A NEW law to tighten regulations on trust companies and “cash trust” schemes is in the pipeline amid concerns over aggressive, high-return products targeting retirees and ordinary investors, says Datuk Dr Fuziah Salleh (pic).
The Domestic Trade and Cost of Living Deputy Minister said the current Trust Companies Act 1949 (Act 100) and the Trustee Act 1949 (Act 208) are limited in scope and insufficient in protecting consumers against questionable schemes.
She added that Act 100 is enforced by the Companies Commission of Malaysia (SSM) while Act 208, which regulates the conduct and activities of trustees, comes under the purview of the Prime Minister’s Department.
“Act 100 is limited to the registration, administration and governance of trust companies. It does not cover the enforcement or the monitoring of investment transactions carried out by these companies,” she said when replying to a question from Lee Chean Chung (PH–Petaling Jaya).
Lee wanted to know the progress of regulatory reforms for private trust companies and the status of amendments to Act 100 to make it mandatory to appoint a licensed fund manager.
Fuziah added that Act 100 has been under review since 2018 and will be replaced with a new Trust Companies Bill.
“The new Bill will introduce a more comprehensive framework, including clearer parameters for activities, a mandatory registration regime, provisions on investment and beneficial ownership, as well as governance, striking-off, corporate rescue, winding-up and dissolution,” she said.
She said public consultation on the proposed Bill began in April 2024, including engagement sessions with the Securities Commission, Bank Negara and other stakeholders.
“We are targeting to table it in Parliament this year, subject to Cabinet approval,” she added.
She explained that the law is needed as many “cash trust” arrangements are currently private agreements between individuals and trustees, which are not covered under Act 100.
“Under the current Act 208, trustees are not required to be registered.
“Section 4 allows them to undertake activities to generate returns from cash placed in trust,” she added.
Fuziah also said investments in capital market products are clearly regulated by the Securities Commission, while investments through licensed financial institutions are regulated by Bank Negara.
She added that Act 208 regulates the conduct of trustees and the types of investments allowed, such as sukuk and bonds.
“This is where there may be loopholes that we can improve,” she said, adding that the government views the issue seriously as operators exploit gaps between regulators to market risky schemes to the public.
Meanwhile, Datuk Abd Ghani Ahmad (PN-Jerlun) asked if the government would set up a special tribunal to speed up claims by victims of bogus trust schemes, instead of leaving them to lengthy court processes.
He also asked if the roles of trustees and investment managers would be separated to avoid conflicts of interest, even for entities registered with Bank Negara and the Securities Commission.
Fuziah said any move to create such a tribunal would have broad legal implications.
“It would require alignment with the Attorney General’s Chambers and the existing judicial system,” she said, adding that the proposal would be brought to the attention of the Prime Minister’s Department, which is responsible for Act 208.
