SC Malaysia chairman: Market digitisation, keeping up with tech advancement key for economic recovery

• SC has facilitated higher daily online trade settlement limit of up to US$23,473
• Shariah Advisory Council resolved it is permissible to invest & trade in digital currency

“Years from now, we will likely be looking back at 2020 as a generational defining moment – of a health and economic crisis globally and also in Malaysia.”

Syed Zaid Albar (pic), chairman of Securities Commission Malaysia (SC), made the remarks during a fireside chat at Invest Malaysia KL2020 last week, in which he talked about the measures and approaches undertaken by the SC in relation to Covid-19 challenges.

The measures the SC has taken, he says, are based on three outcomes they have set to achieve. The first is to maintain market integrity and conduct, and fair and orderly market conditions. “The aim was to ensure the continued functioning of the capital market through this volatile and uncertain period.”

Second is to facilitate relief for issuers, investors and intermediaries. “It was certainly an unprecedented situation for all stakeholders that warranted easing of pressure points that were starting to build up.”

Lastly, it is to “enable immediate opportunities, including market digitisation efforts.”

The last outcome is perhaps most fascinating, and also increasingly vital. As Syed Zaid notes, industry digitisation efforts have increased as an immediate consequence of the challenges posed by the Movement Control Order (MCO).

“Through the collaborative efforts of the Brokerage Industry Digitisation Group or BRIDGe (graphic below), online opening of trading and central depository accounts without the need for face-to-face interaction and wet signatures have been enabled,” he says, adding that the SC has also facilitated higher daily online trade settlement limit of up to US$23,473 (RM100,000) for industry players implementing necessary controls.

Additionally, the SC has also facilitated various e-corporate actions, including enabling fully-virtual and hybrid general meetings by PLCs as well as introducing flexibilities on take-over offer requirements, such as enabling notification and acceptance of general offers digitally.

“Since the issuance of our guidance on the conduct of general meetings in April, listed issuers have conducted 122 fully virtual meetings. We had also granted time extensions for issuance of quarterly and annual reports. 941 PLCs’ quarterly reports have benefited from this, while relief on annual report and audited financial statements covered a total of 652 PLCs,” Syed Zaid says.

Moving towards recovery

Syed Zaid believes that as the country moves into recovery as well as the restructuring and reform phases, the capital market must be ready to support and finance this growth recovery.

“And more importantly, for the longer-term, at the current stage of economic development for Malaysia, it is my belief that the financial system will be a key enabler to our next leap in our economic transformation. More long-term and risk capital will need to be deployed to ‘economic sectors of tomorrow’ that will move Malaysia towards high income status,” he shares.

For this, a dynamic corporate sector to drive the nation into a next stage of growth is vital, but there’s also a need to keep up with technological advancements.

“In terms of the capital market, investor behaviour is certainly evolving arising from the rapid innovation and technological advancement we see around us. This in turn will impact market intermediation models and distribution channels.”

“To remain competitive, industry will need to keep up with the ever-increasing pace of innovation and evolution while managing and balancing emerging risks.”

The SC, too, has to adapt. “I intend for the SC to be a future ready regulator; one that is comfortable operating in an increasingly complex market environment. It goes without saying that we will need to adapt to the ‘new normal’,” he says.

The seeds of readiness are planted, and are beginning to sprout. Syed Zaid shares that two weeks ago, the Shariah Advisory Council (SAC) of SC resolved in principle that it is permissible to invest and trade in digital currency and digital tokens on registered Digital Asset Exchanges (DAX).

“This is a groundbreaking resolution by the SAC that could spur greater development and investments in Digital Assets. Further details will be announced once the resolution details are finalised.”

Innovative intermediaries

Syed also notes that the Malaysian investor population has grown more diverse. At the same time, technological advancement has changed the way investors interact with the capital market.

“This creates the need for more innovative intermediary models in the Malaysian securities market to meet the diverse needs of investors, such as digital-only brokers that can cater to investors looking for no-frills services, or algorithm trading platforms or multi-asset brokers for more sophisticated investors” he stresses.

“The market can also benefit from clearing-only brokers that provide post-trade services. These are but few examples of what is possible with more diverse and innovative intermediary models.”

For this, Syed Zaid says that the market structure needs to evolve. “The SC will facilitate changes to the stock broking licensing framework that will allow for entry of new players with differentiated value propositions.”

All in all, Syed reiterates the silver lining of the Covid-19 pandemic – that it has forced companies and SC’s intermediaries to ramp up their digital strategies and consider technological solutions in ensuring compliance with their legal and regulatory obligations.

“The SC will continue to facilitate digital offerings and solutions for the capital market. We will press on with regulatory reforms that will facilitate business processes and regulatory reporting via digital means including submissions, advertising and service of notices by the SC,” he concludes.