SC meets stockbroking companies to discuss consolidation issues

The Securities Commission (SC) today held a closed-door dialogue with representatives of all the 47 stockbroking companies on the policy framework for stockbroking industry consolidation and other issues concerning the industry. The dialogue was chaired by the SC Chairman, Datuk Ali Abdul Kadir.

The dialogue enabled the SC to solicit constructive feedback from stockbroking companies on issues relating to the consolidation process, especially in terms of further steps that could be taken by both the regulator and industry to speed up the consolidation process. In line with this, the dialogue also provided an added avenue for stockbroking companies to clarify general issues relating to the policy framework, in addition to those raised in regular working meetings with the SC.

During the dialogue, the SC reiterated that all stockbroking companies must merge with at least one other stockbroking company while those aspiring to become Universal Brokers must merge with three others.

The total number of stockbroking companies has reduced from the initial 66 (prior to the introduction of the policy framework in 2000) to 47. Based on the announcements made by stockbroking companies and proposals received by the SC up to 2 May 2002, the number of stockbroking companies is expected to further reduce to 33.

The SC has so far granted the status of Universal Broker to five stockbroking companies. The SC commended these Universal Brokers for being forward-looking and as a result of this, had been reaping the benefits of the various incentives offered to Universal Brokers.

Universal Brokers are allowed to offer a full range of capital market services and hence, have the privilege of expanding their activities beyond the traditional, pure stockbroking functions. They are also allowed to establish additional branches and electronic access facilities throughout the country. To-date, the SC has approved 28 additional branches and eight electronic access facilities at various locations.

The Association of Stockbroking Companies Malaysia (ASCM) has given its commitment to the SC that its members will merge with at least one other stockbroking company. So far, 16 stockbroking companies have yet to announce or propose any consolidation plans. The SC has met with these companies periodically to explore ways to facilitate their consolidation efforts.

The SC also took the opportunity to remind stockbroking companies to exercise good risk management practices and proper internal control procedures in the conduct of their business activities. Stockbroking companies were also reminded of their obligations to their clients and their duty to adhere to all the relevant laws, rules and regulations to ensure that the integrity of the market is always maintained.

The consolidation policy is aimed at strengthening the industry and forming a core group of well-capitalised stockbroking companies to face the challenges of greater competition brought about by the forces of liberalisation and globalisation.

2 May 2002