Maintenance of market integrity and investor protection remains our primary focus. We undertake a wide range of regulatory activities which are aimed at ensuring that our market remains attractive as a destination for listing and investment.
Efficient Capital Raising
We continue to provide a conducive environment for capital raising
through our efficient processes. In 2010, a total of 29 new listings with
a combined market capitalisation of RM52.5 billion were listed on the
Exchange. There were also 105 secondary issues, in which a total amount
of RM13.1 billion was raised.
In assessing and processing listing applications, we stay focused in
ensuring an adequate level of investor protection and transparency, as
well as effective time to market.
Enhancing Corporate Governance Standards
Bursa Malaysia remains committed to establishing and maintaining high
standards of CG amongst PLCs. We continued with our various initiatives
to promote best practices in CG so as to sustain market integrity.
A five-pronged approach was adopted, as depicted below:
In 2010, we proposed several changes to the Bursa Securities LR to
further develop the standards of CG.
The second SC-Bursa Malaysia CG Week was held from 28 June to 2 July
2010 in collaboration with various industry and professional associations
and organisations. This event was successful in raising awareness on key
developments in the area of CG amongst directors of PLCs and industry
participants. In addition, Bursa Malaysia continued to hold various evening
talks for directors to enhance both awareness and understanding of good
CG practices.
We continue to undertake robust engagement with listed issuers at both
plenary level and through direct engagement with boards of directors to
further emphasise the importance of good CG practices.
Subsequent to the issuance of the Corporate Governance Guide - Towards
Boardroom Excellence (the CG Guide) in 2009, we embarked on various
educational and advocacy initiatives to familiarise directors on the
CG Guide. As a follow through, we continued with these education and
advocacy sessions in 2010. To-date, more than 3,000 copies of the Guide
have been printed and issued to various stakeholders and more than
1,000 directors and senior management have attended trainings on the
CG Guide.
Whilst we strengthened our efforts in engagement and education, there
was no let up in terms of enforcement. Where non-compliance with the LR
was detected, we took strict enforcement action.
Improving Standards of Disclosure
We remain vigilant in monitoring compliance with the disclosure
requirements for PLCs and their advisers. In 2010, we issued a total of 477
announcement queries requiring PLCs to disclose additional disclosure or
further clarification in respect of their corporate announcements. A total
of 159 media queries were also issued requiring PLCs to clarify, deny
or confirm rumours or reports about material information not previously
disclosed. In addition, we issued a total of 27 UMA queries aimed
at procuring further disclosure in instances of unusual price/volume
movement which was not accompanied by any corporate developments.
As part of our continuous efforts to further improve standards of disclosure
we undertook a review of our regulatory approach and the requirements in
connection with continuing disclosures and financial reports. As a result of
the review, we have proposed enhancements to the continuing disclosure
and financial reporting obligations of PLCs to enable the availability of
more timely and adequate information in the market.
To further improve disclosure standards, we also intend to issue a guidance
note on disclosure requirements. This will provide greater clarity on LR
disclosure requirements and facilitate ease of compliance. A consultation
paper on these enhancements was issued and the proposals were further
refined after taking into account the views expressed during the public
consultation process. We intend to implement the changes after approval
by the SC.
From time-to-time we engage directly with PLCs and advisers who lack
good corporate disclosure practices and provide them with clarification and
education. In 2010, we engaged a total of 221 listed companies and 19
advisers, highlighting areas where disclosures could be further improved.
Promoting High Standards of Business Conduct Among
Participants
We routinely monitor the business conduct of Participants to ensure
compliance with our Business Rules. Adherence to high standards of
business conduct ensures integrity and quality in the services provided by
Participants to investors.
We have a structured and systematic monitoring mechanism in place
which includes carrying out periodic on-site inspections and thematic
inspections, the conduct of off-site monitoring through review of periodic
submissions and the monitoring of capital adequacy of the Participants.
We also monitor domestic and international developments and trends that
could potentially impinge on the standards and service deliveries of our
Participants, or that could undermine investor protection or the integrity
of the market.
We also keep regular engagements with Participants as part of our
initiative to enhance Participants awareness of any weaknesses in their
business practices as well as any potential non-compliance with the
Rules detected during the course of our inspection. This is to enable the
Participants to take rectification measures at an early stage.
We have an open communication channel where Participants can contact
directly a designated officer from the supervision unit of Bursa Malaysia to
obtain guidance and advice on regulatory issues and concerns.
The above measures have been effective in ensuring that Participants
adhere to high standards of business conduct.
Arising from our robust monitoring framework of the Participants, there
was no financial failure of any Participant in 2010. As at 31 December
2010, the industry average for Investment Banks' RWCR was above the
minimum requirement of 8%. The industry average for Non-Investment
Banks' CAR was 12.3 times against the minimum requirement of more
than 1.2. The industry average Adjusted Net Capital for derivatives
brokers was RM9.22 million as at 31 December 2010, which is above the
minimum requirement.
Surveillance of Market and PLCs
Our underlying philosophy in managing market orderliness lies in
addressing market misconduct.
We have a framework in place to monitor and take appropriate measures
to ensure market integrity is preserved, and to suppress unacceptable
trading conduct.
In relation to the monitoring of trading activities, we conduct realtime
surveillance of the trading which takes place on our equities and
derivatives markets. We use various techniques and approaches, including
online alerts from the surveillance system, observations made by our
analysts and other analytical tools. These help us determine whether
market misconduct and abuses have occurred, such as manipulation or
insider trading. Where trading concerns are noted, we will engage with the
Participants and address the concerns.
We also monitor activities and developments in the PLCs to detect any
non-compliance with the LR.
A framework to monitor the financial condition and level of operations
of PLCs is also in place. Where the financial condition and the level of
operations of PLCs are not at a satisfactory level as defined in the LR, PLCs
are required to take remedial steps.
Where non-compliance is detected, enforcement action will be taken
against the Participants or the PLCs concerned. The matter can also be
referred to the SC if there are potential breaches of the securities laws.
Enhancing the Effectiveness of Enforcement
Enforcement of our Rules is carried out in a fair, consistent and timely
manner. During the year, we strengthened our guidelines and further
improved our processes.
Sanctions were imposed against PLCs and their directors for various
breaches of the LR, as shown in the table below. The total number of
sanctions was 280 in 2010 and included reprimands and fines amounting
to RM7,474,850.
Sanctions Imposed#
PLCs
Directors
Directors
Public Reprimand and Fine
-
107
107
Public Reprimand
86
35
121
Private Reprimand
32
20
52
Total
118
162
280
Total Fines Imposed (RM)
Nil
7,474,850
7,474,850
As for violations of the Business Rules, enforcement actions were
instituted against Participants, their dealer representatives and agents.
The total number of sanctions was 212 in 2010 and included reprimand
(public and private), striking off and fines amounting to RM793,200.
Trading
Participants/
Derivatives
Clearing
Participants/FBRs/
Local Participants
Total
Reprimand (Public/Private) and/or
Fine and/or Suspension/Striking off
[& additional condition(s)]
2
8
-
1
11
Fine & Deferred Suspension
-
-
-
-
-
Fine & Public Reprimand
-
-
-
-
-
Fine/Deferred Fine with enforceable
conditions and/or directive to rectify
13
92
-
2
107
Private reprimand/Fine and/or directive to
rectify, failing which fine/suspension
17
5
1
15
38
Caution and/or directive and/
or additional conditions
32
11
3
10
56
Total Sanctions
64
116
4
28
212
Total Fines Imposed (RM)
291,400
355,200
-
146,600
793,200
#
more than one sanction may have been imposed on a director, PLC or other market participants and the total number of sanctions reported is greater than the number of persons or entities against whom we took action.
Through these enforcement actions, we aim to deter future breaches, educate market participants, promote a culture of compliance and enhance CG
practices. All fines collected are segregated and used to educate market participants as well as investors and defray legal or court expenses related to
enforcement actions.
Utilisation of Fines Income and Transfer Fees
RM'000
Balance as at 1 January 2010
8,456
Fines collected during 2010:
Fines income received
Transfer fee (transfer of Dealer Representatives between POs)
980
858
1,838
Fines utilised:
Education and training of market participants and investors
Legal expenses relating to enforcement actions
526
225
751
Net Fines/Transfer Fees Income for the period
1,087
Balance as at 31 December 2010
9,543
Elevating the Level of Education and Awareness
in the Industry
We continue to place emphasis on both engagement and education to
further enhance compliance with our rules and promote high standards of
conduct amongst our market participants and PLCs.
We conducted engagements and education on a one-to-one as well an
industry wide basis through road shows, dialogues, seminars, talks and
thought leadership sessions. The programmes are targeted at trading
representatives of market participants, directors, senior management,
compliance officers of market participants and PLCs, as well as industry
associations.
The engagement and education programmes are not only to facilitate
greater understanding of matters relating to compliance with the rules, but
also to discuss and highlight emerging trends and areas of concerns. This
is an effective avenue for two way communication between the Exchange
and market participants, and helps in bridging any gaps in expectation
and understanding.
The education programmes involving the trading representatives form
part of their 'Continuing Professional Education' and credit points are
awarded for attending these programmes.
In 2010, we also issued guidance notes and industry communication
letters as another form of education to highlight, discuss and clarify issues
of concerns and areas of rule breaches.
Rule Changes
A robust and growing market can only be achieved with balanced,
transparent and progressive rules that are benchmarked internationally
to meet the needs of the Malaysian capital market. For this purpose, we
continuously review our regulatory framework to improve efficiency in our
market and to promote the competitiveness and attractiveness of Bursa
Malaysia as a listing and investment destination.
In line with our objectives above, we have amended our Rules this year to
include the following key changes:
Introducing the e-Dividend framework for payment of cash dividends
by listed companies to their shareholders;
Facilitating the issuance and listing of callable bull and bear warrants
on the Main Market;
Facilitating the migration of all derivatives products on Bursa
Malaysia Derivatives Berhad onto CME Globex®; and
Providing greater flexibility in undertaking SBLNT.
As part of our ongoing efforts to provide balanced, transparent and
progressive rules we are also working on various other enhancements to
the rules. Proposed amendments in the following key areas are pending
SC's approval:
Bursa Securities Listing Requirements
Enhancing the continuing disclosure and financial reporting
obligations of listed issuers;
Enhancing the CG requirements;
Reviewing the framework of share schemes for employees of listed
issuers; and
Allowing listed issuers to dispatch documents to securities holders
via electronic means, if it is permitted under the laws; facilitating
listed issuers to pay dividends in shares to their shareholders through
a scheme known as 'Dividend Reinvestment Scheme'.
Bursa Securities Listing Requirements and Rules of Bursa Malaysia
Securities Berhad
Enhancing the processes for the taking of enforcement actions.
