In Part 2 of this series, we defined the boundaries of private credit in Malaysia, distinguishing it from public instruments like listed bonds, as well as retail-focused mechanisms like licensed moneylending and consumer credit. However, establishing what private credit is structurally does not fully explain how it functions operationally. Because a dedicated legal framework for this asset class has yet to be formally enacted, market participants must currently execute these complex transactions within a fragmented legislative environment.
This final installment of our series explores the regulatory maze of the Malaysian private credit ecosystem. We examine how current players utilize existing statutory exemptions under the Capital Markets and Services Act 2007 (“CMSA 2007”), evaluate the residual oversight of Bank Negara Malaysia (“BNM”) under the Financial Services Act 2013 (“FSA 2013”), and outline the anticipated regulatory evolution as we move toward the full implementation by the Securities Commission (“SC”) of the Capital Market Masterplan 2026-2030 (“CMP4”).
The CMSA 2007: Primary Oversight and the Licensing Gap
The CMSA 2007 stands as the primary legislation governing private credit fund activity. Any non-bank entity that raises capital from third-party investors and subsequently deploys it as loans or debt securities is fundamentally conducting a fund management activity. This is a regulated activity which requires a Capital Markets Services Licence from the SC[1]. Other activities common to the sector, such as dealing in securities (which includes investing in or underwriting debt securities) and the provision of investment advice, must similarly be licensed under the CMSA 2007.
Despite the growth of the market, there is currently no existing SC framework that directly authorizes private credit fund managers or recognizes private credit funds as a distinct class. From a technical reading of the CMSA 2007, a private credit fund manager is required to seek authorization of the SC to offer for subscription or purchase unlisted capital market products, including securities, Islamic securities, derivatives, and any product or arrangement based on securities or derivatives or a combination thereof[2], unless exempted under Schedule 5. In this regard, a private credit fund manager is ordinarily required to prepare for investors and register with the SC a disclosure document containing information and particulars of the private credit fund.
Notwithstanding the above, the current ecosystem in practice is different as it capitalizes on existing statutory exemptions and effectively leeches on the SC Guidelines on Unlisted Capital Market Products under the Lodge and Launch Framework (“UCMP Guidelines”), the SC Guidelines on Registration of Venture Capital and Private Equity Corporations and Management Corporations (“VCPE Guidelines”), and the SC Guidelines on Recognized Markets (“RM Guidelines”). It should be noted that peer-to-peer (P2P) platform operators, regulated under the RM Guidelines, are often considered by market participants in Malaysia as part of the private credit market.
This lack of a bespoke framework categorizes private credit as a legal creature of all sorts. It forces the asset class into mismatched structures such as a wholesale fund unit trust scheme (e.g., Muamalat-i Dana Sinar and Tradeview Funding Societies Income Fund), a private equity or venture capital fund structure (e.g., Crewstone New Horizon Fund and Spartan Ambitious Fund), or a recognized alternative marketplace through which P2P financing is offered (e.g., CapBay and BR Capital), all of which are governed under separate and distinct licensing or registration frameworks. Crucially, by allowing private credit fund managers and funds to be structured to meet the requirement of existing guidelines and exempted categories, it inadvertently leads to a circumvention of the intent, if not the spirit, of the licensing rules under the CMSA 2007.
The Exemption Paradox Under Schedule 5
Regarding the fund vehicle itself, current private credit funds are generally treated as being exempt from formal approval, registration, or authorization by the SC[3]. Schedule 5 of the CMSA 2007 exempts several specific types of offerings, including:
• Unlisted capital market products offered to sophisticated investors under the lodge and launch framework governed by the UCMP Guidelines, which covers registered wholesale funds.
• Securities of a venture capital or private equity fund managed by corporations licensed by or registered with the SC under the VCPE Guidelines.
• Effective 1 January 2026, any small offer of securities of a private company, other than shares, provided the offer complies with terms determined by the SC, which can cover debt securities or debt positions underlying certain private credit funds and investment notes offered through a P2P platform.
• Shares of private companies that comply with SC requirements, which may cover the offer of preference shares underlying certain private credit funds.
However, a significant technical anomaly exists within this statutory framework. While the recent 1 January 2026 legislative updates have expanded the Schedule 5 exemptions to cover offerings of securities of a venture capital or private equity fund structured as a private company (previously, this exemption was confined to limited partnerships) by fund managers licensed or registered under the VCPE Guidelines, the exact language used continues to create a distinct statutory gap for dedicated private credit vehicles.
The primary issue is that the text of Schedule 5 explicitly links its fund exemptions to venture capital or private equity. We would argue that private credit is fundamentally distinct from venture capital or traditional equity-based private equity, as it relies on pure debt or credit-driven mandates.
The phrase “private credit fund” is completely absent from Schedule 5, and it cannot be assumed that “venture capital fund” or “private equity fund” includes private credit funds. Therefore, a dedicated credit fund cannot confidently rely on the existing exemptions. For instance, if an asset manager establishes a closed-end corporate direct-lending fund (the global standard for private credit) under a registered management corporation, that specific combination of a corporate credit mandate does not fit cleanly into the established exemptions for wholesale unit trusts (under the UCMP Guidelines) or for venture capital or private equity funds (under the VCPE Guidelines).
Because the SC and CMSA 2007 generally rely on a strict prescriptive interpretation of statutory exemptions, any corporate proposal that does not fit perfectly into a Schedule 5 bucket necessarily defaults back to the main rule under the CMSA 2007. There is no express exemption in Schedule 5 covering the offer of securities of a private credit fund managed by a licensed or registered person. In this regard, dedicated private credit funds managed by registered private equity management corporations or venture capital management corporations are technically not exempted and should be formally authorized, approved by and registered with the SC[4].
The FSA 2013: Bank Negara’s Residual Power
Under the FSA 2013, the act of lending money or extending loans falls under the definition of the provision of finance and financial intermediation activities. The strict provisions of the FSA 2013 are typically triggered if the provision of finance is coupled with the acceptance of deposits for investment banking businesses, or the paying and collecting of cheques for commercial banking businesses.
Crucially, the definition of a deposit under Schedule 2 of the FSA 2013 expressly excludes money paid in relation to the issue, offer, or invitation for subscription or purchase of securities[5]. This includes shares, debentures, units in a unit trust scheme, or prescribed investments. Neither private credit fund managers, institutional or retail lenders, nor corporate borrowers are captured by the FSA 2013 in this regard, unless they engage in broader financial intermediation activities and are prescribed by the Minister of Finance as a prescribed financial institution on the recommendation of BNM.
Persons licensed, approved, or recognized by the SC under the CMSA 2007 are expressly excluded from being regulated as a prescribed financial institution engaging in financial intermediation activities. However, for registered persons under the CMSA 2007, BNM is required to consult with the SC when deciding whether such persons should be designated as a prescribed financial institution subject to the FSA 2013.
While this power to prescribe has never been exercised against any category of private credit managers, PE/VC managers, or their funds to date, it remains an important theoretical risk. If the SC adopts a registration framework for private credit, the Minister of Finance could potentially apply provisions of the FSA 2013 to registered private credit fund managers as if they were regulated entities. This step would only be taken if BNM determines that these fund managers pose or are likely to pose a risk to financial stability arising from the scale, concentration, or interconnectedness of their activities. In a market still writing its own rules, the assumption that BNM oversight is entirely inapplicable to private credit should not be prematurely made.
CMP4 and the Road Ahead
Taking a cue from the CMP4, which identified private credit as a growth area requiring a dedicated framework, it is anticipated that the Malaysian private credit ecosystem will soon transition towards a unified licensing or registration framework. A registration framework would likely require an amendment to Schedule 4 of the CMSA 2007 to include private credit fund managers registered with the SC as a distinct category of registered persons.
Concurrently, the offering of securities of a private credit fund may be explicitly added to Schedule 5 of the CMSA 2007 to ensure that these vehicles are exempt from formal approval or authorization when managed by authorized private credit fund managers. Although unique to the Malaysia context, it should not be surprising if the SC introduces a separate framework for private credit platform operators to register as Recognized Market Operators (“RMO”), allowing them to operate a recognized private credit marketplace accessible by retail investors, either under enhanced RM Guidelines or by incorporating existing P2P financing rules.
Conclusion
The Malaysian private credit market today operates less within a clearly defined regulatory framework and more within a carefully navigated legal construct. As explained, market participants are not applying the default CMSA 2007 rules but actively structuring products and transactions around gaps and prescribed exemptions. This creates a system that is functionally viable yet legally imperfect, where compliance depends as much on technical interpretation and regulatory alignment as it does on commercial strategy.
The clarity emerging around the definition of private credit stands in sharp contrast to its fragmented legal architecture, which imposes general licensing rules on private credit fund managers and formal authorization of private credit funds but which also allows managers to contort themselves or their funds to retroactively fit credit fund structures into a patchwork of mismatched guidelines. While navigating these legislative hurdles is undeniably a complex balancing act, it also provides an opportunity to instill deep institutional discipline. By committing to rigorous underwriting standards and tight structural frameworks now, Malaysian market participants are better placed to build a robust foundation, ultimately ensuring that the sector achieves sustainable growth under CMP4 while managing systemic risks from the very beginning.
[1] Section 58(1) read with Paragraph 3, Part 1, Schedule 2 of the CMSA 2007
[2] Section 212(5) of the CMSA 2007
[3] Section 212(8) read with Schedule 5 of the CMSA 2007
[4] Section 212 of the CMSA 2007
[5] defined under Section 2(1) of the CMSA 2007
About the authors
Shaun Lee Zhen Wei
Principal Associate
Corporate & Investor Services
Halim Hong & Quek
shaun.lee@hhq.com.my
.
Sherzanne Lee
Senior Associate
Corporate & Investor Services
Halim Hong & Quek
sz.lee@hhq.com.my
.
Carmen Lee Kar Mun
Associate
Corporate & Investor Services
Halim Hong & Quek
carmen.lee@hhq.com.my
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