Brunei: Wealth Management
Banks, Stocks and Real Estate
The International Banking Order 2000 ("IBO") governs the provision of international banking services to non-residents. While encompassing the traditional definition of banking by reference to taking of deposits, the IBO recognises that this is not the daily concern of a sophisticated International Bank.
Four classes of licence are provided for:
- a full international licence for the purpose of carrying on international banking business generally;
- an international investment banking licence for the purpose of carrying on international investment banking business;
- an international Islamic banking licence for the purpose of carrying on international Islamic banking business, granted in respect of full, investment or restricted activities.
- a restricted international banking licence for the purpose of carrying on international banking business subject to the restriction that the licensee may not offer, conduct or provide such business except to or for persons named or described in an undertaking embodied in the application for the licence.
Among the banks that have been granted international banking licenses in Brunei are HSBC and Sun Hung Kai International Bank [Brunei] Limited, a new subsidiary of Sun Hung Kai Securities Limited (SHKSL) in Hong Kong.
"International banking business" includes the taking of deposits from the (non-resident) public, the granting of credits, the issue of credit cards and money collections and transmissions. But the definition is expanded to embrace foreign exchange transactions, the issue of guarantees, trade finance, development finance and sectoral credits, consumer credit, investment banking, Islamic banking business, broking and risk management services whether conducted by conventional practices or using Internet or other electronic technology and includes electronic banking .
"International investment banking business" includes:
- providing consultancy and advisory services relating to corporate and investment matters, industrial strategy and related questions, and advice and services relating to mergers and restructuring and acquisitions, or making and managing investments on behalf of any person;
- providing credit facilities including guarantees and commitments;
- participation in stock, or share issues and the provision of services relating thereto: or
- the arrangement and underwriting of debt and equity issues.
"International Islamic banking business" is banking business whose aims and operations do not involve any element which is not approved by the Islamic Religion. Provision for Syariah Law to over-ride a conflicting provision in the IBO is made, subject to good banking practice, and there is a requirement for the appointment of a Syariah Council. The restriction to local ownership which applies under the domestic Islamic Banking Act does not apply to the international regime.
International banks will pay no tax, and neither will their staff, customers or products.
Securities is very widely defined under the Securities Order, 2001 ('SO') which provides a framework for the establishment of a financial exchange or exchanges in Brunei, and for the licensing of "dealers". The latter may, or may not, be members of an exchange licensed under this Order. The terms 'investment adviser' is also very widely defined. No person or company, whether based in Brunei or visiting, may offer any form of financial product or investment in any form of security without holding a license granted under the SO.
The Securities Order is "An Order to make provision with respect to financial exchanges, dealers and other persons providing advice in respect of, managing or dealing in securities, for certain offences relating to securities, and for other purposes connected therewith".
The responsible Minister is the Minister of Finance, and the Order is administered by the Authority appointed by His Majesty the Sultan and Yang Di-Pertuan Negara Brunei Darussalam. The Minister may establish or cause to be established within Brunei Darussalam a body or bodies corporate to be exchanges. An exchange shall, with the approval of the Authority, make rules which provide for the conditions of entry and admission into membership and for the regulation generally of the conduct of trading members in connection with the business of an exchange. The secretary of the exchange shall keep a register of the trading members. The register of trading members shall be made available for inspection at the registered office of an exchange during business hours. An exchange shall provide such assistance to the Authority, as the Authority reasonably requires for the performance of the Authority's functions and duties.
The Minister may by order published in the Gazette require that an exchange shall establish and keep such fidelity fund as he may determine to be administered by the committee on behalf of that exchange. The assets of fidelity fund shall be the property of the exchange but shall be separated from all other property and shall be held in trust for the purposes set out in this Part. Provision is also made for appropriate insurance.
The Authority may, where it appears to be in the interests of Brunei Darussalam, issue directives to an exchange with respect to trading, the manner in which that exchange carries on its business, including the manner of reporting off-market purchases, and any other matter which the Authority considers necessary for the effective administration of this Order and such exchange shall forthwith comply with that directive.
Except as permitted pursuant to the Order, a person shall not carry on the business of a dealer or hold himself out as carrying on such a business unless he is the holder of a dealer's license granted under Part III. A person shall not act as a dealer's representative, who in Part III is referred to as the "representative", unless he is the holder of a dealer's representative's license granted under that Part.
Except as permitted pursuant to the Order, a person shall not act as an investment adviser or hold himself out to be an investment adviser unless he is the holder of an investment adviser's license granted under Part III. A person shall not act as an investment representative, who in this Part is referred to as the "representative", unless he is the holder of an investment representative's license under that Part.
Under the Securities Order, an investment adviser is very widely defined, and includes all persons (including companies) who in or from within Brunei Darussalam carry on the business of advising others concerning securities or of investments or of investments or portfolio management. Also included are those who as part of a regular business issue or promulgate analyses or reports concerning securities. Certain institutions are exempted, for example licensed banks, registered newspapers and licensed broadcasters. In the latter two cases it is giving of advice, which is relevant.
Like other Asian locations, Brunei has seen a boom in commercial property development over the last ten years, briefly interrupted by the global debt crisis in 2008 and 2009, which has led to over-supply, particularly in the retail sector.
The state has been quite active in supporting commercial and industrial development, mostly through BEDB (the Brunei Economic Development Board) which was set up by the Sultan in 2001. An Infrastructure Development Strategy was formulated to ensure continued investment by government and through public-private sector partnerships in developing and maintaining world-class infrastructure.