SIDC Module 11 key terms

The statutory regulator that supervises Malaysia's capital market, including licensing of capital market services representatives, under the Capital Markets and Services Act 2007. It sets conduct, competency and examination requirements for market participants.

The principal Malaysian statute governing capital market activities, licensing, conduct and enforcement. It defines regulated activities, licensing categories, and the obligations that licensed representatives must meet when dealing with clients.

The SC's training and development arm, which administers competency programmes and professional examinations such as the SC Licensing Examinations. Passing its modules is part of meeting entry requirements for licensed representatives.

The set of competency examinations candidates must pass to qualify for a Capital Markets Services Representative's Licence. Modules cover regulation, conduct, products and role-specific technical knowledge, and are administered through the SIDC.

A licence issued by the SC to a firm permitting it to carry on one or more regulated capital market activities, such as dealing in securities or fund management. The firm must hold a CMSL for the activities its representatives perform.

A personal licence granted to an individual to act as a representative of a CMSL holder for specified regulated activities. It depends on the firm's sponsorship, passing the relevant SCLE modules and meeting fit and proper criteria.

Any capital market business listed in the CMSA that requires a licence, such as dealing in securities, advising on corporate finance, fund management or dealing in derivatives. Performing one without a licence is an offence.

The SC's standards for assessing honesty, integrity, solvency, competence and reputation of licence applicants and holders. Failures such as dishonesty convictions or insolvency can prevent licensing or trigger revocation of an existing licence.

Ongoing training that licensed representatives must complete each year to keep their knowledge current and maintain their licence. The SC sets minimum CPE hours and acceptable activity types, and firms must track and report compliance.

The SC's rules requiring licensed persons to act honestly, with due skill and care, in clients' best interests, and to manage conflicts of interest. Breaches can lead to disciplinary action against the firm and the individual.

Funds a licensed firm holds on behalf of clients, which must be kept in segregated trust accounts and handled under strict rules. Mishandling or misappropriating client money is a serious breach attracting criminal and disciplinary liability.

The requirement to keep client assets separate from the firm's own assets and from those of other clients. It protects clients if the firm becomes insolvent and prevents misuse of client property.

A designated bank account in which a licensed firm deposits client money, kept apart from the firm's operating funds. Withdrawals are restricted to permitted purposes and the account is subject to audit and reconciliation requirements.

The process of identifying clients, understanding their financial situation, objectives and risk tolerance before recommending products or opening accounts. It underpins suitability assessments and anti-money-laundering controls.

Evaluating whether a recommended investment matches a client's objectives, risk appetite, financial capacity and experience. Representatives must document the basis for recommendations and avoid products unsuitable for the client's profile.

The obligation to explain clearly the nature and risks of a product or transaction before a client commits, including potential loss of capital. Written disclosures and signed acknowledgements are common evidence of compliance.

Providing clients with accurate, balanced and timely information about an investment, including fees, risks, structure and terms. Misleading or incomplete disclosure can amount to a breach of securities law.

A disclosure document issued for a public offering of securities, containing the information investors need to make an informed decision. It must be registered with the SC and any material misstatement attracts liability.

The first sale of a company's shares to the public, typically accompanied by a prospectus and listing on an exchange. Representatives involved must follow allocation, disclosure and marketing rules set by the regulator.

The Malaysian exchange that operates the securities and derivatives markets and enforces its own listing and trading rules. Licensed representatives interact with it for order execution, trading and market conduct compliance.

Dealing in securities while in possession of material non-public information, or communicating such information for trading. It is a market abuse offence under the CMSA carrying civil and criminal penalties.

Conduct that creates a false or misleading appearance of trading activity or price, such as wash trades or ramping. It undermines market integrity and is prohibited under securities law with severe sanctions.

Information about a company or security that is not generally available and would likely affect its price if disclosed. Possession of such information restricts a person from dealing in the affected securities.

An internal information barrier separating departments, such as corporate finance and dealing, to prevent the flow of confidential price-sensitive information. Firms must maintain policies, physical and system controls, and monitoring.

Situations where a firm's or representative's own interests, or duties to another client, could compromise objectivity toward a client. They must be identified, disclosed and managed, often by declining the transaction.

A legal obligation to act in another party's best interests, placing the client's interests ahead of one's own. Representatives owe duties of loyalty, care and good faith when managing or advising on client assets.

Controls to prevent criminals from disguising proceeds of crime as legitimate funds through the financial system. Licensed firms must perform customer due diligence, monitor transactions and report suspicious activity.

A report filed with the financial intelligence authority when a firm suspects funds relate to unlawful activity. Reporting obligations override client confidentiality, and tipping off the client about a report is prohibited.

Measures to detect and prevent the raising or moving of funds for terrorist purposes. Firms screen customers and transactions against sanctions lists and report matches to the competent authority.

Checking clients, beneficial owners and transactions against designated persons and entity lists issued by authorities. Matches must be blocked or reported, and screening should occur at onboarding and periodically thereafter.

The natural person who ultimately owns or controls a client or the funds involved, even where another name appears on the account. Identifying them is essential for customer due diligence and AML compliance.

An individual entrusted with prominent public functions, or a close associate or family member, who presents higher money-laundering risk. Firms must apply enhanced due diligence and senior approval before establishing the relationship.

More intensive checks applied to higher-risk clients such as PEPs, complex ownership structures or cross-border relationships. It includes source-of-funds verification, senior sign-off and closer ongoing monitoring.

The requirement to retain accurate records of client transactions, advice and compliance checks for a set period. Good records support audits, investigations and defence against client complaints or regulatory action.

A chronological record that allows each transaction or decision to be traced from origin to completion. It supports internal review, regulatory examination and dispute resolution by showing who did what and when.

The internal unit responsible for monitoring adherence to laws, regulations and firm policies, and for advising staff on obligations. It reports to senior management and must operate independently of revenue-generating activities.

The SC's power to cancel a CMSL or CMSRL when a holder breaches conditions, becomes unfit or fails to comply with requirements. Revocation ends the person's authority to carry on the licensed activity.

Sanctions imposed by the regulator or an exchange on licensed persons for misconduct, ranging from reprimand and fines to suspension or licence revocation. Firms also run internal disciplinary processes for staff breaches.

The protected reporting of suspected wrongdoing within or about a firm to an internal or external authority. Effective programmes provide confidential channels and protect reporters from retaliation.