Strengthening Investment and Funding Ecosystem

Towards creating an investment and funding ecosystem that is relevant, efficient and diversified, the SC had introduced flexibilities and facilitated innovation, aimed at expanding investment options and access, as well as enhancing the efficiency of the public markets.

Enhancing Investment And Advisory Options

Expanding categories of sophisticated investors to provide greater access to capital market products
Given the ever-changing investor base and market conditions, the SC continues to review regulations to meet market and investors’ needs. The following initiatives were carried out to allow investors to expand their investment options while at the same time enabling issuers to tap into a larger pool of sophisticated investors:
In July 2021, Schedules 6 and 7 of the CMSA were amended to widen the categories of persons who qualify as ‘sophisticated investors’. These included, among others, individuals with investments of RM1 million in capital market products, either on their own or through joint accounts with their spouse; CEOs and directors of licensed or registered persons under the CMSA; and corporations that manage funds of their related companies with assets of more than RM10 million.
In August 2021, in line with the amendments to the respective Schedules, the SC issued a technical note to further clarify the categories of high-networth individuals (HNWI) and high-net-worth entities (HNWE) under Schedules 6 and 7 of the CMSA. The technical note, among others, clarified the categorisation of HNWE and calculation of the threshold to qualify as an HNWI.
Read more on Updated Categories of Sophisticated Investors (as at 1 July 2021)
Read more on media release ‘SC Amends Capital Market Laws to Widen Categories of Sophisticated Investors, Exemption for SC’s Approval on on Corporate Proposals'
Broadening and strengthening the role of financial planning industry
Following the launch of the three-year joint action plan for the financial planning industry in 2020, the industry had witnessed the following encouraging developments:
As at the end of 2021, 20% of financial planning firms had representatives fulfilling the additional competency requirements to provide specific advice to investors on a wider spectrum of securities. These securities include listed securities such as equities, debentures or warrants listed on Bursa Securities, as well as unlisted corporate bonds or sukuk. Investors would be able to obtain a more comprehensive financial plan, thus encouraging a more holistic approach to investment planning by the industry.
Recommendation on elevating the industry’s overall standards and practices was completed via the harmonisation and elevation of the code of ethics and best practice standards by the relevant certification associations for financial planners. The industry code of ethics focused on elements such as integrity, fairness and competency, together with best practices served as a benchmark for professional conduct expected of a licensed financial planner.
The joint action plan was also aligned with the SC’s objective to empower investors to make informed investment decisions and be aware of investment frauds. The industry had set up an Investor Protection Group to provide guidance to financial planners and centralise assessment regarding doubtful activities.
Promoting competitiveness and innovation in the unit trust fund industry
In December 2021, the Guidelines on Unit Trust Funds was revised to promote competitiveness and innovation within a balanced and proactive oversight regime. Key revisions, among others, entail the following:
Expanding requirements to allow foreign securities lending activity as well as allowing sale and repurchase transactions and reverse repurchase transactions for efficient portfolio management;
Allowing investments in investment accounts, which are products regulated by BNM, investment in physical-backed metal ETF, and increased exposure to foreign government securities;
Removing restrictions on a management company’s ability to hold units in its funds provided that adequate policies, procedures and controls are established to manage any potential conflict of interests; and
Removing restrictions on sources of distribution by a fund subject to adequate disclosures to investors.

The following controls and safeguard measures were also introduced to uphold investor protection:
Strengthening requirements on unit trust management companies’ risk management for their business and funds; and
Requiring unit trust management companies to disclose fund information on their website to promote greater transparency and access to information.
Read more on Revised Guidelines on Unit Trust Funds
Read more on media release ‘SC Broadens Access to Investments; Liberalises Unit Trust Framework’
Facilitating cross-border access to ASEAN Collective Investment Schemes
Connectivity via the cross-border offering of funds was enhanced with the admission of the Securities and Exchange Commission (SEC) Philippines into the ASEAN Collective Investment Schemes (CIS) Framework in May 2021. Joining the earlier signatories, namely the SC, the Monetary Authority of Singapore, and the Securities and Exchange Commission (SEC) Thailand, the ASEAN CIS Framework aims to facilitate cross-border product access and fund distribution for investors and issuers, respectively.
With the SEC Philippines’ participation in the ASEAN CIS Framework, eligible management companies in Malaysia may now offer eligible funds to retail investors in Philippines (in addition to Singapore and Thailand) and qualified investment companies in the Philippines and their fund managers will also be able to offer eligible funds to retail investors in Malaysia, Singapore, and Thailand.
Strengthening international trade
The SC continued to be involved in various regional and international committees and trade agreements to support the Government’s overall international trade and economic agenda. Participation in these fora also facilitated access into the Malaysian market, while safeguarding the interests of Malaysian investors and companies abroad.

The SC’s involvement includes the ASEAN Working Committee on Financial Services Liberalisation (WC-FSL), ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA) review, and the Malaysia-European Free Trade Association Economic Partnership Agreement (MEEPA).

Enabling Greater Efficiency of Public Market Fundraising

Promoting faster time-to-market via new frameworks for IPO/RTO and Principal Adviser
The new framework for initial public offering (IPO) and reverse take-over (RTO), which promotes shared responsibility among key stakeholders involved in the submission of an IPO for listing on the Main Market of Bursa Malaysia, or RTO of corporations listed on the Main Market, came into effect on 1 January 2021.
Under the new IPO framework:
Mandatory pre-submission holistic consultation between the SC and key stakeholders was introduced to enable issues to surface and be addressed prior to the formal submission of IPO applications. This had resulted in a smoother and more efficient review for companies seeking listing on the Main Market.
The exposure period for IPO prospectuses on the SC’s website had been extended. The longer exposure period had enabled greater public participation in providing feedback on the draft prospectuses.
Expanding the pool of Principal Advisers
The Principal Adviser (PA) regime had been liberalised to enable a larger pool of qualified professionals to be involved in the submission of IPO or reverse takeover (RTO) applications to the SC. This new regime came into effect on 1 January 2021 in conjunction with the new framework for IPO/RTO.
In 2021, the number of principal advisers had increased to 17 from 15 in 2020. In addition, the number of qualified professionals had increased significantly from 48 in 2020 to 86 in 2021. This liberalisation addressed the industry’s concern on the small pool of corporate finance professionals who are able to make submissions to the SC, and in 2021, the SC had seen a higher number of corporate proposal transactions, including IPOs.
Enhancing the SPAC framework
To ensure that the SPAC framework remains relevant, with the aim of spurring interest in deals involving SPACs, the Equity Guidelines was revised on 16 December 2021.
Under the revised SPAC framework:
Qualifying acquisitions will no longer be limited to only cash acquisitions and may include business combinations.
The threshold for shareholders’ approval of the qualifying acquisition had been reduced from a special resolution of at least 75% majority to a simple majority approval by all shareholders present and voting. This served to minimise the greenmail issue faced by SPACs, where certain investors acquire interests in a SPAC and use their ability to vote against a proposed qualifying acquisition to obtain additional consideration from the SPAC’s management team.
Greater clarity was provided to allow professionals with extensive experience in private equity (PE) and venture capital (VC) with asset sourcing and deal making experience to steer SPACs. This could potentially broaden the target asset universe, and spur mergers and acquisitions by Malaysian corporations; and
Minimum IPO price had been raised from RM0.50 to RM2.00 to signal the difference of investing in SPACs vis-à-vis traditional IPOs.

This revised framework will be effective on 1 January 2022.
Read more to Summary of Amendments of the revised Equity Guidelines
Article 1: Private Placement - Strengthening the Pillars of the Regulatory Ecosystem
read more
Enhancing fundraising process via amendments to Schedules 5, 6 and 7 of CMSA
To increase the efficiency of the fundraising process, the SC exempted the following types of corporate proposals from requiring approval via amendments to Schedule 5 of the CMSA:

Initial exchange offering (IEO) of digital assets through an RMO; and
IPO or cross-listing of the shares of a public company or listed corporation on a stock exchange outside Malaysia

Schedules 6 and 7 of the CMSA had also been amended to enable Bursa Malaysia to undertake the registration of ACE Market prospectuses effective 1 January 2022. This amendment would result in Bursa Malaysia becoming the one-stop centre for all approvals in relation to ACE Market listings.

Driving Greater Liquidity and Improving Market Vibrancy

Enhancing market making framework

Recognising the importance of market makers in the capital market ecosystem, the SC approved a two-year pilot market making programme to increase the liquidity and price efficiency of selected mid to large capitalisation stocks with low velocity. Stocks eligible for the programme are those with the
following criteria:

Eligible stocks criteria

Daily market capitalisation

≥ RM500 million

Velocity

≤ 35%

Public float

≥ 15%

Market makers registered with Bursa will be market making a certain number of these eligible shares while adhering to a list of prescribed trading obligations.

To encourage participation from the market makers, various fee rebates and waivers were offered to attract market makers to participate in this two-year programme.

The pilot programme was rolled out in June 2021.

Maintaining Competitiveness of the Derivatives Market

To cater to changing investor needs and reflect current market practices, a new futures contract was introduced, and modifications were also made to some existing contracts on Bursa Malaysia Derivatives (BMD).

Streamlining the Crude Palm Kernel Oil Futures contract

After taking into account the growth of the crude palm oil industry, and the need for greater harmonisation among the available palm oil futures contracts on offer to traders and market participants, the Crude Palm Kernel Oil (FPKO) contract was revised and made available for trading from 8 March 2021.

As the palm oil industry pivots towards sustainability-friendly business practices, BMD requires traceability documents to be produced when there is delivery of palm kernel oil. This will provide some clarity for buyers looking to show a commitment to sustainability on where and how their palm oil is sourced.

The number of delivery ports was also reduced to emphasise those with higher activity levels and greater proximity to palm oil production and consumption centres. Other changes to the FPKO contract included improved quality of deliverable oil and adjustment to its trading limits.

Revision of existing MGS futures contract

As part of an initiative to revamp and generate vitality in the MGS futures contracts, BMD announced a revamp to the existing three-year MGS futures contract (FMG3) and 10-year MGS futures contract (FMGA).

To better align with the five-year MGS futures contract (FMG5), the settlement methodology for both the FMG3 and FMGA futures contracts was changed from cash to physical. Several modifications were also made to the contract specifications to ensure that both futures contracts can be traded efficiently as the physically settled futures contract.

The alignment of the three MGS futures contracts into physical delivery allowed BMD to offer products across the spectrum and meet the short, medium and long-term hedging needs of market participants. The FMG3 and FMGA contracts were relaunched to the market on 27 December 2021.

Introducing a new derivatives contract: the East Malaysia Crude Palm Oil Futures

In light of providing market participants with a better avenue for price discovery of the crude palm oil market in East Malaysia, the East-Malaysia Crude Palm Oil Futures (FEPO) contract was launched on 4 October 2021. The introduction of FEPO aimed to complement the FCPO contract by ensuring market participants of various needs and circumstances can hedge with greater ease.

The FEPO contract mirrors the original FCPO contract save for a few key changes. Firstly, the three-port tank installations in East Malaysia are chosen to ensure cost-efficient delivery of crude palm oil. Secondly, the contract starts trading half an hour earlier to allow arbitrage opportunities and greater visibility, particularly to the commodity traders in China’s Palm Olein Market of the Dalian Commodity Exchange. Market activity has been positive, with growth in trading volumes observed since the initial launch.