MALAYSIA Law and Practice Contributed by: Dilys Tan, Adnan Sundra & Low
1.5 Material Forms of Credit Enhancement
Sale of assets to SPE by originator This involves sale of the assets to the SPE by the originator. Such a sale must fulfil the true sale criteria set out in the LOLA Guidelines. Please see 6.3 Transfer of Financial Assets for more information on the true sale criteria. Issuance of ABS by SPE This involves issuance of the ABS by the SPE, whether conventional or Islamic in nature. Corporate administrator and servicer appointment This involves appointment of a corporate admin - istrator of the SPE and a servicer for the assets. 1.3 Applicable Laws and Regulations The principal applicable laws and regulations in Malaysia having a material effect on the struc - tures referred to in 1.2 Structures Relating to Financial Assets are: • the Capital Markets and Services Act 2007 (CMSA); • the Companies Act 2016; • the LOLA Guidelines; and • the Guidelines on Islamic Capital Markets Products and Services. Depending on the type of asset being securi - tised, the relevant laws and regulations in Malay - sia that would apply to such asset would also need to be taken into account when structuring a securitisation transaction. 1.4 Special Purpose Entity (SPE) Jurisdiction As mentioned in 1.2 Structures Relating to Financial Assets , the SPE must be incorporated in Malaysia for tax purposes.
Typically, the material forms of credit enhance - ment used in the securitisation marketplace would be: • subordination, where the senior class ABS are assigned a higher rating, while the sub - ordinated class ABS would be lower-rated or unrated; • over-collateralisation; • cash reserves or deposits; and/or • financial guarantee. 2. Roles and Responsibilities of the Parties 2.1 Issuers The issuer is typically a bankruptcy-remote SPV incorporated solely for the purpose of the secu - ritisation transaction, and must comply with the requirements of paragraphs 2.15 to 2.22 of Chapter 2, Part 4, Section B of the LOLA Guide - lines. Please refer to 1.2 Structures Relating to Financial Assets for more information on the requirements for an issuer. 2.2 Sponsors In Malaysia, there is no specific concept of a sponsor in a securitisation transaction. 2.3 Originators/Sellers The originator/seller is the owner of the assets. Types of businesses that comprise the origina - tors/sellers of the financial assets referred to in 1.1 Common Financial Assets include the fol - lowing: • commercial real estate – owners and opera - tors of shopping malls;
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