Surveillance - Regulatory Performance and Outcomes

Surveillance

Promoting Transparency and Accountability in Public-Listed Companies for Market Integrity

The integrity of capital markets is paramount for fostering investor confidence and ensuring the stability of the financial system. In this context, the SC plays a critical role in monitoring the conduct of public-listed companies (PLCs), with the aim of ensuring compliance with securities laws and regulations, ultimately safeguarding investors’ interests.

The SC’s surveillance efforts are risk-based, focusing on scrutinising corporate transactions, disclosures, and financial statements of PLCs. This year, with the greater enhancement of its in-house surveillance and analytics tools, the SC has employed greater automation and more effective analytics in identifying companies with heightened concerns. With better detection and more expeditious review of cases, the effectiveness of the SC’s surveillance has been enhanced, resulting in a 60% increase (in comparison to 2023) in the number of cases with potential issues being reviewed and appropriate actions taken.

In reviewing PLCs’ corporate transactions and conduct, the SC engaged with directors, officers, and statutory auditors to gather insights and ensure accountability. Upon completion of review, cases with possible breaches of securities laws were referred for formal investigation and/or enforcement action by the SC, while cases with possible breaches of Listing Requirements were directed to Bursa Malaysia for further action.

Greater emphasis has also been placed on PLCs’ adherence to approved financial reporting standards to ensure transparency and comparability in financial statements, thus providing investors with accurate information about the PLCs’ financial health.

To ensure that its surveillance activities remain relevant and effective, the SC continuously reviews and, where appropriate, enhances and refines its approaches, taking into consideration, among others, emerging market trends and concerns regarding corporate behaviour and conduct. As the capital market continues to evolve amid global challenges, the SC’s commitment to safeguarding investors’ interests remains unwavering, making it a cornerstone of market stability and integrity.

Fostering Compliance with Take-over and Merger Regulations and Maintaining Effective Regulation

As part of its mandate, the SC also closely monitors compliance with the take-over requirements to detect misconduct and breaches which could jeopardise the interests of the investing public. In 2024, the SC had issued infringement notices for various non-compliances detected which include failure by advisers to ensure clients comply with the take-over regulations and noncompliances relating to dealings in securities during the offer period and/or disclosure of information to the SC (Table 14).

Note:

* Computed based on the offeree company involved rather than the number of notices issued or actions taken. Statistics also reflected under the SC’s administrative actions (Table 20) and Infringement Notices (Table 25).

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.