Speech by

YBhg Datuk Ranjit Ajit Singh
Managing Director, Securities Commission Malaysia

at the

Malaysian Financial Planners and Advisers Association Ceremony

30 September 2010
Securities Commission Malaysia

Mr Yap Min Hui, President of the Malaysian Financial Planners and Advisers Association (FPA),

Members of the FPA Executive Committee,

Distinguished guests,

Members of the press,

Ladies and gentlemen



Good afternoon. I am pleased and honoured to have been invited by the Malaysian Financial Planners and Advisers Association (FPA) to deliver the keynote address at the launch of the new name and logo of the FPA, formerly known as ‘Malaysian Association of Chartered Financial Consultants’.


Today’s event is as I understand not merely a rebranding exercise for the FPA but more importantly an important step taken by the association to forge a new path for itself, taking on a wider role within the financial planning landscape in Malaysia. The FPA has opened membership to all licensed financial planning and financial advisory practitioners.


The SC welcomes the efforts made by the financial planning industry to continue to position itself with a view to developing the financial planning industry in Malaysia. As some of your more senior members are aware, the regulatory framework for the financial planning industry has evolved over time, with financial planning being recognised as a distinct licensable activity. In developing this framework, the SC has always benefited from useful discussions with the financial planning associations as well as licensed practitioners.

An opportunity to strengthen investor protection


The Malaysian capital market and its institutions have remainded resilient during the global financial crisis which began in 2007. This was a result of the efforts put in place during the decade following the Asian financial crisis both by regulators and market players to strengthen risk management and improve controls in governance. However, the GFC has demonstrated the interconnectedness of global markets and intermediaries, and further work is needed to improve the regulatory framework internationally.


President Obama’s chief of staff was quoted as saying that “You never want a serious crisis to go to waste”1. Whether the crisis occurs in foreign countries or your own backyard, it is something which a prudent regulator needs to learn from. So what is the result of this crisis? Globally it has led to a serious rethink by policy makers and regulators of the regulatory framework under which financial markets operate, including in the area of investor protection. Among the changes have been the following:

  • Following the Lehman mini-bonds issue, both Hong Kong and Singapore reviewed the sales practices for capital market products.
  • The Australian government has also announced key reforms which include a prospective ban on conflicted remuneration structures; the introduction of an adviser charging regime which contains flexible options for consumers when paying for advice; and the introduction of a statutory fiduciary duty for financial advisers requiring them to act in the best interest of their clients2.
  • The UK Financial Services Authority has also announced a prospective ban on financial advisers from receiving commissions on pensions, annuities and unit trusts.


Investor protection regulation is crucial as investor confidence is the key for any financial market to function effectively and efficiently. Investors, retail investors in particular, require protection given the often observed information asymmetry in markets. Retail investors generally purchase capital market products infrequently and as a result have less scope to understand the nuances of investing. Compounding this is the fact that products are becoming more diverse and sophisticated, enabling more choices yet adding complexity for investors. The GFC which initially began in the collateralized debt obligation market has also highlighted that even issuers themselves may fail to appreciate the risk contained in some financial products.


Taking note of developments regionally as well as in Malaysia, the SC has issued a consultation paper on the current sales practice regime for capital market products and the classification of sophisticated investors. To encourage higher standards of sales practices and engagement between investors and intermediaries, we feel the review of the sales practice regime is timely.


The SC is also working on introducing a continuous professional development framework for licensed intermediaries, in support of the objective of continuous learning for professionals. The existing approach will be improved through the adoption of enhanced learning methodologies to ensure licensees remain professionally competent and possess required standards.


Work is still on-going on these as well as other projects, to improve the investor protection framework in tandem with the growth and new developments in the Malaysian capital market. As persons who interact closely with investors, financial planning associations like the FPA, would be able to assist the SC in crafting a reasonable framework for investor protection.


The SC remains committed towards an independent and fee-only business model for financial planners. As evidenced by the actions taken in Australia and the UK, concerns will always arise over the linkage between poor or inappropriate advice and commissions. At present, the current approach in requiring financial planners to disclose fees to investors, deal in unit trust products pursuant to a financial plan and have procedures to prevent conflicts are acceptable, but the SC will continue to monitor developments in the industry to ensure that investors interests are not compromised.


It is heartening to note that industry representatives in other countries take a long term view in developing their industry, going further than being purely trade associations and focusing their efforts on improving services for their clients. In the United States, industry participants calling themselves the Financial Planning Coalition, are engaging financial planners and the public on the need for legislation to impose on financial planners a fiduciary duty of care to clients, making it a legal requirement and not merely an expectation that the clients’ interests are placed first. In Australia, the Financial Planning Association has pledged to phase out commissions. We hope that this forward-thinking international trend will be taken on board by all capital market associations in Malaysia.


In regulating the capital market, the SC has always adopted a prudent approach which is also applied in its developmental efforts for the capital market. The SC is always mindful and conscious of the stage of development of the industry we are regulating and will focus on appropriate efforts that allow for nurturing and growth of the industry.

Developments in the investment management industry complements financial planning growth
Ladies and gentlemen,


The SC has always expressed the view that a viable financial planning industry will be an important component in the investment management industry. With the continued expansion and sophistication of investment products, the financial planning industry as a whole plays the role of an important intermediary between the array of investment products and investors. Professional advice will be necessary for investors to meet their different needs and investment objectives in an increasingly deeper and broader capital market.


The investment management industry in Malaysia is one of the fastest growing segments in the capital market, having experienced compound annual growth rate of 19% for assets under management (AUM) over the past decade with AUM of over RM300 billion in 20093. The unit trust segment is a key player in this industry, experiencing compound annual growth rate of 18% over the same period and today the net asset value of funds stands at RM216 billion and represents 19% of NAV to Bursa Malaysia market capitalization.


There is still strong growth potential in the investment management industry. A wide range of products, services and investment styles is necessary for a vibrant and competitive industry capable of meeting the various risk-return profiles of investors. The SC will continue to facilitate the growth of the industry, and among the initiatives we have taken are:

  • Entered into strategic agreements with regulators in Dubai and Hong Kong to facilitate cross-border offerings of Islamic collective investment schemes;
  • Developed distinct regulation for wholesale funds to provide flexibilities for innovative strategies whilst maintaining appropriate investor protection suitable for sophisticated or professional investors;
  • Attracted international fund managers with global expertise to establish operations in Malaysia; and
  • Permitted flexibility in offerings of retail unit trust schemes by allowing multi-class funds with different features for fees and charges to suit different preference and investment objectives, as well as to facilitate cross-border offerings of Malaysian unit trust funds.

Ladies and gentlemen,


As the investment management industry progresses, this provides further scope for the financial planning industry to develop. Financial planners play a pivotal role in educating investors on the need for financial planning and different products. Increased financial literacy empowers investors to make more informed decisions, sparking further demand for investment products and financial planning services. Greater engagement, awareness and understanding by the general public of financial markets and products will spur interest and generate liquidity in the Malaysian capital market. Whilst the SC will continue to work towards capital market promotion and education efforts, the financial planning industry must play a key role in supplementing and complementing the SC’s efforts.


With the new branding and direction for the FPA, the SC looks forward to continue working with the association towards the development of the financial planning industry and the capital market. Once again I congratulate the FPA and members of the executive committee on this initiative to rebrand the association.

Thank you.

1 In Crisis, Opportunity for Obama, Wall Street Journal website (21 November 2008)

2 The Future of Financial Advice Information Pack (26 April 2010)

3 For 2000-2009 fund management AUM and unit trust funds NAV experienced CAGR of 19% and 18% respectively.