Securities Commission Malaysia revises Guidelines on Recognized Markets

The Securities Commission Malaysia (‘SC’) issued the 10th revision of the Guidelines on Recognized Markets (‘Guidelines’) which came into effect on its date of issuance, 19 April 2023.
A summary of the main amendments introduced under the Guidelines is as follows:
Paragraph 1.17 which defines the words and phrases used in the Guidelines has been amended as follows:
  1. the definition of ‘approved clearing house’, ‘central depository’ and ‘recognized market’ have been deleted as these phrases are defined in the Capital Markets and Services Act 2007 (‘CMSA’); and

  2. the definition of ‘controller’ which refers to section 60(7) of the CMSA has been expanded to specify the circumstances set out in section 60(7) in which a person is deemed to be a controller, i.e. a person who:
  • is entitled to exercise, or control the exercise of, not less than 15% of the votes attached to the voting shares in a recognized market operator (‘RMO’); or 

  • has the power to appoint or cause to be appointed a majority of the directors of the RMO; or

  • has the power to make or cause to be made, decisions in respect of the business or administration of such RMO, and to give effect to such decisions or cause them to be given effect to. 
Paragraph 6.03
This paragraph which reproduces the full text of the definition of ‘controller’ in section 60(7) of the CMSA has been deleted as it is redundant in light of the amendment to the definition of ‘controller’ in paragraph 1.17 of the Guidelines.
Chapter 18
A new Chapter 18 is introduced into the Guidelines which sets out the following:
  1. the requirements to be fulfilled by an individual investor for purposes of applying for an annual certification from an equity crowdfunding platform operator (‘ECF Operator’) to qualify for a 50% income tax exemption under the Income Tax (Exemption) (No. 4) Order 2022 [P.U.(A) 142/2022] (‘Tax Exemption Order’) for investments made in an investee company hosted on an equity crowdfunding platform; and

  2. information that must be submitted by the ECF Operator to the SC,   
in relation to the application for the tax exemption.
As regards the conditions to be fulfilled by an individual investor to qualify for the income tax exemption under the Tax Exemption Order, paragraph 18.04 merely states that the individual investor must fulfil the conditions set out in the Tax Exemption Order. Hence, an individual investor seeking details of the conditions must refer to the Tax Exemption Order. Our write-up on the Tax Exemption Order can be read here.
The new Chapter 18 also requires an ECF Operator to:
  1. disclose to all its investors, the information that must be submitted by an individual investor to the ECF Operator for purposes of obtaining the annual certification;

  2. submit to the SC, the information as set out in Appendix 3 (see below), for purposes of the SC’s verification;

  3. provide the annual certification to the individual investor only upon obtaining the SC’s verification; and

  4. immediately inform the SC of any material change that may impact the verification process
The SC has the discretion to request for additional information from the ECF Operator other than those specified in Chapter 18.
Chapter 19
The procedures for the submission of registration forms and annexures, and periodic reports and additional documents to the SC have been revised and are now set out in Chapter 19 (previously Chapter 18) of the Guidelines.
Appendix 3
The information to be submitted by an ECF Operator in an investor report for verification by the SC is detailed in the new Appendix 3 of the Guidelines. Such information is as follows:
  1. investee company: the name, registration number, legal structure and contact details of the investee company;

  2. investor: the name, identification details and contact details of the investors;

  3. acquisition of shares: the amount, number of shares and the date of investment;

  4. disposal of shares: the amount, number of shares and the date the investment is disposed of (if any); and

  5. mode of investment: whether the investor invested directly or via a nominee company.
The main thrust of the revisions to the Guidelines is to set out the requirements to be complied with in an application for certification in respect of tax exemptions for investments made by an individual investor in an investee company hosted on an equity crowdfunding platform.
Alert by Kok Chee Kheong (Partner) and Tan Wei Liang (Senior Associate) of the Corporate Practice of Skrine

This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact