Technical Note No. 2/2017

CLARIFICATION ON OBTAINING CLIENT’S CONSENT FOR THE PURPOSE OF ISSUANCE AND DELIVERY OF ELECTRONIC CONTRACT NOTES BY A CAPITAL MARKETS SERVICES LICENCE (CMSL) HOLDER

(Issued: 25 August 2017)

1. This Technical Note is issued to facilitate the delivery of electronic contract notes by CMSL holders to clients and seeks to provide clarification to paragraph 4.01 of the Guidelines on Electronic Contract Notes.1
2. The Securities Commission Malaysia (SC) notes the difficulties faced by CMSL holders to obtain clients’ consent to issue electronic contract notes as required under paragraph 4.01. As such, for the purpose of complying with paragraph 4.01 in relation to obtaining clients’ consent via electronic form, a CMSL holder must be able to demonstrate the following:
(a) where a CMSL holder wishes to deliver electronic contract notes to a client’s active email account, a CMSL holder must maintain records of the following:
(i) A list of clients who are provided with electronic contract notes; and
(ii) All communications with clients that evidences adequate prior notice had been given to them on the cessation of physical contract notes or non-provision of physical contract notes, including that clients had been provided with clear instructions on how to opt-out of electronic contract notes and any costs that may be incurred.
(b) where a client does not have an active e-mail account, a CMSL holder may provide clients access, via its webpage, to download their respective electronic contract notes, and the CMSL holder must maintain records of the following:
(i) In addition to records mentioned in sub-paragraphs (i) and (ii) above, communication with clients that the CMSL holder had provided a protected password for the clients to access and view the electronic contract notes; and
(ii) The authentication processes adopted by the CMSL holder to validate the identity of the client accessing the electronic contract note via the webpage.
The CMSL holder is also required to clearly state, on the webpage, the duration of the retention period of the electronic contract notes, statements and other records available on the webpage.
3. The SC intends to phase out the issuance of physical contract notes within the next 12 months. Hence, CMSL holders must equip themselves with the necessary infrastructure, systems, processes and policies for the issuance, delivery or making available of electronic contract notes to clients.
4. All other requirements under the Guidelines on Electronic Contract Notes must be complied by the CMSL holder.

1 Paragraph 4.01 requires a Capital Markets Services Licence (CMSL) holder to obtain client’s consent before issuing an electronic contract note. The consent must be obtained either via written or electronic form. The consent should also include as to the manner of issuance and delivery of the electronic contract note, as well as an alternative mode of issuance and delivery in the event of systems failure.