Empowering Investors for a Better Future - Enabling a More Relevant, Efficient and Diversified Market

Empowering Investors for a Better Future

As Malaysians accumulate wealth, there continues to be a need to develop an advice-centric approach to assist investors to navigate their financial futures. Towards this end, the SC has introduced flexibilities and measures to enable broader investment advisory models that would cater to a wider spectrum of advisory for the domestic investor base and help strengthen the role of the financial planning industry to provide quality advice.

Broadening Advisory Models to Cater to Varied Investor Needs

With increasing access and use of mobile devices, there is an observed emergence of mobile/app-based software providing investment advice. These apps employ algorithms to provide investment advice and are an increasingly popular way for retail investors to get access to advisory services and the market-at-large. These applications provide a convenient and alternative option to investors where there is no human adviser interaction in the advisory process.

Recognising this, the SC sought to provide flexibility and regulatory clarity on the key requirements in undertaking the business of investment advice using automated algorithm-based tools. The aim is to balance the need of attracting new entrants while ensuring quality of players. To this end, the SC issued a technical note in October 2022 to clarify the minimum financial, competency and technological-related ongoing conduct requirements expected for intermediaries interested in providing digital investment advice.

Read more on media release on ‘SC Issues New Guidelines and Technical Note to Enhance the Quality and Diversity of Investment Advisory’.

Strengthening the Role of the Financial Planning Industry to Provide Quality Advice

Issuance of Guidelines on Islamic Capital Market Products and Servicesnd Services
The SC had, in November 2022, issued the Guidelines on Islamic Capital Market Products and Services (ICMPS Guidelines) which serves as a single point of reference that provides a consolidated and distinctive aggregation of Shariah requirements. The ICMPS Guidelines consolidate all Shariah requirements for ICM products including sukuk, Islamic structured product and Islamic CIS, that were previously cited in the relevant chapters within respective guidelines.

Read more on media release on ‘SC Issues Consolidated Guidelines on Islamic Capital Market Products and Services’.
Revision of Guidelines on Islamic Fund Management
Following the launch of the three-year joint action plan for the financial planning industry in 2020, the industry has witnessed a 5% growth in the number of licensed firms, and a 49% growth in the number of licensed financial planning representatives.

While this trend of growth is encouraging as it benefits investors with more accessibility to investment advice, initiatives to drive better advisory services and outcomes to more Malaysians continues to be an important consideration within the financial planning industry.

In line with the recommendations under the joint action plan, industry representatives and associations sought and received Capital Market Development Fund (CMDF) funding of RM7.5 million for 16 initiatives that will be implemented between 2023 to 2025 to enhance standards, attract talent and elevate the quality of advice.

These initiatives include:
Ultimately, the measures introduced in 2022 would facilitate a move towards a wider spectrum of advisory models which increases accessibility and affordability of quality advice – in turn, empowering more Malaysians to participate in capital markets.

Special Feature 3

Behavioural Insights to Address Retirement Savings Inadequacy

Mitigating Systemic Risks And Promoting Financial Stability

Enhanced Risk Governance Framework

In 2021, the SC-wide risk governance framework was enhanced as part of an overall initiative to have an effective integrated and predictive risk surveillance to maintain regulatory agility.

The structured risk governance framework integrated the wider spectrum of risks such as technology, cyber and conduct risk at the SC’s Systemic Risk Oversight Committee (SROC) and Accounting, Market and Corporate Surveillance Committee (ACMS).

Intensified surveillance

The SC continued to intensify its surveillance of systemic risk to maintain market resilience and stability. Regular SROC engagements were held to deliberate concerns emanating from various segments across the capital market. Domestic equity and bond market, foreign fund flows and trade participation continued to be monitored closely for potential stress points.

In addition, measures and economic stimulus packages introduced by the government to weather the impact of COVID-19, market trading conduct and the financial position of listed companies were among the focus areas for discussion.

Thematic assessments

The SC also conducted thematic assessments covering investors’ fund flows, the position of firms, and policy decisions to ascertain the possible impact on the capital market. In 2021, the SC reviewed and enhanced its crisis indicators on potential emerging risks in the
capital market.

The enhanced crisis indicators provided a reference point for escalation to SROC when the identified indicators and triggers materialised and ensured prompt response to manage and prevent any issues of concern that might lead to a systemic crisis.

Joint regulatory discussions

In 2021, the SC conducted frequent joint regulatory discussions with other authorities such as Bank Negara Malaysia (BNM) and Labuan Financial Services Authority (Labuan FSA) to identify systemic risk concern areas within the financial and capital markets in Malaysia.

Monitoring of various components of the capital market

The SC continued its efforts to undertake a methodological and integrated approach to ensure any potential systemic risk was being monitored, mitigated, or managed. Figure 1 highlights the findings from the following risk assessments on the various components of the capital market.