Capital market laws amended to drive innovation and promote market efficiency

Kuala Lumpur, 2 January 2013

Capital market laws amended to drive innovation and promote market efficiency

Securities Commission Malaysia (SC) today announced the coming into force of the Capital Markets and Services (Amendment) Act 2012 (CMSA 2012), together with the issuance of several guidelines, which aim to encourage market and product innovation, promote market efficiency, and allow more informed investment decisions.

CMSA 2012 introduces a new approval framework that will facilitate the offering of a broader array of capital market products, which will effectively benefit issuers, intermediaries and investors.

The new approval framework distinguishes listed and unlisted capital market products given their distinct characteristics and differing risk profiles and applies the appropriate level of regulation commensurate with the risks attached. This enhances approval efficiency without compromising investor protection.

The SC has also released the Business Trusts Guidelines which allows for greater fund raising flexibility and provides investors with an opportunity to invest in a new asset class. The Guidelines on Private Debt Securities and Sukuk have also been revised to allow public listed companies and banks to offer bonds and sukuk to retail investors.

"The international capital markets and their regulatory paradigms continue to evolve. To ensure that our market is equipped to deal with the dynamic landscape and remain competitive, the SC continuously reviews and augments the regulatory framework to meet the financing and investment needs of market participants," said Datuk Ranjit Ajit Singh, Chairman of the SC.

"These initiatives are intended to provide issuers with avenues to better optimise their capital structure and raise finance at competitive costs in meeting their business needs. At the same time, investors will benefit from a wider array of investment options to match their investment profiles and risk appetite. The initiatives will reinforce the appeal and vibrancy of our capital market and build on the record level of funds raised in 2012 of RM145.9 billion, a 89% increase compared to the RM77.2 billion raised in 2011."

CMSA 2012 also establishes a consolidated Capital Market Compensation Fund and has widened the scope of compensation to include private retirement schemes, as well as claims arising from mis-selling of products. The consolidation of compensation funds will also improve administrative efficiency and make recourse for compensation simpler for investors.

The SC has additionally introduced Guidelines on Sales Practices of Unlisted Capital Market Products (Sales Practices Guidelines) to promote responsible conduct in the development and sale of unlisted capital market products.

The Sales Practices Guidelines will provide investors with access to quality advice and require Product Highlights Sheet to be given to investors at the point of sale. Product Highlights Sheet will enable product comparison and allow investors to obtain the relevant information for more informed investment decisions.