibition of financing facilities 29. Single counterparty exposure limit 30. Restriction on giving of financing facility 31. Disclosure of director’s interest 32. Control of credit limit 33. Investment of assets Development Financial Institutions 5 PART IIIA ISLAMIC FINANCIAL BUSINESS Division 1 Interpretation Section 33A. Interpretation and application 33B. Prescribed institution permitted to carry on business or activity in accordance with Shariah 33C. Requirement on prescribed institution approved under paragraph 33B(1)(b) Division 2 Shariah compliance 33D. Duty to ensure compliance with Shariah 33E. Power of the Bank to specify standards on Shariah matters Division 3 Shariah governance 33F. Establishment of Shariah committee 33G. Appointment of Shariah committee member 33H. Functions and duties of Shariah committee and its members 33I. Cessation as member of Shariah committee 33J. Notice of cessation as member of Shariah committee 33K. Information to be provided to Shariah committee 33L. Qualified privilege and duty of confidentiality Division 4 Audit on Shariah compliance 33M. Appointment of person by prescribed institution to conduct audit on Shariah compliance 6 Laws of Malaysia ACT 618 Section 33N. Appointment of person by Bank to conduct audit on Shariah compliance PART IV OBLIGATIONS AND SOURCING OF FUNDS 34. Statement of corporate intent 35. Annual funding 36. Restrictions on payment of dividend 37. Maintenance of liquid assets 38. Maintenance of capital funds 39. Maintenance of reserve fund 40. Maintenance of assets in Malaysia 41. Power of Bank to specify other prudential requirements 42. Amendment of constituent documents PART IVA BUSINESS CONDUCT AND CONSUMER PROTECTION 42A. Interpretation 42B. Application 42C. Standards on business conduct 42D. Prohibited business conduct 42E. Financial Ombudsman Scheme PART V DEALINGS WITH GOVERNMENT FUNDS 43. Establishment and maintenance of trust fund 44. Utilization of trust funds 45. Investment of trust fund 46. Credit into trust fund 47. Property of trust fund as collateral Development Financial Institutions Section 48. Valuation of trust fund 49. Transfer of trust fund 50. Breach of trust 51. Determination of trust fund 52. Application of a trust fund in a winding up PART VI CONTROL OF DEFAULTER 53. Inability to meet obligations 54. Action by the Bank 55. Action by the Minister 56. (Deleted) 57. Appointment under section 54 58. Removal from office under section 54 59. Assumption of control 60. Reduction of share capital and cancellation of shares 61. Extension of jurisdiction 62. Moratorium PART VII AUDITOR AND ACCOUNTS 63. Appointment of auditor 64. Disqualification of auditor 65. Restriction on audit firm 66. Consent to act as auditor 67. Appointment of audit firm 68. Auditor not deemed to be employee 69. Auditor’s report 70. Additional requirement on auditor 7 8 Laws of Malaysia ACT 618 Section 71. Auditor to report certain matters to the Bank 72. Information to auditor 72A. Qualified privilege and duty of confidentiality 73. Annual accounts 74. Quarterly returns 75. Accounting standards 76. Annual accounts and quarterly returns to be rectified 77. Submission of annual accounts 78. Action in relation to annual accounts 79. Admissibility of document 80. Liability where accounting records and information not kept 81. Application to trust fund PART VIII EXAMINATION AND INVESTIGATION 82. Examination by the Bank 83. Power of Minister to direct examination 84. Duty to produce and provide access to document and information 85. Examination of person other than prescribed institution 86. Appearance before bank 86A. Confidential information 87. Investigation by the Bank 88. Appointment of investigating officer 88A. Governor to have powers and functions of investigating officer 89. Powers of an investigating officer 90. Power to examine persons 91. Admissibility of evidence 92. Search of person 93. Obstruction to exercise of powers by an investigating officer Development Financial Institutions 9 Section 94. Requirement to provide translation 95. Delivery of property, record, report or document 96. Seizing of property, record, report or document 97. Release of property, record, report or document seized 98. Investigating officer may arrest without warrant 99. Arrested person to be made over to police officer 99A. Service of orders or notices generally, etc. 99B. Surrender of travel documents 99C. Agent provocateur 100. Assistance to police or other public officer 101. Investigating officer deemed to be public servant and public officer 102. Report to Minister 103. Powers of Minister 104. Application of sections 84 to 86 105. Application of sections 89 to 101 106. Provisions of this Part to prevail PART VIIIA ADMINISTRATIVE ACTION 106A. Power of the Bank to take action 106B. Lodgement of amount not distributed with Registrar of Unclaimed Moneys 106C. Power of Bank to prescribe monetary penalty 106D. Application for appeal of decisions PART VIIIB CIVIL ACTIONS 106E. Civil action by Bank 106F. Orders by court 106G. Civil action to seek compensation 10 Laws of Malaysia ACT 618 Section 106H. Interim orders 106I. Contravention of court order 106J. No undertaking as to damages 106K. Other actions 106L. Evidence obtained in investigations may be used in civil proceedings PART IX MISCELLANEOUS 107. (Deleted) 107A. Enforceable undertakings 108. Falsification, concealment and destruction of document 108A. Imprisonment 109. Offence by body corporate 110. Offence by an individual 111. Joinder of offences 112. Seizable offence 113. Power of Governor to compound offences 114. Attempts, preparations, abetments and conspiracies punishable as offences 114A. Prosecution 114B. Protection in relation to disclosure of information to Bank 114C. Evidential provision 114D. Power of Bank to publish information 115. Annual report 116. Submission of information and statistics 117. Indemnity 118. Prohibition on receipt of gifts, commission, etc. 119. Secrecy 120. Permitted disclosure 121. Decision of Minister to be final Development Financial Institutions 11 Section 122. Exemptions 123. Regulations 123A. Provisions relating to approvals, consents, standards, specifications, notices, requirements or directions 123B. Opportunity to make representations 124. Amendment of Schedule 125. Application of other laws 126. Power of the Bank to issue guidance 127. Application of measures relating to international and domestic transactions 128. Contravention not to affect contract, agreement or arrangement 129. (Deleted) 130. Savings FIRST SCHEDULE SECOND SCHEDULE THIRD SCHEDULE FOURTH SCHEDULE 13 LAWS OF MALAYSIA Act 618 DEVELOPMENT FINANCIAL INSTITUTIONS ACT 2002 An Act to make provisions for the regulation and supervision of development financial institutions and for matters connected therewith. [15 February 2002, P.U. (B) 51/2002] ENACTED by the Parliament of Malaysia as follows: PART I PRELIMINARY Short title and commencement 1. (1) This Act may be cited as the Development Financial Institutions Act 2002. (2) This Act comes into operation on a date to be appointed by the Minister by notification in the Gazette. Application 2. (1) This Act shall apply to such development financial institutions as may be prescribed by the Minister by order published in the Gazette. (2) For the avoidance of doubt, the Minister may, by order published in the Gazette, on the recommendation of the Bank, provide 14 Laws of Malaysia ACT 618 that all or any part of the provisions of this Act shall not apply in respect of any development financial institution, or shall apply with such modifications as may be set out in the order and such modifications must be consistent with the intent and purpose of this Act. Interpretation 3. (1) In this Act, unless the context otherwise requires— “child” includes an illegitimate child, a step-child and a child adopted under any written law of Malaysia or of any place outside Malaysia, or under any custom recognised by a class of persons in or outside Malaysia; “member”, in relation to an institution which is— (a) a corporation, means a shareholder; and (b) a partnership, means a partner; “statutory body” means any authority or body, whether corporate or unincorporate, established, appointed or constituted by any written law, but does not include any local authority; “Bank” means the Central Bank of Malaysia established under the *Central Bank of Malaysia Act 2009 [Act 701]; “related”, in relation to a corporation, means related within the meaning of section 6 of the **Companies Act 1965 [Act 125]; “books” includes any register or other record of information and any accounts or accounting records, however compiled, recorded or stored; *NOTE—The Central Bank of Malaysia Act 2009 [Act 701] has repealed the Central Bank of Malaysia Act 1958 [Act 519] which comes into operation on 25 November 2009–see section 99 of Act 701. **NOTE—The Companies Act 1965 [Act 125] has been repealed by the Companies Act 2016 [Act 777] which comes into operation on 31 January 2017–see subsection 620(1) of Act 777. Development Financial Institutions 15 “collateral” includes a mortgage or charge (whether legal or equitable), debenture, bill of exchange, promissory note, guarantee, lien or pledge (whether actual or constructive), hypothecation, indemnity, undertaking or other means of securing p