Sub Advisor Agreement Template for Malaysia

A Sub Advisor Agreement is a specialized contract that allows licensed investment advisors and fund managers in Malaysia to delegate specific investment management duties to qualified sub-advisors. You need this document when your firm requires specialized expertise that you don't possess in-house, or when you want to expand your service offerings while maintaining regulatory compliance under Malaysian law.

When do you need this document?

You'll require a Sub Advisor Agreement when your investment advisory firm needs to engage external expertise for specific asset classes, geographical markets, or investment strategies. This commonly occurs when managing international portfolios that require local market knowledge, or when clients demand specialized investment approaches like Islamic finance, ESG investing, or alternative investments. Fund management companies also use these agreements when they need to subcontract portions of their investment decision-making to boutique specialists or when expanding into new market sectors. The agreement is essential for maintaining clear legal boundaries while ensuring both parties meet their regulatory obligations under the Capital Markets and Services Act 2007.

Key legal considerations

Your Sub Advisor Agreement must clearly define the scope of delegated authority, including specific investment mandates, risk parameters, and decision-making limitations. The contract should establish comprehensive reporting requirements, fee allocation mechanisms, and performance measurement criteria. You need to address liability allocation, indemnification clauses, and termination procedures to protect both parties. The agreement must also cover confidentiality obligations, client communication protocols, and compliance monitoring responsibilities. Pay special attention to clauses governing regulatory breaches, as both parties remain liable to the Securities Commission Malaysia for their respective roles. Include provisions for dispute resolution, governing law specifications, and force majeure events that could affect performance.

Legal requirements in Malaysia

Under the Capital Markets and Services Act 2007, both primary advisors and sub-advisors must hold appropriate licenses from the Securities Commission Malaysia before entering into these agreements. Your contract must comply with SC guidelines on outsourcing arrangements and demonstrate that the primary advisor retains ultimate responsibility for client relationships and regulatory compliance. The agreement must address Anti-Money Laundering and Counter-Terrorism Financing obligations under the relevant Malaysian legislation, including customer due diligence and suspicious transaction reporting. You're required to maintain proper records and ensure the sub-advisor can provide necessary documentation for regulatory inspections. The Personal Data Protection Act 2010 applies to any client information sharing, requiring explicit data protection clauses and consent mechanisms. Additionally, ensure your agreement addresses the Contracts Act 1950 requirements for valid contract formation and enforceability in Malaysian courts.