The revision was made to strengthen investor protection measures and enable intermediaries to focus on their core strengths of intermediation by outsourcing their back office functions to service providers. In appointing a service provider, intermediaries are required to exercise due care and diligence in the selection process, premised on the service provider’s ability to undertake the functions efficiently without jeopardizing clients’ interest. Intermediaries must also demonstrate their controls used to continuously monitor and assess the service provider’s quality of service and conduct. Such assessment should be verified periodically by an internal or external auditor.
Outsourcing of functions deemed as material (i.e. internal audit, risk management, compliance, fund accounting and maintenance of unit holders’ register) will still be subjected to the SC or Bursa Malaysia’s approval. Other functions such as human resource and finance no longer require approval from the SC or Bursa Malaysia.
In creating a more business friendly and efficient environment for intermediation activities, the Guidelines would also allow intermediaries to outsource to foreign service providers. To ensure that such outsourcing arrangements do not impede the SC’s supervisory efforts, full access to books and records kept offshore must be made available to the SC, upon request.
SECURITIES COMMISSION MALAYSIA
