Unlicensed Sales: Section 5(1) Penalties and Enforcement Cases in Malaysia

1. Key takeaways

Selling an unregistered medical device in Malaysia is a criminal offence, not an administrative irregularity. Section 5(1) of Act 737 prohibits importing, exporting or placing on the market a device that is not registered. Section 5(2) makes a contravention of section 5(1) an offence punishable on conviction with a fine not exceeding RM200,000, or imprisonment not exceeding 3 years, or both.

The licensing layer sits alongside the registration layer. Section 15(1) requires an establishment licence (EL) to carry on the regulated activity, and importing or distributing without an EL is equally unlawful. Enforcement is not theoretical: the MDA conducts raids on unlicensed premises, seizes unregistered product and opens a case under the registration provisions.

• Registration offence: section 5(1) read with section 5(2) — fine up to RM200,000, imprisonment up to 3 years, or both.
• Licensing offence: section 15(1) — importing or distributing without an EL is unlawful.
• Enforcement powers: the MDA may raid unlicensed premises, seize unregistered product and open an investigation.
• January 2026 case: a raid on an unlicensed premises in Puchong seized 160 unregistered medical oxygen machines with a value of about RM19,712, investigated under section 5(1).
• Purchaser exposure: buying unregistered product creates clinical compliance and asset disposal risk; lack of knowledge does not fully exempt the purchaser.
• Public tools: registration status can be checked through MMDR and unregistered activity reported through FEMES.
• Self-check: MMDR registration status, EL and GDPMD validity, and advertising consistency with the registration, reviewed quarterly and documented.

2. Legal basis

Act 737 separates the product permission from the operator permission. Section 5 governs the device: it may not be imported, exported or placed on the market unless registered, and section 5(2) attaches the criminal sanction to a breach of that prohibition. Section 15 governs the establishment: the regulated activity requires an EL, and carrying it on without one is unlawful. The two provisions are cumulative in practice, because an unregistered product on the market is normally also being handled by an operator whose licence position needs to be tested.

The enforcement consequence is that the seizure value is only the smallest part of the loss. A prosecution exposes the company to the statutory maximum, and separately to the commercial consequences of an interrupted supply, a damaged reputation and a customer base that now has to verify its own position.

3. Expert insights

Insight 1: the penalty is attached to a prohibition, not to an intention.

Section 5(2) does not require proof that the company set out to sell unregistered product. The offence is constituted by the prohibited act. In practice this means that the commercial explanation — a supplier change, a lapsed certificate, a batch bought from a wholesaler — explains the conduct but does not remove it from the scope of the provision. The only reliable protection is a control that prevents unregistered product from entering the sales process at all, which is why verification at goods receipt matters more than verification at audit.

Insight 2: the two permissions fail independently, and both failures are visible.

A company may hold a valid registration and still be operating without a valid EL, or hold an EL and handle product whose registration has lapsed. Because the two permissions are recorded in different systems, a check of one says nothing about the other. The January 2026 case illustrates the enforcement posture: an unlicensed premises was entered, product was seized and a case was opened under section 5(1). The lesson for legitimate operators is that the regulator can see the licensing position before it arrives, so an unlicensed activity is not a hidden risk but an exposed one.

Insight 3: the seizure value understates the exposure.

In the Puchong case the seized product was valued at about RM19,712, a modest figure set against the maximum fine of RM200,000 and a potential term of imprisonment of up to 3 years. The gap between the two numbers is the point. Companies sometimes treat the goods value as the measure of the risk and conclude that the downside is manageable; the statutory maximum, the interruption to supply and the loss of standing with hospitals are all larger and harder to price.

Insight 4: purchasers carry risk too, and knowledge is not the only variable.

A hospital or distributor that buys unregistered product faces clinical compliance exposure and practical problems in disposing of an asset it may not lawfully keep in service. The MDA encourages the public to check registration status through MMDR and to report concerns through FEMES. A purchaser who did not check is not in the same position as one who did, and the absence of knowledge does not fully exempt the purchaser. Procurement procedures that require an MMDR check before purchase convert an argument after the event into evidence before it.

Insight 5: a quarterly self-check is cheap, and it is the only control that catches drift.

Three checks cover most of the risk: confirm through MMDR that every product on sale is registered; confirm that each operating entity holds a valid EL and GDPMD; and confirm that advertising claims are consistent with the registration, which is the section 44 exposure. Running the check quarterly and retaining the record creates a defensible history. Run annually, the same check tends to discover a problem that has already been in the market for eleven months.

Insight 6: legacy stock should be corrected before it is discovered.

Where unregistered product is found in the channel, the sequence is to withdraw it immediately, assess whether to pursue registration or to remove it from the market, and examine the distribution records for the affected batch. The legal position of a company that corrects proactively is materially different from that of a company that is found. The distribution records are what make a proactive correction credible, because they show the extent of the problem was understood rather than guessed.

4. Practical recommendations

• Verify at goods receipt. Check the registration number against MMDR before product enters saleable stock, not at the point of invoice.
• Track EL and GDPMD expiry separately from registration. Two calendars, two owners, both reviewed quarterly.
• Run the three-part self-check quarterly and retain the evidence. Registration, licences and advertising claims, with the date and the reviewer recorded.
• Put an MMDR check into hospital and distributor procurement. Make the check a condition of purchase rather than a post-purchase enquiry.
• Act on legacy stock immediately. Withdraw, assess registration or removal, and review the distribution records for the batch.
• Do not rely on good faith as a defence. Treat the prohibition in section 5(1) as absolute when designing controls.
• Document the reasoning behind disposal decisions. Asset disposal carries its own compliance risk and should be evidenced, not improvised.

5. Verification checklist

• □ Act 737 sections 5(1), 5(2) and 15(1) confirmed against the current text
• □ MDA Circular No. 2/2022 reviewed (orphaned, obsolete and discontinued device policy, citing sections 5(1) and 15(1))
• □ January 2026 enforcement report reviewed for the current enforcement posture
• □ MMDR and FEMES access confirmed for the responsible person
• □ Registration status of every product on sale verified
• □ EL and GDPMD validity verified for each operating entity
• □ Advertising claims checked against registration under section 44

How GRZAN can help. GRZAN provides medical device and IVD registration, quality system, authorised representative and local testing support across Southeast Asia, including Malaysia. Our team prepares dossiers to ASEAN CSDT structure, manages submissions and deficiency responses with the MDA, and supports post-market vigilance obligations. Business enquiries: info@grzanglobal.com