SC’s Initiatives For A More Agile Capital Market

April 20, 2020

In its recently issued Annual Report 2019, the Securities Commission Malaysia (SC) set out several of its ongoing and proposed efforts to promote agility within the capital market. One of SC’s aims is to reinforce the following two fundamentals of the primary market:

1. Facilitation of a conducive fundraising environment for the benefit of issuers to tap the Malaysian capital market; and

2. Empowerment of investors to make informed investment decisions.

The SC’s initiatives, which are expected to come into effect this year, are as follows:

(1) Enhanced Initial Public Offering (IPO) Framework

The SC has been actively engaging with primary stakeholders who undertake key roles in an initial public process such as Approved Principal Advisers, reporting accountants, due diligence lawyers, valuers and other stakeholders, to gather their views in improving and building a more agile IPO framework.

The collaboration between the SC and the Approved Principal Advisers is especially premised upon their shared obligations to ensure a robust due diligence process in order for investors to make informed investment decisions based on adequate disclosures of the risks and returns in the offering documents.

In 2020, the SC targets to roll out principles-based rules and regulations as part of the enhanced IPO framework, with increased flexibility and corresponding accountability accorded to Approved Principal Advisers to achieve the desired outcomes whilst upholding investors’ interest.

(2) Liberalising The Approved Principal Adviser Framework

The SC is expected to issue guidelines to liberalise the Approved Principal Adviser framework in 2020 for the following areas:

1. Recognised Principal Advisers (RPA) For submissions of corporate proposals to the SC, qualified corporate finance advisers would only require the SC’s recognition to act as RPA instead of obtaining the SC’s approval to act as an Approved Principal Adviser to submit specific corporate proposals.

2. Qualified Person (QP) In the new QP regime which replaces the previous Qualified Senior Personnel regime, the RPA must appoint at least one QP (who satisfies the minimum criteria prescribed by the SC but does not need the SC’s approval) to work full time for each specific corporate proposal. To facilitate market-driven outcomes, it is anticipated that the RPA will have the discretion to appoint the QP from a broader selection of qualified corporate finance professionals to make submissions to the SC.

3. Senior Officer (SO) The RPA must designate a SO who is of higher authority than the QP to keep the RPA in check as an effective gatekeeper for each specific corporate proposal submitted to the SC. The SC will also set out standards and obligations to be complied with by the SO and QP to promote good market practice and to safeguard investors’ interests.

(3) Enhancing SC’s Supervisory Role

The SC proposes to put in place enhanced measures to expand its supervisory capabilities to proactively oversee actual, potential or perceived risks in the primary market. This is mainly by evaluating the RPA’s degree of regulatory compliance especially in respect of due diligence processes conducted by the RPA during the implementation of specific corporate proposals.

(4) Making Prospectuses More Accessible And Relevant

To adapt to the increasingly digitised capital market, the SC initiated measures last year to enhance the functionality and ease of navigation in electronic prospectuses for investors. Further, to assist investors to make informed investment decisions, electronic prospectuses can now incorporate hyperlinks that redirect the investors to informative materials issued by the SC or Bursa Malaysia.

The SC plans to issue the enhanced guidelines to increase the relevance of prospectuses this year.

The full SC’s Annual Report 2019 can be accessed here.