International Stakeholder Engagements

The SC’s stakeholder engagements at the international level serve to lend Malaysia’s voice to global policymaking in capital markets, support the country’s trade and economic agenda and contribute to regional connectivity within ASEAN. In this regard, the SC has established long-standing and regular engagements with foreign policymakers and regulatory counterparts through various international fora and actively engages with multi-lateral organisations and international industry associations. The SC’s international stakeholder engagements are further driven by the need to ensure that regulatory developments in the Malaysian capital market are closely aligned with international best practices and standards, thereby ensuring that the Malaysian capital market remains competitive and relevant.

International Organization of Securities Commissions

The SC continues to demonstrate its commitment to global regulatory policymaking and international standard-setting by being actively involved in the IOSCO, the leading international standard-setter for securities regulation. The IOSCO’s membership regulates more than 95% of the world’s capital markets in approximately 130 jurisdictions.

In July 2022, the SC was re-elected as the APRC representative to the governing Board of the IOSCO. The SC’s successful re-election to the IOSCO Board is a significant recognition of its active contribution and participation and demonstrates the confidence IOSCO members have in the SC as an organisation. The SC’s membership on the IOSCO Board allows it to be at the forefront of global regulatory discussions and policymaking and gain relevant insights into emerging regulatory issues impacting global capital markets. Given the SC’s priority of strengthening cross-border co-operation in the areas of supervision and enforcement, the SC has supervisory and enforcement co-operations with regional and international regulators.

Throughout 2022, the SC actively participated in the IOSCO’s work to further securities regulators’ core objectives of protecting investors; maintaining fair, efficient, and transparent markets; and addressing systemic risks. These include, among others, sustainable finance, crypto/digital assets and Decentralised Finance (DeFI), retail market conduct and operational resilience. This work helps guide international regulators to achieve a globally consistent and effective approach to mitigate the risks of regulatory arbitrage and ensure investor protection in a cross-border context. They also foster greater engagement and collaboration among members.

Further, the IOSCO Asia Pacific Hub, hosted by the SC since 2017, continues to play an important role in strengthening the regulatory capabilities of securities regulators globally. Being the only regional hub set up outside of the IOSCO headquarters in Madrid, Spain, the hub’s capacity-building initiatives continue to benefit a substantial portion of domestic stakeholders, particularly the SC employees. To date, the hub has collectively trained more than 1,100 participants from over 90 countries.

Read more on media release ‘SC Signs Supervisory Co-operation MMoU At Global Regulators Meeting’.

Association of Southeast Asian Nations

Through the ACMF and the ASEAN Working Committee on Capital Market Development (WC-CMD), the SC engages with securities regulators, central banks and finance ministries from all ASEAN member states to enhance and facilitate better pan-ASEAN connectivity to realise the growing potential of its capital markets, and promote and sustain the inclusiveness of ASEAN capital markets. Regional initiatives led by the SC to help achieve these ambitions include the ASEAN SLBS, the ASEAN SRFS (as Co-Chair of the ACMF’s SFWG) and the Sustainable Finance for Sustainable Projects – Conversation Pack (as Chair of the WC-CMD’s Infrastructure Finance Working Group), all of which were launched in 2022.

Through these workstreams, the SC also engages with multilateral organisations and the industry through the Industry Advisory Panel (IAP), which includes market participants and professionals from the ASEAN region and beyond.

As Chair of the ASEAN Taxonomy Board’s (ATB) Working Group on Market Facing and Resourcing, the SC has played a key role in driving engagement with international stakeholders on the ASEAN Taxonomy. Through consultations, targeted events and speaking sessions, there has been close interaction with international organisations, market participants within and outside of the region, as well as regulators and participants in other related sectors.

International Trade Agreements

Development in the digital offerings of the capital market
As the demand for digital services grew, the capital market continued to witness encouraging growth via digital innovation and the introduction of new business models.
Initial exchange offerings
Following the introduction of the regulatory framework governing digital token offering, the SC has registered two initial exchange offerings (IEOs) operators in March 2022. The registered IEO operators will provide an alternative avenue for eligible companies to raise funds via the issuance of digital tokens in Malaysia. These new operators will be required to carry out the necessary assessments to, among others, verify the issuer’s digital value proposition, review the issuer’s proposal and disclosures in its whitepaper, and undertake a comprehensive due diligence on the issuer and its token offering, prior to hosting the issuer’s digital token on their platform. An issuer may raise funds of up to RM100 million from retail, sophisticated and angel investors, subject to the respective investment limits provided in the SC’s Guidelines on Digital Assets.
Digital asset market
The local digital asset market has moved along with the global market trend in 2022, with an average daily transaction value of RM25.75 million in 2022, compared with RM57.29 million in 2021. Further, more than 128,000 accounts were created in 2022, which added 17% more accounts since end of 2021.

The SC continues to promote responsible innovation within the digital asset space and places a high priority on managing emerging risks and safeguarding the interests of investors. Recognising the strong appetite to operate new digital asset exchanges (DAX) in Malaysia, the SC has opened the application for RMO-DAX registration and enabled a new digital broker business model to operate on the RMO-DAX. This will facilitate the introduction of platforms with different value propositions.

As at 31 December 2022, there were four RMO-DAX operators registered with the SC. Allowing more players to enter the market increases capital market vibrancy by widening the number of regulated exchange platforms for investors to invest in.
Digital investment management
The digital investment management (DIM) segment continued to expand its capital market offerings to address the investment needs of the emerging digital generation of investors. The segment had grown in an upward trend over the years, with a total AUM of more than RM1.39 billion as at end 2022. The number of new accounts created has increased by 42%, since 2021, with the majority of accounts held by men younger than 35 years old. Women-held accounts have invested at least 57% more since December 2021, indicating a positive step towards closing the gender investment gap.
Digital-only brokerage
Digital brokers have enjoyed a dominant presence from retail investors using online brokerage accounts, particularly among millennial investors who comprised the majority (72%) of the clientele base. The increased retail interest in the equity market has peaked (33%) in 2022 during this economic recovery comparatively to 2021, with digital brokers gaining a retail market share of 4%1 with total number of accounts having risen by more than 10% to approximately 276,000 in 2022 [2021: approximately 251,000].
Catalysing greater adoption of emerging tech
In the era of post-pandemic recovery, investments into technology has become crucial to sharpen the competitive edge for businesses. Malaysia’s capital market players will only continue to grow with the help of innovative digital solutions such as the use of artificial intelligence, data analytics, and blockchain technology. To boost productivity and increase digitalisation in the capital market, the SC, in partnership with the Capital Market Development Fund (CMDF), established a RM30 million Digital Innovation Fund (DIGID). Through this fund, the SC will co-fund innovative projects that demonstrate the use of technology to allow new and competitive propositions to be brought into the Malaysian capital market. DIGID aims to encourage smaller capital market players to adopt innovative digital solutions and the development of industry-wide solutions impacting capital raising and investment activities.

Read more on media release ‘SC Unveils Digital-related Initiatives to Bolster Capital Market’.
Facilitating cross-border access to ASEAN Collective Investment Schemes via Digital Repository
Through its participation in the negotiations of Malaysia’s free trade agreements, led by the Ministry of International Trade and Industry (MITI), the SC supports and facilitates Malaysia’s international trade and economic agenda from the perspective of financial services.

Multiple engagements with regulatory counterparts from the financial and other related sectors, such as BNM and the Attorney General’s Chambers, allow the SC to shape discussions for the Malaysian capital market ahead of the negotiations. These include negotiations for trade agreements such as the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA) review and the Malaysia-European Free Trade Association Economic Partnership Agreement (MEEPA). These engagements are critical to ensuring protection of the overall interests of the Malaysian capital market, including preserving the right to regulate entry into the capital market.

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.