The annual report provides a holistic account of the Commission's developmental efforts, its regulatory and operational activities as well as the financial statements of the Commission for the year ended 31 December 2000.

Key Developmental Efforts

Development of the Capital Market Masterplan

The year 2000 saw the Commission channeling its resources towards the formulation of the Capital Market Masterplan, a strategic blueprint for the development of a capital market for Malaysia that is well-positioned to make a significant contribution towards the country's national aspirations. It was presented to the Minister of Finance in October 2000 and subsequently received his approval in December 2000. It was launched by the Commission in February 2001.

"The Masterplan envisages that Malaysia will be able to establish a capital market that it internationally competitive, provides an efficient conduit for the mobilisation and allocation of funds, and is supported by a facilitative and strong regulatory framework," said the Commission Chairman, Encik Ali Abdul Kadir.

"We are now concentrating on the implementation process, which uses a phased approach. The Commission has taken a pragmatic approach towards the implementation of the plan, and has prescribed various measures in the Masterplan, which includes performance monitoring, to ensure the plan remains progressive and dynamic in a changing environment," said Encik Ali.

New Regulatory Landscape for Fund-raising

The Securities Commission (Amendment) Act 2000 which came into effect in July 2000 made some far-reaching changes to the regulatory framework governing fund-raising activities in Malaysia, broadly resulting in positioning the Commission as the sole regulator for such activities. Under the amendments, the Commission was mandated as the approving and registering authority for prospectuses in respect of all securities (other than shares and debentures issued by unlisted recreational clubs). This has resulted in greater legal and regulatory certainty in the area of public offerings of securities, a move towards promoting a more efficient and competitive capital market.

The new regulatory landscape also introduced a new issuance process for the corporate bond market given the Commission's new mandate as the single regulatory authority for the corporate bond market.

The Commission under the auspices of the Government's National Bond Market Committee (NBMC), is also working on further initiatives to widen the issuer and investor base for corporate bonds. Among other things, the Commission introduced the guidelines on asset-backed securities in April 2001.

Consolidation of the Stockbroking Industry

Another significant development in year 2000 was the introduction of a policy framework to facilitate the consolidation of the stockbroking industry.

The Policy Framework on Consolidation of the Stockbroking Industry was announced in April 2000. A Task Force on Stockbroking Industry Consolidation was formed shortly after the Commission's announcement to monitor and review the progress and extent on the consolidation of the stockbroking industry.

Based on the recommendations provided by this Task Force as well as industry feedback, the Commission issued a revised version of the Framework in November 2000 allowing some flexibility of the earlier framework for the sake of alleviating practical difficulties faced by brokers and to facilitate the process of consolidation.

"I am satisfied with the progress made on broker consolidation and the commitment shown by the brokers towards the consolidation exercise thus far. It is the Commission's objective to form a strong core of domestic intermediaries through the introduction of Universal Brokers. As announced by the Commission, four stockbroking companies have been granted with the coveted status," said Encik Ali.

Enhancing Transparency and Governance in the Capital Market

Several significant milestones were achieved in the course of the Commission's efforts to enhance transparency and corporate governance in the capital market. Among others, the market entered Phase 2 of the three-phase transition towards a disclosure-based regulatory (DBR) environment in January 2000. Essentially, Phase 2 is a partial DBR system with further emphasis on disclosure enhancement, due diligence and corporate governance as well as promotion of accountability and self-regulation.

The Commission also recently embarked on a market readiness survey to gauge market preparedness for full DBR.

In 2000, headway was also made in terms of measures to enhance corporate governance standards in the capital market. There was noteworthy progress in the implementation of the recommendations of the Finance Committee Report on Corporate Governance (Finance Committee Report). This took the form of efforts to amend the KLSE Listing Requirements and introduce new rules aimed at raising the standards of conduct of directors and company officers of public-listed companies (PLCs), as well as developing effective internal governance mechanisms. Work in this area led to the introduction of the revamped KLSE Listing Requirements in January 2001.

Significantly, the introduction of the Securities Commission (Amendment) Act 2000, which came into effect on 1 July 2000 introduced a new civil remedy enabling investors to recover losses or damages arising from the provision of false or misleading information contained in a prospectus.

Corporate governance has also been extended to market institutions such as exchanges, clearing houses and central depositories. The Commission's Code of Conduct for Market Institutions was released in May 2000 to bring about transparency, consistency and fairness in their regulatory processes, best practices of governance and accountability for decisions and actions.

Enhancing Professional Standards of Intermediaries

In 2000, significant efforts were undertaken by the Securities Industry Development Centre (SIDC) of the Commission to formulate the Continuing Professional Education (CPE) programme. Work in this area culminated with the introduction of the CPE courses in February 2001. The points collected from attending the CPE courses will be a pre-requisite for dealer's representative license renewals in July 2002 and eventually cover all other categories of licenses.

"By tying licence renewal to attendance of the CPE programme, the Commission seeks to enhance professional competence of all licensed representatives and in the long run, create a culture of continuous education and improvement among them," said Encik Ali.


Year 2000 Operations

Corporate Proposals

The number of corporate proposals submitted to the Commission in 2000 had risen by 24.2% from 335 in 1999 to 416 in 2000. This total, added to the number of submissions brought forward from 1999 meant that the Commission had to deal with 518 proposals in 2000, as compared to 429 proposals in 1999.

About 76% of the proposals were processed and considered during the year, 3% withdrawn while the remaining 21% brought forward to 2001. The percentage of approvals granted by the Commission was also higher - 71.6% in 2000 as compared to 64.1% in 1999.

The Commission expects the various corporate exercises approved in 2000 to raise funds amounting to RM37.62 billion.

Fund Management and Collective Investment Schemes

In terms of the fund management industry, there were 72 fund management companies and 205 fund manager's representatives in operation at end-2000. Fifty-seven of the fund management companies were 100% local-owned, 10 were joint-ventures with majority local ownership, one was 100% foreign-owned and four were joint ventures with majority foreign ownership. There were also nine licensed futures fund managers and 32 fund manager's representatives.

Based on the semi-annual reporting of 63 of the total 72 fund management companies, total funds managed as at 31 December 2000 amounted to RM46.05 billion - of which RM43.4 billion consisted of local funds and RM2.65 billion (US$696.86 million) foreign funds.

The unit trust industry showed positive growth in 2000. The industry (in terms of units in circulation) continued its upward trend from 1999. At end December 2000, 63.9 billion units were in circulation, up 21.5% from end 1999. Net asset value (NAV) of the unit trust industry, totaling RM43.3 billion at end December 2000, was close to the RM43.26 billion recorded at the of 1999.

Licensing of Intermediaries

The Commission, as the licensing authority for market intermediaries under the Securities Industry Act 1983 (SIA) and the Futures Industry Act 1993 (FIA), achieved a significant milestone in 2000 when its Licensing Department was awarded the Management Standard ISO 9002:1994 Quality Systems certification by SIRIM QAS Sdn Bhd.

"This represents our commitment towards achieving higher standards of efficiency and professionalism in the service we provide to capital market participants," said Encik Ali.

A total of 1,305 new licences were granted in year 2000 - 1,139 under SIA and 166 under FIA (excluding fresh registration of nine local members). In terms of licence renewals, 7,555 were granted under the SIA while another 659 under the FIA.

The number of dealer's representatives, the largest category of licences under the SIA, increased from 7,315 at end 1999 to 7,805 at end 2000. Of the number in 2000, 5,802 were remisiers while the remaining 2,003 were paid dealer's representatives.

In terms of other market intermediaries licensed under the SIA at end-2000, there were 60 stockbroking companies, 38 investment advisers, 136 investment representatives, 72 fund managers, and 205 fund manager's representatives.

The composition of market intermediaries licensed under the FIA at end-2000: 31 futures brokers, 737 futures broker's representatives, nine futures fund managers and 32 futures fund manager's representatives.

Enforcement

The Commission continued to step up it enforcement efforts throughout 2000, in line with the statutory duty of the Commission to preserve market integrity and protect shareholders' interests.

"The Commission continued to act against breaches of capital market laws and regulations - 41 investigation papers were opened in 2000 while 113 papers were carried over from 1999. Resulting from these, four warning letters were issued, six cases prosecuted, 17 cases compounded while another 39 were closed without further action with the Public Prosecutor's approval," said Encik Ali.

In the first four months of year 2001, the Commission has taken action against 10 individuals of whom seven are directors and one an executive chairman.

International Affairs

Year 2000 also witnessed the continued expansion of the Commission's international role. In May 2000, the Chairman on the Commission was elected as Chairman of the Asia-Pacific Regional Committee (APRC) of the International Organisation of Securities Commissions (IOSCO). One of the four regional committees of the IOSCO, the APRC is an important forum for the discussion of capital market issues of concern to the region.

"It is my hope the APRC will promote greater integration and overall development of the regional markets for mutual benefit.

"Indeed, this appointment constitutes a clear and strong international recognition of Malaysia, its leadership, our capital market and, of course, the Commission," said Encik Ali.

Accounts

The Commission's Financial Statements for the year ending 31 December 2000 show a total income of RM129.89 million, an increase from RM120.94 million in 1999.

Meanwhile, total operating expenditure for year 2000 amounted to RM92.27 million, 17.3% higher than the previous year's RM78.63 million.

The Commission ended the year under review with a surplus after taxation of RM26.95 million, relatively lower than the RM38.16 million attained at the end of 1999.

Human Resources

Total staff strength of the Commission as at end of 2000 was 523 - an 18.6% increase from the total at end-1999. The staff turnover rate decreased to 3% as compared to 5.4% in 1999.

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