Compensation Fund

Kuala Lumpur, 30 April 1998

In order to enhance investor confidence, the Securities Commission (SC) and the Kuala Lumpur Stock Exchange (KLSE), with the approval of the Minister of Finance, have agreed to boost the compensation fund which presently stands at RM14 million by making contributions of RM100 million and RM200 million respectively. In addition, member companies of KLSE would each be required to increase their annual contributions into the fund from RM10,000 to RM50,000.

Under the current compensation fund rules, a claim can be made against the fund by any person who suffers monetary loss because of a defalcation, fraudulent misuse of monies or other property, by a director, officer, employee or representative of a stockbroking company or because of insolvency of a member company and the loss is suffered in respect of monies or other property that was in connection with the company's dealing in securities, entrusted to or received by the company or by a director, officer, employee or representative of the company, for or on behalf of the person suffering the loss or another person or because the company was trustee of the monies or other property. The SC is also examining additional mechanisms by which investors' claims against stockbroking companies whose licences may be suspended or revoked, can be met.

The current financial difficulties affecting some stockbroking companies had led to various measures being taken against them both by the SC and the KLSE including that of imposition of trade restrictions and the issuance of show cause letters for the suspension or revocation of their licenses. Simultaneously, the SC and the KLSE, with the approval of the Minister of Finance, have taken various steps to enhance investor protection and to ensure systemic stability.

The enhancement of the compensation fund is yet another measure directed towards the same objectives. The authorities will continue to monitor the financial position of stockbroking companies to ensure that these objectives continue to be served.


Issued on behalf of the Securities Commission. For assistance please contact the Corporate Affairs Department, tel no. 03-2597164 (Karen De Cruz) or tel no. 03-2507513 (Ann Teoh).
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