Kuala Lumpur , 27 September 2007

Capital Markets and Services Act 2007 comes into force 28 SeptStrengthens capital market and investor protection

The Capital Markets and Services Act 2007 (CMSA) comes into force on 28 September 2007, marking a major milestone in the Securities Commission’s (SC) continuous measures to strengthen the capital market regulatory framework, improve business efficacy and further enhance investor protection.

“The introduction of the CMSA marks significant enhancements to our approach in regulating the marketplace. It sets the stage for us to achieve key regulatory outcomes in relation to investor protection, market integrity and systemic stability,” said the SC Chairman, Dato’ Zarinah Anwar.

The CMSA accords greater protection to investors by:

  • enhancing the SC’s power to take civil action and administrative actions,
  • allowing the SC to recover three times the amount of losses through civil action for a wider range of market misconduct including market manipulation,
  • requiring application monies of sophisticated investors to be held on trust in fund raising exercises,
  • enhancing the standards of trustees for debenture holders, and
  • extending investor protection provisions to clients of financial institutions.

A key CMSA measure benefitting capital market intermediaries is the introduction of the single licensing regime. Under this measure, intermediaries hold a Capital Markets and Services Licence as opposed to multiple separate licences, which effectively reduces administrative and compliance costs, and ultimately saves time.

A Licensing Handbook explaining the implementation of the single licensing regime has also been released. The Handbook stipulates, among others, that Capital Markets and Services Licence holders are required to attend mandatory equity training courses under the Industry Transformation Initiative (ITI), a new series of CPE training courses funded by the Capital Market Development Fund.

The CMSA increases the efficiency of the fund raising process where SC’s approval on corporate proposals such as share splits or share consolidations, and entitlements in respect of warrants, options or rights will no longer be required.

The law provides further impetus to Malaysia’s position as a competitive global Islamic financial hub by providing clear statutory provisions to recognise Islamic products. Notably, under the CMSA, Islamic banks which carry out the whole range of capital market activities for all Shariah-based products and services are automatically granted the ‘registered person’ status.

To ensure a smooth transition to the new regulatory framework, the SC has introduced the Capital Markets and Services Regulations 2007 and Guidelines on Regulation of Markets, which come into effect concurrently with the CMSA and the consequential amendments to the Securities Commission Act 1993.

Provisions relating to take-overs and mergers in the CMSA will come into force in 2008 with the revised Code on Take-Overs and Mergers, which will be introduced after consultation with industry participants.

The CMSA, passed by Parliament in May 2007, consolidates the Securities Industry Act 1983, Futures Industry Act 1993 and Part IV of the Securities Commission Act 1993 which deals with fund raising activities.

The SC will be issuing a series of FAQs on the salient features of the CMSA. These FAQs, the CMSA, the Licensing Handbook, Capital Markets and Services Regulations 2007 and Guidelines on Regulation of Markets will be available at here from 28 September 2007.

Enquiries on the CMSA can be e-mailed to cmsa@seccom.com.my or directed to the Corporate & International Affairs Department via telephone at 03-6204 8777.