With effect from 2 January 2007, only trust companies that are registered with the Securities Commission (SC) are eligible to be appointed as bond trustees. The SC has released a set of criteria under the Practice Note on Registration by the Securities Commission for the Purpose of Acting as a Bond Trustee to facilitate the registration process.
The registration criteria under the Practice Note aim to ensure that trust companies that act as bond trustees are those that have demonstrated sound track record and high professional standards.
The SC expects the higher standards of professionalism among trustees to translate to greater protection for investors. The need for the credibility, integrity and effectiveness of bond trustees to be consistently maintained is underlined by the critical role they play in safeguarding the interests of bondholders.
Specifically, the registration criteria in the Practice Note focus on the level of expertise and resources in bond trustees, their independence and avoidance of conflicts of interest, and on their track record. Only trust companies that meet these criteria will be registered by the SC.
The requirement for the appointment of an SC-registered bond trustee only applies to new bond issues that are granted approval by the SC on or after 2 January 2007. Further, the Practice Note only applies to the trusteeship of corporate bond issues i.e. a company that is not registered with the SC, or chooses not to be registered with the SC, may continue to act as trustee in all other matters.
The issuance of the registration criteria for trust companies to act as bond trustees ties in with the requirement for a corporate bond issuer to appoint a trustee and enter into a trust deed under the Securities Commission Act 1993.
In coming up with the registration criteria, the SC had engaged with the Association of Trust Companies in Malaysia, who will on their part be introducing a code of conduct for bond trustees to complement the SC’s Practice Note.
A list of bond trustees registered is available here.
The Practice Note is available here.