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Malaysian Banking Law: Difference Between “Authorised Person” and “Approved Person”
Case Scenario
Mei Ling deals with two financial institutions in Malaysia. One is a licensed bank offering deposit accounts and loans, while the other operates a payment system and provides financial advisory services. When an issue arises, she assumes both are regulated in the same way. However, the law distinguishes between an “authorised person” and an “approved person.” What is the difference?
Explanation (Q&A Format )
Q1: What is an “authorised person” under the Financial Services Act 2013?
An authorised person is a broad category referring to any entity that is legally permitted to carry on regulated financial activities. This includes both licensed and approved entities.
Q2: What is meant by a “licensed person”?
A licensed person is an institution that has obtained a formal licence to conduct core financial businesses such as banking, insurance, or investment banking. These are typically highly regulated and central financial institutions.
Q3: What is an “approved person”?
An approved person is an entity that does not hold a full licence but has been granted approval by the regulator to carry out specific financial activities listed under the law.
Q4: What kinds of activities do approved persons usually perform?
Approved persons are typically involved in specialised or supporting services such as:
The main difference lies in the level and scope of authorisation:
Yes. The term “authorised person” is an umbrella term that includes both licensed persons and approved persons.
Practical Application
In practice, a bank in Malaysia is a licensed person, while a company operating a payment gateway or providing financial advice may be an approved person. Both are regulated, but the scope of regulation differs depending on the nature of their activities.
Critical Analysis
This distinction reflects a modern regulatory approach. Instead of treating all financial institutions the same, the law differentiates between core banking activities and supporting financial services. This allows for proportionate regulation—stricter control over banks and more tailored oversight for specialised service providers. However, this layered system may confuse customers who assume all regulated entities have identical responsibilities.
Resolution of the Case Scenario
In Mei Ling’s case, the licensed bank is a licensed person and therefore an authorised person with full banking responsibilities. The other institution, if only approved to operate a payment system or advisory service, is an approved person and also falls under the category of authorised person but with a narrower scope of duties. Therefore, while both are regulated, their legal obligations and responsibilities differ based on the type of authorisation they hold.
Case Scenario
Mei Ling deals with two financial institutions in Malaysia. One is a licensed bank offering deposit accounts and loans, while the other operates a payment system and provides financial advisory services. When an issue arises, she assumes both are regulated in the same way. However, the law distinguishes between an “authorised person” and an “approved person.” What is the difference?
Explanation (Q&A Format )
Q1: What is an “authorised person” under the Financial Services Act 2013?
An authorised person is a broad category referring to any entity that is legally permitted to carry on regulated financial activities. This includes both licensed and approved entities.
Q2: What is meant by a “licensed person”?
A licensed person is an institution that has obtained a formal licence to conduct core financial businesses such as banking, insurance, or investment banking. These are typically highly regulated and central financial institutions.
Q3: What is an “approved person”?
An approved person is an entity that does not hold a full licence but has been granted approval by the regulator to carry out specific financial activities listed under the law.
Q4: What kinds of activities do approved persons usually perform?
Approved persons are typically involved in specialised or supporting services such as:
- Operating payment systems,
- Issuing payment instruments,
- Conducting financial advisory services,
- Acting as insurance brokers or money brokers.
The main difference lies in the level and scope of authorisation:
- Licensed persons carry on principal financial businesses (e.g., banking).
- Approved persons carry on specific or ancillary financial services with regulatory approval.
Yes. The term “authorised person” is an umbrella term that includes both licensed persons and approved persons.
Practical Application
In practice, a bank in Malaysia is a licensed person, while a company operating a payment gateway or providing financial advice may be an approved person. Both are regulated, but the scope of regulation differs depending on the nature of their activities.
Critical Analysis
This distinction reflects a modern regulatory approach. Instead of treating all financial institutions the same, the law differentiates between core banking activities and supporting financial services. This allows for proportionate regulation—stricter control over banks and more tailored oversight for specialised service providers. However, this layered system may confuse customers who assume all regulated entities have identical responsibilities.
Resolution of the Case Scenario
In Mei Ling’s case, the licensed bank is a licensed person and therefore an authorised person with full banking responsibilities. The other institution, if only approved to operate a payment system or advisory service, is an approved person and also falls under the category of authorised person but with a narrower scope of duties. Therefore, while both are regulated, their legal obligations and responsibilities differ based on the type of authorisation they hold.
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