Financial ombudsman scheme

Financial ombudsman scheme was appointed by the governmant or parliament. The

purpose of this scheme is to solve all the problems that arise. It is one of the key
changes to strengthen the consumer protection under Financial Services Act (FSA)
and Islamic Financial Services Act (IFSA). The establishment of this financial
ombudsman schemeis because to ensure the effective and fair handling of
complains and at the same time to resolve disputes in connection with financial
services or products
Each of the financial service providers is required to be the member of the financial
ombudsman scheme and to comply with the terms of its membership. The
regulations that are set out in the financial ombudsman scheme are the operational
details of the scheme, types of disputes that may be referred, eligible complainants,
membership requirements, procedures, fees charged and awards.

Impacts of the FSA / IFSA 2013

Parliament of Malaysia has enacted the Financial Services Act 2013 (FSA) and the
Islamic Financial Services Act 2013 (IFSA). These two acts were established in the
Gazette on 22nd March 2013. There are five impacts of the FSA /IFSA 2013.
The first impact of FSA/IFSA is it restructuring the financial holding company. It
means that, if impacted companies do not want to become financial holding
companies under the acts, they may pare down their staes in respective financial
institutions below 50%.
The second impact of FSA/IFSA is restructuring corporate which is issurers. It means
the company ios separated into two lgal entities. It is about the separation into two
legal entities or divestment of one of the business.
The third is to audit compliance. In this case, it gives impacts on the companies to
allocate more resources to improve any weaknesses in intrnal control that arise.
Fourth is it gives impacts on individual shareholding limit. It means that, the limit to
hold the shares are available. Shareholders are restricted to the percentage that
allowed. The impacts that occurred are individuals may need to pare down their
stakes to only 10% or below than that allowed percentage.
The last impacts that aris is talent recruitment. In this case, Bank Negara Malaysia
have approved for appointment of chairman, director and chief executive officer; a
senior officer can only be appointed if the person fulfils the requirements stated in
the Acts and as specified by BNM.

Central Bank of Malaysia Act 2009 (CBMA)

This act was established to provide for continued existence of Central Bank of
Malaysia and for administration, objects, functions and powers of the banks. It can
be whether for consequential or incidental matters. The most significance of this
new provision is Part VII that is under the heading islamic financial business.
Part VII is divided into 2 chapters. Chapter 1 discuss about the Syariah Advisory
Council as stated in Section 51 until to Section 58. Meanwhile, in Chapter 2 it
discuss about the powers of the Bank that started from Section 59 to Sction 60. This
part provides for islamic financial businss which defined under section 2 as any
financial business in ringgit or other currency that are subjected to the laws
enforced by the bank and consistent with the Shariah.
The Shariah Advisory Council on Islamic Finance shall be established by Central
Bank of Malaysia of section 51 and the council shall be the authority for
ascertainment of Islamic law for purposes of Islamic financial business. This council
is also given the authority to determine its own procedures in carrying the duties
under the act. There are four functions of Shariah Advisory Council. The first one is
to ascrtain the Islamic law on any financial matter and issue a ruling upon reference
made to it in accordance with part VII of the act. Second, it is to advise the bank on
any shariah issue rlating to Islamic financial business, or activities or transactions of
bank. Third, to provide advice to any Islamic financial institutions or other person as
provided under any written law in force in Malaysia and such other functions as may
be determined by bank.
Shariah Advisory Council shall examine and endorse the validity of application of
shariah in Islamic financial product which submitted by Islamic financial institutions
under supervision of Central Bank of Malaysia. Islamic financial institutions also may
seek the advice; refer for ruling from SAC on operations of its business to ascertain
it did not involve any element of inconsistent with shariah.
In case of conflict between ruling issued by shariah committee of Islamic financial
institutions and ruling issued by SAC, the ruling of SAC shall prevail and be
applicable. Section 57 also provides that any ruling made by Shariah Advisory
Council is pursuant to as a reference made under Chapter VII shall be binding on
Islamic financial institutions.
In 2005, Central Bank has prepared guidelines on governance of shariah committee
for islamic financial institutions that regulates governance of shariah committee of
islamic financial institutions. These guidelines shall be applicable to all islamic

financial institutions and supervised under Central Bank under Islamic Banking Act
1983 ( IBA ). It set the roles, scope of duties and rsponsibilities of Shariah
Committee and its members also the relationships between Shariah Committee and
SAC board of Central Bank. The framework is divided into six sectors which are
genral requirements of shariah governance framework, oversight, accountability
and responsibility, independence, competency, confidentiality and consistency and
shariah compliance and research functions. These framework requires shariah
governance framework on islamic finance institutions.

An overview of the framework under BNM Act 2009

Proper governance provides multi layer assurance on shariah compliance is divided
into six. They are SAC were given the legislative stature as highest authority shariah
matters in Islamic finance, accountability of shariah committee of Ifs on decision,
views and opinion related to shariah matters, board and senior management with
sufficient expertise and capability in dealing with issues specific to islamic financial
transactions, emphasis the function of shariah review and shariah audit to provide
check and balance, timely disclosure on fatwa rulings and institutionalise mutual
respect by recognising differences of shariah interpretations in various jurisdiction.