Shared Accountability

Throughout 2023, the SC continued to engage with various stakeholders towards enhancing shared ambitions and stewardship for the capital market. These opportunities to establish and nurture closer ties with key stakeholders enable the SC to establish facilitative policies, a robust regulatory framework, and foster continuous capital market growth and development.

  • Strengthening Corporate Governance
    In 2023, the SC continued efforts to promote the adoption of good corporate governance practices in the capital market, including bringing together and working with domestic and international stakeholders through various fora. From 11 to 12 October 2023, the SC hosted the OECD Asia Roundtable on Corporate Governance, which gathered over 150 senior delegates from across Asia to discuss the current issues in corporate governance. The Roundtable also witnessed the Asia launch of the revised G20/OECD Principles on Corporate Governance, officiated by Yang Berhormat Datuk Seri Ahmad Maslan, the then Deputy Minister of Finance I, witnessed by the SC Chairman, Dato’ Seri Dr. Awang Adek Hussin and the OECD Deputy Secretary General, Yoshiki Takeuchi.

    In addition, on 10 October 2023, the SC co-hosted the International Auditing and Assurance Standards Board (IAASB) Asia Pacific Roundtable, which discussed the International Social Security Association (ISSA) 5000, General Requirements for Sustainability Assurance Engagements – the draft standard on sustainability assurance. These discussions involved over 70 participants from markets across the Asia Pacific region including accounting and auditing firms, accounting standard setters, audit oversight bodies, capital market regulators, and institutional investors.
    At the ICGN-Hawkamah Conference held in Dubai from 28 to 29 November 2023, the SC was invited to share its perspective on the role of boards in governance sustainability. The conference co-organised by the International Corporate Governance Network and the Hawkamah Institute of Corporate Governance had the participation of close to 200 delegates. The SC shared its efforts to support boards in providing the strategic oversight of a company’s sustainability risks and opportunities, which includes structured training for directors on sustainability.

    Meanwhile, the SC remained vocal in its support for diversity as a vital component of good corporate governance practices. Among other avenues, the SC was represented as a panellist at the Malaysia Venture Capital Management Bhd’s (MAVCAP) Accelerating Venture event in conjunction with International Women’s Day 2023. The panel session, ‘Does Gender Matter in the Digital World’, discussed opportunities and challenges faced by women in the workforce, the participation of women in leadership positions, and the collective effort required to close gender gaps and break gender biases in the fintech industry.
  • Ensuring Compliance and Protecting Investors
    The SC and the Association of Trust Companies, Malaysia (ATCM) continued to co-host the Bond and Sukuk Trustee Forum, the second in its series. The forum marked a significant milestone for the Malaysian bonds and sukuk industry and was first convened in 2021 as a response to the global pandemic and its disruptions to the economic and financial landscape.

    The second iteration of the forum, held on 12 May 2023 at the SC, gathered 35 representatives from various trustee companies involved in Malaysia’s bond and sukuk market. The SC Chairman, Dato’ Seri Dr. Awang Adek Hussin delivered the welcoming address at the forum, highlighting the crucial role played by bond and sukuk trustees in ensuring compliance and protecting investors’ interests in the bond and sukuk market.
    The forum included participation by the SC together with the bonds and sukuk trustees. The discussions focused on the challenges and opportunities presented by digitalisation in the bond and sukuk market. The forum attendees also had the opportunity to share their insights on the duties and liabilities of the board of directors of trustee companies.

    The forum provided a platform for bonds and sukuk trustees to gain a deeper understanding of their responsibilities. It also embodied the SC’s commitment to being a facilitative, transparent, and engaging regulator. Continuous engagements with the bonds and sukuk trustees enable the SC to formulate policies that address challenges faced by stakeholders and foster continuous growth and development of the bond and sukuk market.
  • Building Technological Resilience
    The cyber security landscape has evolved rapidly, with the likelihood of cyber-attacks growing substantially with each passing year as cyber criminals deploy increasingly sophisticated tactics. In response to this, the SC maintains a vigilant approach to monitor threats and incidents, and adopt a proportionate stance in managing cyber incidents effectively.

    The SC through the CMCS exercise remains steadfast in its overarching objective to instil preparedness and proficiency among participating entities, equipping them with the agility to respond promptly and the resilience to recover effectively when confronted with cyber incidents and escalation procedures. The scenarios presented are tailored to mirror the ever-evolving landscape of cyber threats, ensuring that participants engage in an interactive and instructive event.
    The SC’s Technology Supervision Department under DSI conducts the CMCS in collaboration with the National Cyber Agencies (NACSA) and CyberSecurity Malaysia (CSM). The event on 5 October 2023 marked the sixth consecutive annual CMCS, involving 112 organisations selected based on their level of dependency on technology for day-to-day operations.
    Since the release of the Guidance Note on Management of Cyber Incidents (Guidance Note) in 2022, the SC has proactively engaged capital market entities to enhance the understanding of their roles and responsibilities in the event of a cyber incident. The pursuit of enhancing the effectiveness of the capital market entities in responding to cyber attacks, the SC organised five sessions of the Capital Market tabletop Exercise (CMTTX) from 2022 to 2023. The events were designed for capital market entities not selected for the CMCS exercise and served as an avenue to familiarise these entities with the contents of the Guidance Note. The CMTTX sessions were attended by 277 participants representing 184 organisations, offering them a valuable opportunity to participate in this educational exercise.
  • Enhancing Risk Management
    The SC continued to work with key stakeholders to remain vigilant of emerging risks and vulnerabilities that may impact the systemic stability of the domestic capital market. The SC’s involvement in the Macro Risk Focus Group (MRFG) with BNM is part of a biannual collaborative regulatory discussion with BNM to exchange assessments of developments pertaining to the stability of the financial and capital market.

    The SC led the first MRFG meeting with BNM on 14 April 2023. The SC then hosted a meeting with BNM to further share developments from the SC’s macro stress test on funds, which was featured in the Capital Market Stability Review (CMSR) 2022. During this engagement, BNM also shared high-level details of its Climate Risk Stress Test, outlining its objectives, and scope, as well as the challenges involved.

    To facilitate inter-agency co-ordination, the SC held engagements with BNM and Perbadanan Insurans Deposit Malaysia (PIDM) on resolution planning in March and June 2023. The engagements included discussions on inter-agency co-ordination such as the Strategic Alliance Agreement (SAA) between PIDM and BNM on information sharing, interventions, and risk monitoring. Given the recent banking crises in US and Europe, the engagement also discussed observations of market stabilisation measures and resolution strategies being undertaken by the relevant authorities.

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.

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