The Securities Commission Malaysia has amended the requirements relating to the conduct of stock or derivatives trading seminars by a holder of a Capital Markets Services Representative’s Licence (‘licensed representative’) by revising its Guidance Note on Provision of Investment Advice (‘Guidance Note’) and Guidelines on Market Conduct and Business Practices for Stockbroking Companies and Licensed Representatives (‘Guidelines’) with effect from 4 April 2022.
 
The amended paragraph 3.3 of the Guidance Note permits a licensed representative to conduct stock or derivatives trading seminars if he is representing the holder of a Capital Markets Services Licence who is his principal (‘the principal’), and such conduct is incidental to his role as a licensed representative.
 
Prior to the revision on 4 April 2022, paragraph 3.3 of the Guidance Note clarified that ‘incidental’ means circumstances where the licensed representative is providing advice in his capacity as the commissioned or salaried representative of the principal and only to his clients. The revision of 4 April 2022 removed the phrase ‘and only to his clients’ from paragraph 3.3 of the Guidance Note. Henceforth, a licensed representative may conduct seminars on stock or derivatives trading for persons who are not his clients provided that he does so as a representative of the principal.
 
At the same time, the Guidelines were amended to introduce a new Section 9A that sets out the requirements relating to the provision of investment advice by a licensed representative. Some of the requirements in Section 9A are as follows: 

1. a licensed representative may offer investment advice only on listed securities to any person in his capacity as a licensed representative of the principal (‘permitted activity’);¹ 


2. the licensed representative must: 

• obtain the prior approval of the senior management of the principal to undertake the permitted activity; 


• maintain a record of the permitted activity and related materials, including the presentation materials; and 


• comply with any other terms or conditions that may be imposed by the principal.² 

3. the licensed representative must not charge or collect any fees in relation to the permitted activity including for any related materials;³ 


4. the principal, in approving the licensed representative under item 2 above and in continuing to allow the licensed representative to undertake the permitted activity, must ensure that the licensed representative: 

• is competent and has the necessary skills and expertise reasonably expected of a person carrying on the permitted activity; 


• complies with securities laws and the relevant guidelines in carrying out the permitted activity; and 


• maintains records of the relevant approvals and investment advice-related materials;⁴ 

5. the principal must have in place adequate policies and procedures to ensure that the licensed representative complies with item 4 above.⁵ 

Comments
 
The amendments introduced by Section 9A of the Guidelines seek to ensure that the principal exercises adequate oversight over the licensed representatives whom it allows to carry out the permitted activity.
 
Alert prepared by Phua Pao Yii (Partner) and Vanessa Ho (Associate) of the Corporate Practice of Skrine.