Securities Commission Launches Capital Market Masterplan 3

30 September 2021

• Relevant to the development of the economy and its stakeholders;
• Efficient in capital mobilisation and achieving desired regulatory outcomes; and
• Diversified to create value for all participants. 

• Catalysing competitive growth;
• Empowering investors for a better future; and
• Shaping a stakeholder economy with sustainable and responsible investment (‘SRI’) and Islamic capital market (‘ICM’). 

• Embedding shared accountability;
• Prioritising efficiency and outcomes; and
• Embracing the digital age. 

1. Pushing the frontiers of the economy 

• explore new avenues such as simple agreement for future equity (SAFE) notes, Angel Funds and Angel Syndication Lists for early-stage financing;
• collaborate with relevant government agencies and investment entities to facilitate greater use of market-based financing, and develop the domestic venture capital (VC) and private equity (PE) industry as well as the corporate venture landscape;
• streamline the listing process and evaluate more options beyond initial public offerings (IPOs) to enhance the efficiency of the equity market for late-stage financing; and
• introduce new intermediary models and evaluate mechanisms that will enable the bond market to be more inclusive for small to mid-cap companies. 

2. Enabling a multi-layered market 

• enable differentiation in marketplaces for different segments of market participants. 

3. Facilitating diversity of the intermediation landscape 

• facilitate healthy competition across the intermediation value chain; and
• enhance the market-making framework and the securities borrowing and lending (SBL) framework. 

4. Expanding risk intermediation 

• develop a framework to allow remote membership into the Malaysian derivatives market, starting with trading participants;
• enable diversification of derivatives intermediaries onshore and develop talent pipelines to support the growth of the intermediation landscape;
• expand the suite of commodities, financial and equity derivatives; and
• expand derivatives products for retail investors, complemented with efforts to educate retail investors on derivatives trading. 

1. Widening investment options across more investor segments 

• review the framework for investor categorisation by considering criteria, such as level of investor knowledge, professional experience and sophistication, to assess qualifications for the accredited investor segment, and consider measures to increase inclusivity for the mass affluent segment;
• evaluate the approach to liberalise access to non-traditional products for the mass affluent segment;
• facilitate the introduction of portfolio account management schemes (PAMs) within private retirement schemes (‘PRS’);
• facilitate for innovative and differentiated PRS service providers as well as retirement product offerings in the market;
• embark on a phased approach to allow the offering of a broader range of foreign funds to investors onshore; and
• review the liberalisation of alternative investment strategies and asset classes to enable development of new investment solutions. 

2. Fostering accessible and quality investment advice 

• develop a roadmap, together with market participants, towards a more diverse investment advisory landscape in Malaysia; and
• conduct a joint review with Bank Negara Malaysia (‘BNM’) towards consolidating the licensing regime between financial planners (FPs) and financial advisers (FAs), which are regulated by the SC and BNM respectively. 

3. Enabling greater efficiencies through market infrastructures 

• conduct a feasibility study on infrastructure needs for the Malaysian fund management industry to determine, together with the industry, the appropriate next steps, based on the results of the study. 

4. Facilitating greater digital inclusiveness across investors 

• facilitate greater collaboration with market participants on digital preparedness for investors at risk, starting with elderly and rural investors. 

1. Mobilising capital to sustainable and responsible businesses 

• explore the approach for transition financing in Malaysia;
• facilitate wider options across the funding escalator for companies embarking on net-zero commitments;
• promote greater transparency in the market through disclosures; and
• evaluate the approach for investor protection in relation to the management of disclosures, data, environmental, social and governance (‘ESG’) investment decision-making as well as green-washing risks. 

2. Expanding the reach of ICM to the broader stakeholders of the economy 

• enable greater access to Shariah-compliant fundraising for micro, small and medium enterprises (MSMEs), focusing on those in the halal economy;
• develop guidance to facilitate assessment of unlisted companies for Islamic fundraising activities;
• develop guidance to incorporate Shariah requirements and ESG best practices for public listed companies (PLCs); and
• leverage and strengthen relevant ICM frameworks to enhance the Islamic social finance ecosystem. 

3. Embracing collaboration and innovation for growth 

• position Malaysia as a hub for SRI by developing thought leadership, catering to regional capacity-building needs as well as championing innovation and research;
• enhance ICM global thought leadership to promote greater alignment of capital market activities with maqasid al-Shariah;
• build capacity for ICM by strengthening the capabilities of practitioners in the area of Shariah governance and by developing talents for Islamic wealth management; and
• facilitate innovation in Islamic fintech through regulatory guidance and accelerator programmes. 

1. Promoting responsible businesses 

• strengthen board leadership through effective board composition;
• develop capacity for ESG leadership in corporates; and
• evaluate the approach for investor protection in relation to the management of disclosures and data as well as ESG governance and risk management. 

2. Inculcating greater self-regulation 

• formulate strategies, including guidance, to incentivise greater voluntary self-reporting or co-operation. 

3. Encouraging greater investor activism and advocacy 

• accelerate shareholder activism and stewardship, focusing on greater use of digital tools and platforms; and
• implement initiatives in relation to the Malaysian National Strategy for Financial Literacy together with BNM and other members of the Financial Education Network (FEN). 

4. Moving further towards principles-based regulations 

• review regulations and make provisions for principles-based regulations;
• enable regulated entities through the implementation of strategies to engage, educate and guide market participants; and
• calibrate supervision and enforcement approaches in tandem with principles-based regulations. 

5. Enhancing the transparency of the SC’s regulatory approach 

• enhance communication of regulatory principles, priorities and dimensions of decision-making. 

1. Enhancing focus on protecting investors against vulnerabilities 

• elevate supervisory and enforcement focus on misconduct relating to vulnerable investors, particularly senior investors;
• collaborate with industry to identify investor vulnerabilities and best practices to protect vulnerable investors; and
• strengthen investor outreach programmes for vulnerable investors. 

2. Reviewing the regulatory architecture for the capital market 

• conduct a joint study with BNM to enhance the regulatory structure for the financial market; and
• review the licensing and registration framework in tandem with the review of regulatory architecture. 

3. Enhancing supervisory efficiency and efficacy 

• expand supervisory coverage across the industry as well as strengthen capabilities on emerging risks arising from SRI and innovation;
• issue governance standards for capital market participants and enhance supervisory focus on culture and conduct; and
• expand the SC’s and Audit Oversight Board (‘AOB’)’s supervisory technology capabilities to enhance supervisory efficiency. 

4. Enabling swift, effective and targeted enforcement 

• institutionalise annual identification of the SC’s and AOB’s enforcement priorities, in alignment with the broader priorities of the SC;
• allocate resources more effectively, in alignment with the SC’s enforcement strategy;
• enhance the efficiency of enforcement triage and investigation, including through the exploration of new enforcement tools and use of advanced analytics;
• enhance digital enforcement capabilities, including in digital forensics; and
• enhance communications on enforcement priorities, strategies and outcomes. 

1. Catalysing regulatory technology 

• deepen understanding about regulatory technology (‘RegTech’) within the industry through outreach programmes and industry-wide dialogues;
• catalyse RegTech innovation through collaboration with other regulators, market participants and ecosystem players; and
• encourage the industry to adopt RegTech through education, engagements and joint-implementation of pilot projects. 

2. Navigating emerging technology risks 

• strengthen intelligence capabilities of the SC and the industry to enhance preparedness against potential breaches and imminent threats;
• develop an approach to strengthen cyber defence capabilities in the industry;
• develop a framework to regulate technology risks more holistically; and
• develop guidance, setting out principles and standards, on the utilisation of data analytics and artificial intelligence (AI). 

3. Integrating data and technology across the regulatory value chain 

• strengthen analytics and predictive capabilities to augment policymaking and risk surveillance;
• enhance automation of process workflows to elevate efficiency across regulatory activities; and
• improve interface with regulated entities and market participants.