Gatekeeping - Regulatory Performance and Outcomes | Securities Commission Malaysia

Gatekeeping

The SC ensures that only fit and proper persons are licensed or registered to conduct capital market activities. A thorough assessment of each application will be made prior to its approval including conducting adverse checks with other regulators and authorities (Table 13 and Table 16). In 2023, all the Capital Markets Services Licence (CMSL) and Capital Markets Services Representative’s Licence (CMSRL) applications were attended to within the service charter (Table 14).

There has been a significant increase in the number of approved new CMSL holders and registered entities compared to 2022. 44% of the approved CMSL holders were in relation to the regulated activity of fund management, while another 25% were for the regulated activity of financial planning. There were 13 new registered entities which includes three Digital Asset Custodians (DACs). As of 31 December 2023, 864 CMSRL applications were approved and the total number of CMSRL holders stood at 10,272.

TABLE 13

Status of licensing and registration applications

Application for new CMSL	2023	2022
New applications received	8	18
Brought forward from previous year	18	10
Approved	16¹	6
Returned or withdrawn	5	4
Application for new CMSRL
New applications received	931	1,094
Brought forward from previous year	51	58
Approved	864	1,042
Returned or withdrawn	65	190
Application for registration²
New applications received	15	19
Brought forward from previous year	8	6
Approved	13	9
Returned or withdrawn	6	8

Note:

Six approved-in-principle (AIP).
Excluding recognised market operators (RMOs).

TABLE 14

Service charter performance – licensing of CMSL and CMSRL

Service	Measure	Target	Results
Service	Measure	Target	2023	2022
New CMSL application	Within six weeks of receiving complete application	100%	100%	100%
New CMSRL application	Within two weeks of receiving complete application	100%	100%	100%

During 2023, there were three CMSL holders which had surrendered their licences as they were no longer in the business of the regulated activity(ies) for which they were licensed. In addition, 961 CMSRL holders had surrendered their respective licences and one CMSRL holder’s suspension that was imposed pursuant to section 72(3) of the Capital Markets and Services Act 2007 (CMSA) in 2022, had ended on 21 June 2023 (Table 15).

TABLE 15

License or registration ceased, revoked and suspended

CMSL holders	2023	2022
Ceased, revoked or suspended	3	3
CMSRL holders
Ceased, revoked or suspended	962	1,068
Application for registration¹
Ceased, revoked or suspended	8	6

Note:

Excluding RMOs.

In 2023, the SC registered nine RMOs, consisting of four e-services platform (ESP) operators, two ECF platform operators as well as one P2P platform operator, one digital asset exchange (DAX) and one general RMO.

The reopening of applications was announced on 31 October 2022 as part of several digital-focused initiatives to spur further growth in the capital market. It had resulted in an expansion in the breadth of choices available to investors and issuers in this segment with the number of registered RMOs increasing from 33 in 2022 to 42 in 2023.

TABLE 16

Status of recognised market operators

No. of applications	2023
Considered during the year	15
Registered	9
Returned	3
Withdrawn	3
For consideration	20*
Brought forward from previous year	3
Received during the year	17

Note:

* Include applications submitted by two entities seeking to be registered for two different activities.

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.