Kuala Lumpur, 6 October 2005
SC Further Liberalises CDs Account Requirements – Enhances International Competitiveness and Efficiency of Malaysia Capital Market
The Securities Commission (SC) on October 6, 2005 announced further liberalization to CDS (Central Depository System) account requirements to permit a wider group of persons to hold securities on behalf of others. These persons, known as exempt authorised nominees, are also allowed to hold the securities in omnibus CDS accounts.
The list of exempt authorised nominees is available on the SC website.
The increased ability to pool securities into one CDS account will promote greater trading efficiency in the Malaysian market. Additionally, this liberalisation of CDS account requirements will enhance the international competitiveness and vibrancy of the Malaysian capital market, contributing towards the promotion of market liquidity.
The liberalisation of securities account structure requirements will be effected through the Securities Industry (Central Depositories) (Exemption) Order 2005 as well as the relevant rules and directives of Bursa Malaysia, which will come into effect on October 21, 2005.
In tandem with the liberalisation of securities account structure requirements, stockbroking companies and authorised nominees are expected to practise due diligence standards aligned with international best practice, particularly stringent application of “know-your-client” rules to ensure that any information that is required by regulatory authorities on stock market transactions and identities of those behind such transactions can be obtained as and when necessary.
The move towards the further liberalisation of securities account structure requirements is timely given today’s economic recovery, extensive improvements to the stock exchange’s reporting requirements and significantly better information-sharing arrangements that have been established between Malaysian regulatory bodies and authorities in other jurisdictions since 1998.
Market surveillance and investigation have also been enhanced through cooperative efforts at an international level. Furthermore, there is much convergence internationally in recognising and encouraging institutions to identify and verify their direct clients as well as to look behind nominees or trustees to the ultimate beneficial owner, a scenario that was non-existent before 1998.
In 1998, several measures were introduced to address the challenging economic and market conditions at the time including securities account structure requirements, the mandatory deposit of securities into the central depository system, and, procedures on transfers and off-market transactions. These measures have been continuously reviewed over the last six years towards improving efficiency, taking into account market feedback and changing investment climate.
SECURITIES COMMISSION MALAYSIA