Structured products in Malaysia: how the SC regulates them

What is a structured product?

The SC's Guidelines on Unlisted Capital Market Products define a structured product by reference to an underlying reference, which can be any security, index, currency, commodity or other asset, or a combination of them. Examples the SC gives include:

• Equity-linked, index-linked and bond-linked notes.
• Currency-linked and interest rate-linked notes.
• Commodity-linked and credit-linked notes.
• Floating rate negotiable instruments of deposit (NIDs) and Islamic NIDs with a tenure of more than five years.

Who can issue structured products in Malaysia?

A qualified bank or dealer may also issue a structured product of a foreign parent or related corporation that is licensed as an equivalent in its home country. Structured products issued by an SPV must be fully collateralised or guaranteed by a qualified bank, and Islamic structured products must also comply with the SC's Guidelines on Islamic Capital Market Products and Services.

• Qualified banks: licensed banks, licensed Islamic banks and licensed investment banks.
• Qualified dealers: Capital Markets Services Licence holders for dealing in securities that are universal brokers, 1+1 brokers or special scheme brokers.
• Locally incorporated special purpose vehicles (SPVs) sponsored by a qualified bank or qualified dealer.
• Cagamas Bhd and SPVs it sponsors, where the underlying reference is limited to assets originated in the domestic banking sector.

How does the Lodge and Launch framework work?

Under Lodge and Launch, an unlisted product does not need the SC's approval under section 212 of the CMSA, provided the guidelines are complied with. Instead, the issuer lodges true, complete and accurate information and documents with the SC before launching. The SC says the framework aims to improve process efficiency, shorten time to market and give certainty to product offerings. For structured products:

• Lodgement is made for a structured product programme of up to RM5 billion, which must be fully used within three years of lodgement.
• Any rating must come from a credit rating agency registered with the SC.
• Approvals from other regulators, including BNM, must be in place before issue.
• Information for each new series must be submitted before its first issue, and the issuer files a monthly post-issuance report within seven business days of each month-end, even if nothing was issued.
• Terms and conditions of a programme or a product already issued cannot be revised.

Who invests in structured products?

The SC's 2023 annual report recorded 167 structured product series lodged under the Lodge and Launch framework for offering to sophisticated investors that year. High-net-worth individuals made up 91.9% of investors.

Sophisticated investors are defined in the SC's Guidelines on Categories of Sophisticated Investors, issued on 5 February 2024. Besides accredited investors and high-net-worth entities, an individual qualifies as a high-net-worth individual if, for example:

• net personal assets exceed RM3 million, with the primary residence counting for no more than RM1 million;
• gross annual income exceeded RM300,000 in the preceding 12 months, or RM400,000 jointly with a spouse or child; or
• their net investment portfolio in capital market products exceeds RM1 million.

What disclosure must structured product investors get?

The issuer must disclose the principal terms and conditions and the risks of the product to all investors and ask them to confirm that disclosure was made.

Under the SC's Guidelines on Product Highlights Sheet, a product highlights sheet (PHS) is required for retail investors, high-net-worth individuals and investors putting in at least RM250,000 per transaction, and for high-net-worth entities unless they opt out. It is not required for accredited investors. For a structured product, the PHS must carry a warning on its first and last pages that returns depend on the underlying reference and that early redemption may put recovery of the principal at risk.

Distributors must tell investors they are entitled to a PHS, provide it before the investment decision and give them reasonable time to read it.

What suitability rules apply?

The SC's Guidelines on Conduct for Capital Market Intermediaries (revised 1 October 2024) set the rules on personal advice. Advice incidental to dealing in securities is usually exempt, but not personal advice on structured products. Before giving advice, the intermediary must:

• explain why it is gathering the client's information, and the risk of putting all or a large part of the client's funds into one product;
• form a reasonable basis for the advice, matching products to the client's investment objectives, financial situation, risk tolerance, knowledge and experience; and
• document the information gathered and the advice given.

What do the SC's product governance guidelines add?

The SC issued Guidelines on Product Governance on 24 June 2025, effective 2 January 2026. They apply to unlisted capital market products, except ordinary shares, over-the-counter derivatives, venture capital and private equity funds and products on recognised market operator platforms. They require issuers and distributors to put investors' interests first when designing and distributing products, to have controls that improve suitability for the intended target market and prevent harm to investors, to hold the board and management accountable, and to share information so that products continue to serve their intended purpose.

Structured products training from Ogos Learning

Ogos Learning runs derivatives and fixed income training for bank and capital market teams, including on structured products. Founder and principal trainer Jin Yoong Chong, CFA, is an HRD Corp accredited trainer who has run accredited CPE courses for capital market licence holders since 2010. He has served as President of the CFA Society Malaysia and authored the PKMC Module 2, 3 and 4 textbooks with AICB.