Guidelines on compliance function for fund managers introduced to further strengthen investor protection

The Securities Commission (SC) today introduced compliance guidelines for fund managers to further strengthen the level of investor protection. These guidelines were developed by a joint working group comprising the Malaysian Association of Asset Managers (MAAM) and the SC and evolved after substantial input from members of MAAM and consultation with the industry.

The introduction of the Guidelines on Compliance Function for Fund Managers supports the Capital Market Masterplan (CMP) strategic initiatives of ensuring that Malaysian intermediation services were anchored on appropriate prudential standards, with high levels of business conduct and professional skills.

The guidelines complement the existing regulatory requirements and represent substantial progress in efforts to develop greater reliance on market based disciplinary mechanism, compatible with international best practices. This effort is consistent with the transition to a market-based system of regulation of capital market activities as envisaged in the CMP.

Broadly, the guidelines require fund managers to adhere to best practices for trading and portfolio management, reporting to clients, safeguarding of clients assets (including appointment of custodians) and specify best practices for meeting “know your client” obligations and the roles and responsibilities of the Board of Directors and Compliance Officers. The guidelines also specify the requirements for compliance with the Anti Money Laundering Act 2001.

The introduction of these guidelines would assist fund managers in their efforts to substantially strengthen the internal controls and elevate the overall standards of ethical and prudential conduct in the investment management industry. The efforts by the industry would contribute towards enhancing investor protection and promoting the levels of market integrity.

All fund managers are given a grace period of one year from the date of this announcement to comply with the requirements of the – Guidelines on Compliance Function for Fund Managers. The guidelines are available on the SC website here.

15 March 2005