The significant features of these amendments are explained below.


Disclosure to the SC under the Securities Industry (Reporting of Substantial Shareholding) Regulations
The Securities Industry (Reporting of Substantial Shareholding) Regulations 1998 have been amended to define a substantial shareholder as a person having an interest in voting shares in a company where the amount of those shares is not less than two percent of the aggregate of the nominal amount of all the voting shares in the company. Prior to the amendments, the threshold for reporting was five per cent. Furthermore, the period within which the substantial shareholder has to report his substantial shareholding to the SC has been reduced from 14 days to seven days. Hence, according to the amended regulations, a person who is a substantial shareholders by virtue of him having an interest in voting shares in a public company where the amount of those shares is two per cent or more, is required to give a notice to the Commission stating the full particulars of his interest in the form prescribed in the schedule attached to the Regulations. A person who is a substantial shareholder before the coming into effect of the amendments is given up to 14 days to report his shareholding to the SC. Any person who becomes a substantial shareholder after the coming into effect of the amendments is given seven days to give notice to the SC.

The forms on Disclosure by Substantial Shareholders are available on the SC's website at http://www.sc.com.my/ The SC will also be holding briefings for various professional and industry groups in the course of the next two weeks.

Securities Industry (Central Depositories) Amendment Act 1998

The need for enhanced transparency in relation to the trading of shares and shareholding requires shares to be held by the beneficiary owner which is now defined to be the 'ultimate owner'. However, in recognition that there are ,nonetheless, legitimate activities or businesses which may still need shares to be held by someone other than the ultimate owner, the concept of authorised nominees is introduced. A list of such authorised nominees is contained in the rules of the Malaysian Central Depository Sdn. Bhd.

With the intention of creating a more efficient securities market in Malaysia, the amendments to the Securities Industry (Central Depositories) Act 1991 now requires full immobilisation of securities within the central depository that is maintained by the Malaysian Central Depository Sdn. Bhd. Thus, investors may no longer hold shares in the form of scrips. For investors who have shares in scrip form, they are given one month to deposit the scrips with the central depository. All owners of securities are required to have a securities account with the central depository whether they intend to trade in such securities or not.

The implications of the amendments are as follows:

• Investors would be mandatorily required to deposit all scrips with the central depository by opening a securities account;
• A person who has deposited securities in a securities account at the central depository may not make a request for withdrawal of such securities;
• All beneficial owners and nominees must ensure that securities are transferred to the securities account of the beneficial owner of those securities within one month from 1 November 1998, that is, by 1 December 1998;
• Where a person fails to deposit his scrips into his securities account by 1 December 1998, all remaining undeposited shares of such person would be transferred to the securities account of the Minister of Finance;
• The beneficial owner of the securities which have been transferred to the account of the Minister of Finance is automatically given the right to appeal to the SC within six months of the date of transfer giving reasons for his failure to deposit the securities;
• If there is no appeal within six months, the Minister of Finance may dispose of the securities as provided for under the Securities Industry (Central Depositories) Act 1991 and the sale proceeds would be treated as if they were unclaimed monies.

Given the deadline for compliance, the SC would call on all affected members of the public to comply with the requirements of the law without any delay. All efforts are made so as to provide the necessary information and clarification that members of the public would need to understand the new legal requirements. Members of the public can seek information from their stockbroking companies which would be throughly briefed by the authorities by 2 November 1998.. Enquiries may also be directed to the communication lines of the SC and KLSE. The SC would be announcing, in due course, the appeal procedures in regard to those securities which are to be transferred to the Minister of Finance from 1 December 1998 onwards.

The Government recognises that a number of KLSE-listed stocks are also listed on the London Stock Exchange and the Copenhagen Stock Exchange. Shares in these foreign markets are still held in scrip form. Therefore, in order to avoid a situation where the shares in these markets which are in scrip form are not capable of being traded in these markets, the prohibition on withdrawal would not apply to these two stock exchanges on the condition that the exemption would be limited to the number of shares that appear in the branch register of the companies in these two markets as at 1 November 1998. Similarly, bonus and rights issues can still continue to be made in scrip form for these companies in those markets.

Securities Industry Amendment Act 1998 and Securities Commission Amendmment Act 1998

The amendments enhance the enforcement powers of the Securities Commission and the stock exchange, the central depository and the recognised clearing house in order to ensure that the provisions of the laws and the rules of these self-regulatory organisations can be effectively enforced.

Specifically, the penalties and range of persons to whom the penalties are directed as provided in the rules of the stock exchange and recognised clearing house have been increased. The maximum fine that can be imposed on any person by a stock exchange or recognised clearing house is increased from RM250,000 to one million ringgit. In addition, the parties required to comply with, observe, enforce or give effect to the rules of the stock exchange have been widened to include advisers.

A new section 100A has also been introduced to enable the Commission, a stock exchange or a recognised clearing house to make a petition for winding up to the Court against a company which has contravened any securities laws, the conditions imposed on any licence issued under the Securities Industry Act 1983 or the rules and listing requirements of a stock exchange and the recognised clearing house.

Futures Industry (Amendment) Act 1998

A new section 3B has been introduce to prohibit the setting up of a futures market for the trading in futures contracts based on the instruments that are specified in the provision, including KLSE stocks, futures contracts traded on Malaysian futures exchanges, KLSE-index futures and the Malaysian currency, unless such futures markets are recognised markets.

In addition, the definition of futures fund manager has been rationalised with the definition of fund manager in the Securities Industry Act 1983. Hence, a holder of a futures fund manager's licence may now trade in futures contracts on behalf of another person without having to be licensed as a futures broker. Consequently, the provisions that protect the money and property of a client of a futures fund manager are also tightened in the interest of investor protection.

As these changes to the laws affect a wide section of the public, all efforts are made on the part of SC, KLSE and MCD to deal promptly with any problems that may emerge. Dedicated lines have been set up within the SC to attend to any enquiries. The telephone numbers are 03-2539988 / 03- 2507597 / 03-2597164.