SIDC Module 10 cheat sheet

Securities Commission Malaysia (SCM) is the statutory regulator; the Securities Industry Development Corporation (SIDC) is its training and development arm and administers the SC Licensing Examinations (SCLE).

The Capital Markets and Services Act 2007 (CMSA) is the principal statute for licensing, conduct and market offences; the Securities Commission Malaysia Act 1993 covers the Commission's establishment and powers.

Capital market services licence categories under the CMSA include dealing in securities, dealing in derivatives, fund management, advising on corporate finance, investment advice, financial planning and clearing for securities or derivatives.

A 'capital market product' includes securities, derivatives, unit trust schemes, private retirement schemes and prescribed products; the CMSA definition governs scope of regulated activity.

Licensing threshold test: a person carrying on a regulated activity in Malaysia must hold a CMSL or be a registered person, unless a specific statutory exclusion or exemption applies.

Representatives must be registered with the SCM and sponsored by a licence holder; registration lapses if the representative ceases to act for the principal.

The SCLE is a competency requirement, not a licence; passing does not itself authorise employment or dealing, and the licence holder's fit-and-proper assessment remains decisive.

Contravention of licensing requirements can attract administrative sanctions, civil action and criminal liability; section-based penalties differ between the CMSA and subsidiary instruments.

Core duties of a licensed intermediary: act honestly and fairly, with due skill, care and diligence, in the best interests of clients, and manage conflicts of interest.

Know-your-client (KYC) precedes suitability assessment; the suitability determination must match the client's investment objectives, risk tolerance, financial situation and needs.

Client money and client assets must be segregated and held in trust or designated accounts; the licence holder remains responsible for reconciliation and safeguarding.

Priority-of-client-order rule: client orders are executed before the firm's own proprietary orders in the same security on the same terms.

Conflicts of interest must be disclosed and, where the conflict cannot be managed, avoided; personal account dealing by staff is subject to pre-clearance and blackout rules.

Communications with clients must be accurate, balanced and not misleading; projections and past-performance statements require stated assumptions and risk warnings.

Anti-money laundering obligations include customer due diligence, beneficial ownership identification, ongoing monitoring, suspicious transaction reporting and record retention.

Breach escalation: internal reporting to compliance, then to the regulator where required; whistleblower protections apply to good-faith disclosures.

Equity securities confer ownership rights (voting, dividends, residual claim); ordinary shares rank after creditors and preference shareholders on winding up.

Bond price and yield move inversely; price = sum of coupon and principal cash flows discounted at the required yield, so a rise in yield lowers price.

Duration approximates percentage price change for a 1% change in yield; longer maturity and lower coupon mean higher duration and higher interest-rate sensitivity.

Derivatives derive value from an underlying; futures are exchange-traded and margined, forwards are OTC and counterparty-exposed, options confer a right not an obligation.

Unit trust scheme mechanics: units are created and cancelled against the net asset value (NAV) per unit, with entry charges, management fees and trustee oversight.

Settlement cycle for Bursa Malaysia securities is T+2; short selling and securities borrowing are permitted only under the applicable regulated short selling framework.

Market indices measure basket performance; weighting methods (market-capitalisation, price-weighted, equal-weighted) change index behaviour and sector concentration.

Risk-return relationship: expected return compensates for systematic risk; diversification reduces unsystematic risk but not market risk.

Compliance function independence: the compliance officer reports to senior management and the board, not to revenue-generating units, and has access to all records.

Record-keeping rule: transaction, client and communication records must be retained for the period prescribed by the CMSA and subsidiary guidelines and be retrievable on request.

Supervisory toolkit: the SCM may require information, conduct inspections, issue directives, impose conditions on a licence, and refer matters for enforcement.

Enforcement sanctions include reprimand, fines, restriction or revocation of licence, and civil or criminal proceedings; the appropriate sanction depends on severity, intent and remediation.

Market misconduct offences include insider trading, market manipulation, false trading and misleading statements; insider trading uses material non-public information in connection with a dealing.

Fit-and-proper criteria cover honesty, integrity, financial soundness, competence and absence of disqualification; a change in circumstances must be notified.

Complaint handling requires a documented procedure, timely acknowledgement, fair investigation, written outcome and root-cause remediation.

Supervision of representatives includes training, competence maintenance, monitoring of dealings and disciplinary action for breaches of internal and regulatory rules.