Technical Note No. 1/2013 - The Application Of SC’s Guidelines In Relation To Non-Tradable And Non-Transferable PDS And Sukuk

08 Jan 2013

This Technical Note seeks to clarify SC’s application of the Guidelines on Private Debt Securities (PDS Guidelines) and the Guidelines on Sukuk (Sukuk Guidelines) to PDS and Sukuk proposals that are structured on a non-tradable and non-transferable basis.
The SC does not intend to regulate financing arrangements that are essentially a loan whether structured on a Shariah-compliant basis or otherwise. This exclusion is consistent with the exemption of loans from the definition of ‘debenture’ in the Capital Markets and Services Act (CMSA).

In this regard, PDS and Sukuk that are issued on a non-tradable and non-transferable basis will not fall under the PDS and Sukuk Guidelines if –
  1. The PDS and Sukuk are only subscribed by –
    1. the Principal Adviser for the proposed issue;
    2. the Arranger/Manager for the proposed issue; or
    3. the Principal Adviser and Arranger/Manager for the proposed issue; and
  2. If the lending of monies or provision of finance is in the ordinary course of business of the subscriber(s).

Nevertheless, the SC notes that given the structure of the Malaysian bond and sukuk markets where banks remain significant participants in the role of investors, the SC will continue to regulate debentures and sukuk where the investor(s) are not also the Principal Adviser or Lead Arranger/Manager.
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