A very good morning. I am honoured to be given the opportunity to deliver this keynote address and subsequently launch the "Due Diligence Guidelines on Submission of Proposals to the Securities Commission". Indeed, the subject of due diligence has been much talked about and there is no doubt that it would continue to be discussed for a long time to come. In fact, I have been thinking about the matter, from a practitioner's point of view, on how to improve the processes and procedures in which due diligence exercises ought to be undertaken and, here I am today, standing in front of you, giving my first public address as a regulator, on the same issue.

I am heartened to note that the industry shares the same common cause with the Securities Commission in improving the standards of due diligence practices in the country. What started as the imposition of due diligence responsibility under Section 32B of the Securities Commission Act 1993 and the publication of the booklet on due diligence practices in August 1996 by the Commission as guidance notes on how the industry may proceed to carry out these obligations in practice has now been followed through by the industry itself with the launch of the Due Diligence Guidelines. I wish to laud the efforts of the Association of Merchant Banks in Malaysia, Federation of Public Listed Companies, Malaysian Institute of Accountants, Malaysian Association of Certified Public Accountants and the Malaysian Association of the Institute of Chartered Secretaries and Administrators who have worked together in coming up with the Guidelines. I wish to also put it on record that the 5 bodies have managed to sit down with each other and work to make the Guidelines a practical one and, as I understand it, with minimal involvement from the Commission. The Guidelines, therefore, is largely an industry effort and I wish to give due credit for this.

Ladies and Gentlemen,

The regional economic crisis has affected us badly. This downturn should not, however, be used as a convenient excuse to pay less attention on due diligence review and corporate conduct. Instead, we should use this as an opportunity to re-look at ourselves and to improve our shortcomings. Are our corporate governance practices up to mark? Are our due diligence standards adequate? Investors, especially in the current situation, are demanding that directors and advisers of listed companies conduct themselves with high standards of corporate governance and due diligence.

No doubt, the Malaysian economy is beginning to recover and we can expect the number of corporate restructuring exercises to increase. It is everybody's responsibility to restore and promote investors' confidence in our capital market. In this respect, due diligence practices should be undertaken with greater responsibility. The promoters and directors of listed companies must be transparent in their business dealings not only to a privileged segment of their constituents but to all investors and parties who have a stake in their companies. The product of due diligence should be the free flow of good information, such that disclosures are accurate, complete and timely. There should not be omissions of material information which rational investors and shareholders would reasonably expect, or would reasonably require, for the purpose of making informed investment decisions. When due diligence standards are high, it would follow that the quality of disclosures would be high as well. This should translate into enhancement in corporate governance where management actions are made known to all and those responsible are accountable for their actions.

The Commission, as most of you are aware, is taking the lead in moving our capital market from a merit-based system of regulation to a disclosure-based framework of regulation (or DBR). High standards of due diligence, disclosure and corporate governance practices are the pre-requisites for the new regulatory system to work. The Commission will continue to work towards improving these standards.

One example of the progress made towards the new framework is the "freeing" of pricing of securities in initial public offerings and rights issues. Previously, the pricing of such securities was determined by the Commission. That system gave rise to an unresponsive and lumbering mechanism for securities offerings and capital raising. Investors and underwriters became spoon-fed and too protected as a result. Investing and underwriting then were perceived to be quite unrelated to risk-taking. Today, the pricing of securities in an initial public offering and rights issue has been "freed up" and issuers, together with their advisers/underwriters, now price these issues without regulatory intervention.

• As a responsive organisation, the Commission has, in 1998, introduced various initiatives to facilitate capital raising by listed companies in these difficult times. These initiatives, which also represented an acceleration of the Commission's DBR programme, included -
• revision to the shareholding spread requirements for new listings;
• liberalising the limits and rules governing the issue of warrants and convertible securities;
• allowing dilution in earnings per share resulting from acquisition proposals;
• granting dispensations of profit forecasts and projections in public documents; and
• allowing the undertaking of 2-call rights issue by listed companies whose share prices are trading around or below par values.