On 22 May 2026, the Securities Commission Malaysia (SC) officially issued Practice Note No. 2/2026: Application of Paragraph 1 of Schedule 3 of the Capital Markets and Services Act 2007 in Relation to Trust Companies.
This directive clarifies a critical regulatory boundary: trust companies registered under the Trust Companies Act 1949 do not automatically escape SC licensing requirements if their activities resemble capital-market activities. The SC is actively addressing cash trust and investment-linked trust structures that behave like deposit or investment schemes but operate under a trust-company registration.
Here is a breakdown of the new guidelines and how they impact trust operations.
When a Capital Markets Services Licence (CMSL) is Not Required
Conventional trustees are given regulatory breathing room under this practice note. A trust company can invest in capital market products without a CMSL if the investment activity is solely incidental to a conventional trust business.
This applies when the primary purpose remains focused on:
- Estate administration.
- Succession planning.
- Legacy planning.
- Education trusts.
- Dependency support.
- Asset preservation.
Examples of exempt activities include:
- An education trust investing to preserve or grow funds until children reach university age.
- An estate trust investing in unit trusts, shares, or bonds until beneficiaries reach a specified age.
- Recommendations or investment plans made strictly to support the overarching trust objective.
When a CMSL is Likely Required
If a trust company pools or manages money for returns through capital-market products, it cannot hide behind a trust-company wrapper. The SC requires a licence if the trust operates as an investment product.
Red flags that trigger SC licensing requirements:
- Standardised “one-size-fits-all” trust products marketed to the public.
- A required minimum investment amount (e.g., RM500,000).
- A fixed maturity period (e.g., five years).
- Projected quarterly or annual returns.
- Returns paid out independently of a real trust purpose.
- Performance-based fees linked to portfolio returns.
- Funds predominantly invested in capital market products like unit trusts, shares, or bonds.
- The settlor effectively acting as the sole beneficiary.
- Trust deeds stating expected dividends or profits.
Firms exhibiting these characteristics may be conducting regulated activities — such as dealing in securities, fund management, financial planning, or investment advice — and must hold a CMSL.
The Non-Capital Market Carve-Out
The SC specifies that if a trust exclusively invests in non-capital market products, it falls outside of securities laws and the SC’s purview.
Non-capital market products include:
- Fixed deposits.
- Real estate.
- Investment-linked insurance.
- Gold.
Note: While outside SC capital-market licensing, these activities are not “unregulated” and still require adherence to other relevant legal frameworks.
Compliance & Advisory Checklist
To ensure full compliance, trust companies should immediately evaluate their current structures. Wize Platform advises the following step-by-step review:
- Review the trust purpose: Determine if the structure is genuinely for estate, succession, or legacy planning, or if it functions as a marketed investment.
- Review marketing material: Audit materials for projected returns, maturity periods, dividend language, “safe return” claims, or any language resembling a public investment pitch.
- Review asset mix: Identify capital market products that trigger SC analysis. Ensure non-capital-market assets undergo separate legal and regulatory reviews.
- Review fee models: Identify any performance-linked fees that emulate fund management structures.
- Review beneficiaries: Assess structures where the settlor is the sole beneficiary, as this weakens the argument for a “conventional trust”.
- Engage the SC early: The SC actively encourages trust companies to engage with them directly if there is uncertainty regarding licensing requirements.