SC reiterates policy amidst strong progress in broker consolidation

Kuala Lumpur, 16 March 2001

The Securities Commission (SC) has received five applications for Universal Broker status, and expects to grant its approval for the first Universal Broker soon.

The SC Chairman Encik Ali Abdul Kadir said, "I am extremely pleased with the response we have received from the industry and the commitment shown by the brokers."

"To date, nine stockbroking companies have entered into firm agreements to acquire or merge with three other stockbroking companies, and out of these, five have already submitted their applications for Universal Broker status" he noted, adding that these applications are currently at advanced stages of review.

The Capital Market Masterplan, launched last month at the SC by the Minister of Finance, Tun Daim Zainuddin had included recommendations to promote consolidation of the stockbroking industry and to introduce full-service intermediaries known as Universal Brokers.

Encik Ali stated, "It is heartening to see that the implementation of these recommendations is already well underway. We believe that it continues to be critical for stockbroking companies to pursue consolidation. Universal Brokers will be able to offer a full range of integrated capital market services and expand their distribution network through branching flexibilities in order to face future competitive challenges".

"These efforts will strengthen our local players, and are also consistent with the SC’s efforts to remove segmentation of capital market services as stated in the Capital Market Masterplan. In the longer run, we hope that this will further extend to a removal of segmentation within the financial system, which will allow capital market intermediaries such as the Universal Brokers to conduct a wider range of integrated activities within the overall financial system" he added.

"We are expecting nine to 10 Universal Brokers to emerge at the end of the consolidation exercise. I would also like to reiterate that under the consolidation exercise, all stockbroking firms will be required to either obtain Universal Broker status or merge with at least one other stockbroking company, and this applies equally to brokers who form part of banking groups which also own a merchant bank.

"It is my view that Investment Banks, which may emerge later as a result of the mergers of brokers and merchant banks within the same banking group, will complement the Universal Brokers, with both playing an important role in enhancing the overall competitiveness of capital market intermediation services in Malaysia. This will ultimately be to the benefit of issuers and investors, as well as the capital market as a whole," said Encik Ali.

In addition to the nine stockbroking companies which have entered into firm agreements to acquire or merge with three other stockbroking companies, one stockbroking company has proposed to acquire two other stockbroking companies while eight stockbroking companies have identified at least one merger or acquisition partner.

These stockbroking companies are at various stages of effecting their respective consolidation exercises with six stockbroking companies having been converted into branch offices of other stockbroking companies and another five applications for conversion having been approved by the SC.

The SC has had discussions with a further 10 stockbroking companies who have indicated their intention to participate in the consolidation exercise, although they have yet to make any merger or acquisition announcements.

The SC will continue to closely monitor industry consolidation efforts and will be providing further updates on progress.


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