Fund management continued to be the fastest-growing market segment with assets under management (AUM) surpassing the 600-billion ringgit milestone for the first time to reach RM630 billion (+7.1%) by year end. Islamic AUM grew to RM111 billion from RM98 billion in 2013, reflecting the industry’s ability to develop under Malaysia’s facilitative Islamic capital market environment.
Growth was driven by the expansion of channels for managed investments, with the net asset value of the unit trust industry growing to RM343 billion – the largest in Southeast Asia. The nascent Private Retirement Schemes (PRS) segment, which more than doubled its AUM and membership to RM716.1 million and 128,977 members respectively, forms the third pillar of Malaysia’s pension framework and is poised to become an area of future growth in the investment management industry.
The operationalisation of the ASEAN Framework for Cross-border Offering of Collective Investment Schemes also enabled Malaysian investors and fund providers greater access to opportunities in the ASEAN region and serves as another driver for growth.
Promoting fair and efficient markets
In 2014, the SC embarked on the first phase of a comprehensive regulatory review to enhance efficiencies and promote greater competition in the capital market. The first package of reforms resulting from this review comprises a revamp of the wholesale market framework, including the liberalisation of corporate bond and wholesale product approvals through the SC’s upcoming Lodge and Launch (LOLA) framework, as well as revisions to the licensing regime which allow for new classes of market participants such as boutique fund managers and alternative market operators. At the same time, investor protection was heightened through regulatory amendments in areas such as disclosures and takeovers and mergers.
To foster compliance and enable early detection of systemic risk, the SC further broadened the perimeter of its market surveillance activities and strengthened the existing oversight framework for auditors and public-listed companies (PLCs). Supervisory efforts focused on the governance of market institutions and intermediary conduct as well as their capacity to manage risks emerging from threats to cyber-security and the financing of illicit activities.
To safeguard market integrity and deter potential misconduct, the SC continued to deploy its full range of enforcement powers against those responsible for committing breaches of securities laws and regulatory non-compliance. Underscoring the severity with which it regards market abuse, the SC filed 63 criminal charges against two PLC directors, a chief executive officer and a remisier for insider trading offences with the High Court also affirming the conviction and imprisonment of two former PLC directors for market manipulation.
Promoting active and informed investor participation
The enforcement of regulatory discipline in the capital market was complemented by SC’s efforts to strengthen levers of self-and market discipline through corporate governance. The launch of the Malaysian Code for Institutional Investors – the first in Southeast Asia and second in Asia as well as emerging markets – marked a watershed moment for investor activism in the country with signatories voluntarily pledging to harness their influence in strengthening the governance culture of investee companies and the capital market ecosystem.
SC’s sustained efforts to strengthen corporate governance in Malaysia, which include encouraging greater board diversity and profiling well-governed companies through the ASEAN Corporate Governance Scorecard, among others, have been highlighted in a number of recent international assessments, with the ACGA-CLSA CG Watch 2014 commending Malaysia as one of the few markets which have shown consistent improvement in corporate governance.
To encourage broader and more informed retail investor participation, the SC has launched the InvestSmart™ education and outreach campaign comprising a suite of programmes tailored to engage investors throughout Malaysia across multiple platforms. By connecting with investors on platforms such as Facebook, Twitter and a mobile app, in addition to on-going roadshows and workshops, the SC aims to expand its reach across all segments of the investing public, particularly the younger and more tech-savvy demographics.
Expanding investment avenues
Developmental efforts in 2014 focused on enhancing the capital market’s capacity to support growth in the real economy by expanding access to capital market financing for smaller and innovative businesses while also facilitating sustainable and socially responsible investments.
Recognising the role of small and medium enterprises (SMEs) in spurring job creation and economic growth, the SC has developed the SME Investment Partners programme which enables SMEs to obtain non-collateralised financing and management expertise from a pool of qualified private investors. The formulation of a framework for equity-based crowdfunding also illustrates SC’s on-going efforts to establish a regulatory safe harbour for financial innovation.
The launch of the Sustainable and Responsible Investment (SRI) sukuk framework provided impetus for greater availability of investible assets for investors, and capitalised on synergies from the close alignment between the principles of socially responsible investment and the ethics of Islamic finance. Initiatives to enhance the SRI information architecture, such as the introduction of the Environmental, Social and Governance (ESG) index and on-going efforts to encourage the adoption of integrated reporting in Malaysia also collectively facilitate the profiling of SRI to both the domestic and international audience.
Moving forward
To achieve greater regulatory efficiency, SC will undertake a review of primary market regulations regarding capital-raising, disclosure and retail fund approvals. To accelerate the internationalisation of the Islamic capital market, the SC will also develop a blueprint to enhance Malaysia’s Islamic fund and wealth management value proposition which will be released by the end of the year. At the same time, the SC will continue to broaden financing avenues and build greater scale across market segments, including intensifying efforts to broaden and increase PRS participation.
To effect the regulatory streamlining and market development efforts pursued in 2014, the following guidelines shall be released on Monday, 9 March 2015:
