SIDC Module 7 cheat sheet

Securities Commission Malaysia (SC) is the statutory regulator under the Securities Commission Malaysia Act 1993; it regulates the capital market under the Capital Markets and Services Act 2007 (CMSA).

CMSA s.7 lists regulated activities: dealing in securities, derivatives dealing, fund management, advising on corporate finance, investment advice, financial planning, and clearing/settlement.

A Capital Markets Services Licence (CMSL) is activity-specific; s.58 CMSA requires a separate licence for each regulated activity, though one holder may hold multiple licences.

Representatives must be registered with the SC under s.65 CMSA; a licensed entity may only appoint persons who satisfy fit-and-proper criteria and pass SC-recognised modules.

Capital adequacy: a CMSL holder must maintain minimum shareholders' funds per SC Capital Adequacy guidelines; dealing licence tiers set different thresholds and must be reported quarterly.

Key SC guidelines include the Guidelines on Compliance Function, Guidelines on Conduct of Business, and the Code of Conduct for Market Institutions.

Licence applications are made to the SC; the SC may impose conditions, restrict or revoke a licence under s.72 CMSA, and may take action against unlicensed activity under s.25 (dealing in securities without licence).

The SC has enforcement powers including civil action, criminal prosecution, administrative sanctions (reprimand, fine, restriction) and disgorgement under the CMSA and SC Act.

CMSA 2007, Capital Markets and Services Regulations, and SC Guidelines form the primary regulatory stack; Companies Act 2016 governs corporate conduct and share issuance; Bursa Malaysia Listing Requirements govern listed issuers.

Prospectus requirement: s.232 CMSA requires a prospectus for offers of securities to the public; exemptions in s.229 and s.230 (e.g., private placements to accredited investors, small offers) must be checked.

Insider trading: s.188 CMSA prohibits trading on inside information; s.189 covers communication of inside information; penalties include imprisonment up to 10 years and fines up to RM3 million.

Market manipulation: s.179 CMSA prohibits false trading and market rigging; s.180 covers stock market manipulation; s.181 covers making false or misleading statements.

Take-overs are governed by the Malaysian Code on Take-Overs and Mergers 2016 administered by the SC; mandatory general offer triggered at 33% voting rights.

Unit trusts and asset management: SC Guidelines on Unit Trust Funds and Guidelines on Asset Management; wholesale funds under the Guidelines on Wholesale Funds.

Corporate bonds and sukuk are regulated under the SC's Guidelines on Unlisted Capital Market Products and the Lodge and Launch Framework (LOLA) for wholesale products.

Derivatives are regulated under the CMSA and the SC's Guidelines on Derivatives; Bursa Malaysia Derivatives Berhad operates the exchange.

Equity: ordinary shares carry voting rights and residual claim; preference shares carry priority dividend and liquidation rights but limited voting.

Bond pricing: price = sum of coupon/(1+y)^t + face/(1+y)^n; price moves inversely to yield; duration measures sensitivity (modified duration = Macaulay duration/(1+y/m)).

Sukuk are Shariah-compliant certificates representing ownership in an underlying asset or usufruct; common structures include murabahah, ijarah, musharakah, mudarabah, wakalah and salam.

Unit trust funds: NAV per unit = (total assets - total liabilities)/units in circulation; forward pricing uses the next computed NAV after receipt of a valid application.

Derivatives: futures are exchange-traded and standardised; forwards are OTC and customisable; options give the buyer a right but not obligation; swaps exchange cash flows.

Structured products combine a bond component with a derivative overlay; capital-protected and non-capital-protected variants differ in principal risk.

Private retirement schemes (PRS) are long-term savings vehicles regulated by the SC; PRS providers must be approved and funds offered via approved PRS providers.

Real Estate Investment Trusts (REITs) are collective investment schemes investing in income-producing real estate; listed REITs must distribute at least 90% of distributable income to qualify for tax transparency.

Fit and proper criteria under SC guidelines cover honesty and integrity, solvency, competence, and no history of serious regulatory breaches or criminal convictions.

Conflicts of interest must be identified, disclosed and managed; a CMSL holder must maintain a conflicts of interest policy and register as required by the SC's Guidelines on Conduct.

Client money must be held in segregated trust accounts; client assets must be reconciled and reported per SC client money and asset rules.

Know-your-client (KYC) and suitability: recommendation must match client's investment objectives, risk tolerance, financial situation and knowledge/experience.

Record-keeping: CMSL holders must retain client records and transaction records for at least seven years under CMSA s.118 and SC guidelines.

Whistleblowing: the CMSA provides protections under s.152 for disclosures of improper conduct; internal whistleblowing policies are expected of licensed entities.

Personal account dealing by representatives requires prior approval and disclosure to the compliance function.

Marketing materials must be fair, clear and not misleading; performance figures must be presented with required disclosures and past performance disclaimers.

Malaysian Code on Corporate Governance (MCCG) 2021 applies on a 'comply or explain' basis to listed companies; it sets principles on board leadership, effective governance, and sustainability.

Bursa Listing Requirements: at least one-third of the board should be independent directors; audit committee must consist wholly of non-executive directors with a majority independent and an independent chair.

Board committees typically include Audit, Risk, Nomination and Remuneration; separation of Chairman and CEO roles is recommended under MCCG.

Islamic Capital Market (ICM) governed by the SC's Shariah Advisory Council (SAC), which is the authoritative body for Shariah rulings on ICM matters under s.316 CMSA.

Shariah-compliant securities: SC publishes a list of Shariah-compliant securities twice yearly; screening uses business activity and financial ratio benchmarks (e.g., interest income, debt ratios).

Sukuk structures must be endorsed by the SAC or a Shariah committee of the issuer; the SAC ruling prevails over other Shariah views for ICM products.

Sustainability reporting: Bursa Listing Requirements mandate sustainability statements in annual reports; the SC's SRI Taxonomy and the MCCG embed sustainability into board oversight.

Related party transactions require audit committee review and, where thresholds are exceeded, shareholder approval under Bursa Listing Requirements.

AML/CFT framework: Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLA) as amended; reporting institutions must comply with Bank Negara Malaysia (BNM) AML/CFT Policy Documents.

Reporting institutions must conduct customer due diligence (CDD): identify and verify customer identity, beneficial ownership, and purpose/nature of business relationship.

Enhanced due diligence (EDD) applies to politically exposed persons (PEPs), high-risk jurisdictions, and complex or unusual transactions.

Suspicious Transaction Reports (STRs) are submitted to the Financial Intelligence and Enforcement Department (FIED) of BNM; tipping-off the customer is prohibited under s.24 AMLA.

Record-keeping under AMLA: at least six years after the transaction or end of business relationship.

Cash threshold reporting: reporting institutions must submit a Cash Threshold Report (CTR) for cash transactions of RM25,000 and above (threshold as set by BNM).

Compliance function: CMSL holders must appoint a compliance officer and maintain an independent compliance function per SC Guidelines on Compliance Function.

Risk-based approach: AML/CFT controls should be proportionate to assessed ML/TF risks across customer, product, delivery channel and geographic factors.

SC's Sustainable and Responsible Investment (SRI) Roadmap guides the development of the SRI ecosystem; SC issued the SRI Taxonomy for the Malaysian capital market.

Bursa Listing Requirements require listed issuers to disclose a sustainability statement covering material economic, environmental and social risks and opportunities.

The MCCG 2021 embeds sustainability into board strategy and oversight; boards should integrate sustainability into strategy and risk management.

Green, social, sustainability and sustainability-linked bonds/sukuk are recognised under the SC's SRI-linked frameworks; ASEAN Green Bond Standards and ASEAN Sustainability-Linked Bond Standards apply.

ESG integration in fund management: SRI funds must disclose investment strategy, screening criteria and stewardship approach under SC Guidelines on SRI Funds.

Stewardship: the Malaysian Code for Institutional Investors (MCII) sets principles for institutional investors on monitoring, engagement and voting.

Climate disclosure: the SC and Bursa encourage alignment with TCFD recommendations; ISSB/IFRS S1 and S2 are the emerging global baseline for sustainability disclosure.

Greenwashing risk: sustainability claims must be substantiated, consistent and not misleading; SC and Bursa expect clear, comparable and reliable ESG disclosures.