A Guide to Labuan Securities License: Requirements, Benefits, and Application Process

For businesses looking to engage in securities-related activities, the Labuan Securities License not only offers tax advantages but also provides opportunities to expand operations in global markets, enhancing the company’s market credibility. For investors, companies holding this license can offer more professional and compliant services, ensuring the legality and security of the investment process.

This article will explore in-depth the application requirements, benefits, scope, and process for obtaining a Labuan Securities License, providing a comprehensive and professional guide for investors and businesses interested in conducting securities-related activities in Labuan.

Overview of the Labuan Securities License

1. Basic Definition and Scope of the Labuan Securities License The Labuan Securities License, issued by the Labuan Financial Services Authority (Labuan FSA), is a legal certification that allows businesses or individuals to engage in securities-related activities. The establishment of the Labuan Securities License aims to provide financial institutions registered in Labuan with an efficient and compliant framework to operate a variety of financial services, especially securities-related activities, in the global financial markets.

According to the Labuan Financial Services and Securities Act (LFSSA), companies holding a securities license can engage in a range of securities-related activities, including but not limited to:

• Investment advisory services: Providing professional investment advice to clients to help develop investment strategies.
• Securities trading: Buying and selling securities such as stocks and bonds, underwriting securities, and providing related trade execution services.
• Securities and asset management: Providing portfolio management services to clients, helping them select and manage securities assets.
• Securities issuance and underwriting: Offering services for initial public offerings (IPOs) or bond issuance.
• Other securities-related services: Including financial planning, tax consulting, and other ancillary services.

By holding a Labuan Securities License, businesses or individuals gain legal authorization in the international securities market, enabling them to offer various financial products and services, expand their business scope, and increase customer trust.

2. Brief Introduction to the Labuan Financial Services and Securities Act (LFSSA) The Labuan Financial Services and Securities Act (LFSSA) is the core legal framework regulating Labuan’s financial markets and related business activities. Since its implementation in 2010, the LFSSA has provided detailed guidance and regulatory provisions for the operation and licensing of financial institutions in Labuan. The LFSSA covers various financial services such as banking, insurance, fund management, and securities, ensuring that all financial activities conducted in Labuan meet international standards and comply with Malaysian legal requirements.

Under the LFSSA framework, securities license holders are required to comply with a series of strict regulatory requirements, including anti-money laundering (AML) and combating the financing of terrorism (CFT) measures, risk management frameworks, audit and reporting requirements, among others. Additionally, the LFSSA sets forth regulatory policies for the securities market to ensure the transparency, legality, and security of all securities transactions and related activities.

3. Main Functions and Types of Businesses for Securities License Holders Securities license holders in Labuan can engage in various securities-related businesses, with specific functions including:

• Investment advisory services: Securities license holders can offer investment advice to clients, helping them design asset allocation and investment strategies. Services may cover various investment tools such as stocks, bonds, options, derivatives, and provide customized investment consulting based on client needs.
• Securities trading services: Securities license holders can represent clients in buying and selling securities, offering market entry and exit strategies. This includes trade execution and also market analysis and investment advice.
• Asset management: Providing investment portfolio management services for high-net-worth individuals and institutional investors, analyzing market trends, assessing risk and returns, and assisting clients in asset appreciation.
• Securities underwriting: Securities license holders can assist companies in issuing stocks or bonds, offering underwriting services to help businesses raise capital through the securities market.
• Securities issuance and management: License holders can participate in securities issuance management and provide related services to other companies.

With a Labuan Securities License, holders can engage in a wide range of securities-related activities, enhancing their credibility and influence in the global capital markets.

Advantages of Obtaining the Labuan Securities License

1. Tax Advantages: 3% Low Corporate Tax Rate, Tax Benefits Obtaining a Labuan Securities License offers significant tax advantages for businesses. First, companies registered in Labuan enjoy attractive tax benefits. Through the regulatory framework of the Labuan International Business and Financial Centre (IBFC), corporate income tax rates are as low as 3%, which is much lower than the standard tax rates in most countries globally. This means that after obtaining the Labuan Securities License, companies can significantly reduce their tax burden, thereby improving profitability.

Additionally, Labuan provides a range of tax incentives, such as:

• Exemption from capital gains tax: Capital gains generated from securities transactions are not subject to taxation.
• Exemption from estate, gift, and other taxes: Offering tax relief for investors and company executives.
• Wide double taxation treaties (DTA): Labuan has signed tax treaties with numerous countries and regions, avoiding double taxation and ensuring tax efficiency for cross-border operations.

These tax advantages make Labuan an attractive choice for international financial services companies and investment institutions, especially those looking to optimize their global tax structure.

2. Market Access and Credibility: Provides Opportunities to Enter International Markets and Enhance Corporate Credibility Obtaining a Labuan Securities License gives businesses excellent market access. As an international financial center, Labuan has a strategic geographical location, offering companies opportunities to enter Asian and global markets. With a Labuan Securities License, businesses can directly access major financial markets across Asia, Europe, and the Americas, expanding their client base and investment opportunities.

Furthermore, holding a Labuan Securities License will significantly enhance a company’s credibility in the market. As a regulated financial entity by the Labuan FSA, businesses with a securities license are considered to comply with international financial standards and Malaysian legal requirements, fostering trust among investors, partners, and regulators. Especially for cross-border transactions, securities investments, and asset management, the presence of the license provides a higher level of credibility, increasing trust among global investors.

3. Simplified Operations: Clear Legal Framework and Regulatory Environment to Reduce Administrative Barriers Another significant advantage of the Labuan Securities License is the simplified operational process. Labuan offers an efficient and straightforward registration and operating environment for international financial companies, with a clear and transparent legal framework. Compared to other countries, Labuan’s financial regulatory policies are generally more flexible, reducing unnecessary administrative procedures and complicated approval processes while ensuring compliance.

Specific advantages include:

• Simplified license application process: The application process for a Labuan Securities License is clear and efficient, typically completed within a short period, reducing waiting times for businesses.
• Clear compliance requirements: Labuan’s legal framework requires securities license holders to comply with basic compliance guidelines such as anti-money laundering (AML) and combating the financing of terrorism (CFT), ensuring businesses operate within legal boundaries without excessive administrative scrutiny.
• Flexible operational management: Companies can set up their operational model and management structure according to business needs, maximizing operational efficiency.

This simplified operational process not only reduces administrative costs but also enables businesses to focus more on core operations, enhancing their competitiveness in global securities markets.

Scope of the Labuan Securities License

After obtaining the Labuan Securities License, businesses and individuals can engage in various financial services. Key activities include:

1. Investment Advisory Services: Providing Investment Strategies and Securities Consulting Securities license holders in Labuan can offer comprehensive investment advisory services, including tailoring investment strategies, providing market analysis, investment advice, and securities consulting. This service is suitable for businesses or individual investors who wish to optimize their portfolios with professional advice.

Specifically, securities license holders can provide:

• Investment strategy formulation: Developing short- and long-term investment plans based on clients’ financial goals, risk tolerance, and market trends.
• Securities consulting: Offering advice on stocks, bonds, funds, and other securities, helping clients make more informed investment decisions.
• Market analysis and reports: Providing real-time investment information and advice based on market trends, macroeconomic data, and industry developments.

With professional investment advisory services, Labuan securities license holders can help clients with effective asset allocation, reducing investment risks, and enhancing returns.

2. Securities Trading and Brokerage Services: Conducting Securities Trading and Acting as a Broker Labuan securities license holders are also allowed to legally conduct securities trading and brokerage services. This means they can buy and sell securities on behalf of clients or act as brokers to execute buy and sell orders.

Key activities include:

• Securities trading: Acting as a buyer or seller of securities in various transactions (such as stocks, bonds, etc.), and offering direct trading services to clients or executing orders on stock exchanges.
• Securities brokerage: Acting as intermediaries, securities license holders can assist clients in executing trades and charge commissions or fees.
• Securities underwriting: Some license holders may also participate in securities underwriting, assisting companies in issuing stocks, bonds, and other financial instruments.

Securities trading and brokerage services enable Labuan license holders to provide comprehensive services in the securities market, extending their reach to global investors due to Labuan’s international standing.

3. Funds Management: Managing Client Funds and Assets in the Securities Field In addition to investment advisory services and securities trading, Labuan securities license holders can also engage in fund management activities. As fund managers, companies will offer professional asset management services, helping clients manage their funds, allocate assets, and ensure the growth and security of their capital.

Fund management activities include:

• Asset allocation and management: A professional team will diversify investments based on client needs and risk preferences, implementing risk control measures to ensure asset appreciation.
• Fund custody: Securities license holders can offer fund custody services, ensuring that clients’ funds are used according to regulations and always comply with supervisory requirements.
• **Customized asset management plans

The Labuan Securities License, with its low tax rate, simplified compliance framework, and extensive market access, has become an essential tool in the global investment management and financial services sectors. By obtaining this license, businesses can not only optimize their tax structure but also enhance their credibility and competitiveness in international markets. For enterprises looking to engage in securities investment, wealth management, or related activities, Labuan offers an ideal operating environment.

As an experienced professional services provider, Fionza is dedicated to offering comprehensive support for clients applying for the Labuan Securities License. We will assist you in successfully completing the application process, ensuring compliant operations, and maximizing the tax and market advantages brought by the Labuan Securities License. We recommend that interested investors collaborate with Fionza to efficiently and compliantly obtain the Labuan Securities License, laying a solid foundation for future business expansion.