Regulations of Securities Industry PDF

1 REGULATIONS OF SECURITIES INDUSTRY Chapter 2  CHAPTER OUTLINES 2 Banking and Financial Institutions Act 1989 (BAFIA 1989) 1 Capital Market and Services Act 2007 (CMSA 2007) 2 Securities Industry (Central Depositories) Act 1991 (SICDA 1991)...

1 REGULATIONS OF SECURITIES INDUSTRY Chapter 2  CHAPTER OUTLINES 2 Banking and Financial Institutions Act 1989 (BAFIA 1989) 1 Capital Market and Services Act 2007 (CMSA 2007) 2 Securities Industry (Central Depositories) Act 1991 (SICDA 1991) 3 Securities Commission Act 1993 (SCA 1993) 4 Company Act 1965 5 Other related acts and regulation 6  Banking and Financial Institutions Act 1989 (BAFIA 1989) 3  BAFIA came into force on 1st October, 1989  BAFIA 1989 repeals the Finance Companies Act 1969 and the Banking Act 1973  The objectives/ provisions: 1) To provide new laws for the licensing and regulation of the institutions carrying on banking, finance company, merchant banking, discount house and money-broking business 2) Guidance for the regulation of institutions carrying on certain other financial businesses  Banking and Financial Institutions Act 1989 (BAFIA 1989) 4 3) Provide for an integrated supervision of the Malaysian financial system 4) Provide the Central Bank with the power to speedily investigate and prosecute, if necessary any illegal activities in an attempt to reduce white-collar crime. 5) Restrictions in respect to deposits.  Capital Market and Services Act 2007 (CMSA 2007) 5  The Capital Markets and Services Act 2007 (CMSA) repeals the Securities Industry Act 1983 (SIA) and the Futures Industry Act 1993 (FIA).  The CMSA which takes effect on 28 September 2007 introduces a single licensing regime for capital market intermediaries.  Functions of Capital Market and Services Act 2007 (CMSA 2007) 6  To ensure a reasonable practicable. An order manner and fair market in the securities that are traded through its facilities.  Act in the public interest and ensure that where the interest that it required to serve under any law relating to corporations conflicts with the interest of the public.  Ensure that the members of the stock exchange also companies and corporations whose securities are listed on the stock exchange follow the rules of stock.  Functions of Capital Market and Services Act 2007 (CMSA 2007) 7  Must provide adequate and properly equipped premises for the conduct of its business; i) Competent people for the conduct of its business ii) Automated systems with adequate capacity iii) Security arrangements iv) Facilities to meet emergency  Securities Industry (Central Depositories) Act 1991 (SICDA 1991) 8  SICDA is an Act to provide regulation of central depositories, and the deposit, holding, withdrawal of, and dealing in securities.  Govern operation of BMD Sdn Bhd  Securities Commission Act 1993 (SCA 1993) 9  It is the Act of Parliament under which the Securities Commission was established on 1st March 1993;  It is a self-funding statutory body with investigate and enforcement powers.  The functions of SC Act 1993 The SCA establishes the SC, which is the body that regulates the securities industry as a whole. It sets out the powers and the functions of the SC, a body corporate that is entrusted with regulating the security industry. The act also contains provisions for Take Over and Mergers. The SC has wide enforcement and investigations powers ensuring the smooth running of a fair and orderly market.  Company Act 1965 11  enforced to provide a more comprehensive legal framework in supervising the operation of companies.  Enforced the company to register the business. 12 Other Related Acts and Regulations Anti-Money Laundering and Anti- Terrorism Financing Act 2001 (AMLATFA 2001)  The AMLATFA (formerly known as the Anti- Money Laundering Act 2001), which came into force on 15 January 2002, provides the offence of money laundering of proceeds from the predicate offences and the measures to be taken for its prevention.  In general, the AMLATF provides for: 13  suspicious transaction reporting  record-keeping  the functions of a financial intelligence unit that could co- operate with domestic as well as foreign enforcement agencies  investigation into money laundering  law enforcement agencies to freeze, seize and forfeit terrorist property and property involved in, or derived from, money laundering and terrorism financing offences as well as prosecution of money  prohibition of falsification, concealment and destruction of documents  TUTORIAL 14  Distinguish between the Securities Industry (Central Depositories) and Securities Commission Act 1993. (4m)  List any four functions of Anti Money Laundering & Anti Terrorism Financing Act 2001. (4m)  Explain the purpose of Companies Act 1965. (4m)  Explain any two functions of Capital Market and Services Act 2007. (4m)  INDIVIDUAL TUTORIAL 1) Differentiate between the primary and secondary market (4m). 2) State the four (4) major markets in the financial market (4m). 3) Explain two (2) reasons why stock market need to be regulated (4m). 4) Explain two (2) types of participating organization in securities market (4m). 5) Explain the reason of Stock Exchange of Malaysia and Singapore split on 8th May 1973 (4m). 6) List any four (4) rules / Acts in the securities industry in Malaysia (4m). 7) Explain any two (2) functions of Capital Market and Services Act (CMSA) 2007 (4m). 8) Discuss two (2) types of securities traded in Malaysian equity market (4m). INDIVIDUAL TUTORIAL 1) Discuss two main components of the cash market. (6m) 2) Explain the reason of Stock Exchange of Malaysia and Singapore split on 8th May 1973. (3m) 3) Briefly explain the participating organization which carries the business of dealing in securities. (6m) 4) Explain the Capital Markets and Services Act 2007 (CMSA). (5m) 17 REGULATORIES BODIES IN MALAYSIA 1) BANK NEGARA MALAYSIA 2) SECURITIES COMMISSION 3) BURSA MALAYSIA BERHAD 4) COMPANIES COMMISSION OF MALAYSIA 5) OTHER RELATED REGULATORIES BODIES : FOREIGN INVESTMENT COMMITTEE & BURSA MALAYSIA DEPOSITORIES SDN BHD 18  Established on 26 January 1959 under the Central Bank of Malaysia Act 1958 (CBA 1958). The CBA 1958 has been repealed by the Central Bank of Malaysia Act 2009 which became effective on 25 November 2009. It is a statutory body wholly owned by the Government of Malaysia.  The Bank reports to the Minister of Finance, Malaysia and keeps the Minister informed of matters pertaining to monetary and financial sector policies.  Roles and Functions of BNM 19  To issue currency and keep reserves to safeguard the value of the currency  To act as a banker and financial advisor to the Government  To promote monetary stability and a sound financial structure  To influence the credit situation to the advantage of Malaysia  BNM is vested with legal powers under various laws to regulate and supervise the banking institutions and other non-bank financial intermediaries.  Securities Commission 20 The SC is a statutory body formed under the Securities Commission Act 1993 (SCA) which reports to the Minister of Finance It has the power to investigate and enforce the areas within its jurisdiction Established : 1 March 1993  MISSION 21 -To promote and maintain fair, efficient, secure and transparent securities and futures markets. -To facilitate the orderly development of an innovative and competitive capital market.  FUNCTIONS OF SC 22 Registering authority for prospectuses of corporations other than unlisted recreational clubs. Approving authority for corporate bond issues. Regulating all matters relating to securities and futures contracts. Regulating the take-over and mergers of companies.  FUNCTIONS OF SC 23 Regulating all matters relating to unit trust schemes. Licensing and supervising all licensed persons. Supervising exchanges, clearing houses and central depositories. Ensuring proper conduct of market institutions and licensed persons. 24 Bursa Malaysia is an exchange holding company approved under section 15 of the Capital Markets and Services Act 2007 Its operates a fully-integrated exchange, offering the complete range of exchange- related services including trading, clearing, settlement and depository services  Objectives of BM 25 ▪ Provide and maintain a financial market place for the trading of shares of listed company ▪ Responsible to observe the market place and for the enforcement of its listing requirement.  Functions of BM 26  Provide a market place for the transaction of securities  Provide a mechanism for determining the price of security  Provide information on security price and volume of transaction  Provide mechanism for rising funds by companies through issuing rights, warrants, and loan stocks  Provide a mechanism for listing new securities 27  is a statutory body which regulates companies and businesses. CCM, which came into operation on 16 April 2002.  is a statutory body formed as a result of a merger between the Registrar of Companies (ROC) and the Registrar of Businesses (ROB) in Malaysia.  Functions of CCM 28  to serve as an agency to incorporate companies and register businesses  to provide company and business information to the public.  to ensure compliance with business registration and corporate legislation through comprehensive enforcement and monitoring activities to sustain positive developments in the corporate and business sectors of the Nation.  MEMORANDUM OF ASSOCIATION 29 It set out the powers and the EXTERNAL activities of the company. It must state: 1. The name of the company 2. The place or address the company 3. The objects of the company. ( what types of business allowed ) 4. The liability of the members is limited by shares or guarantee 5. The name, address and occupation of subscribers 6. The amount of share capital AND 7. Its division into shares of a fixed amount  ARTICLES OF ASSOCIATION It sets out the regulations governing the INTERNAL working and management of the company. It must state: 1. The duties, rights and powers of board of directors 2. The extent of directors’ borrowing powers 3. The notice and proceedings of meeting 4. The right of different classes of shareholders 5. The authority of the directors 6. How capital may be altered? 7. The issue of shares and the calls on shares 30  Bursa Malaysia Depositories Sdn Bhd 31  The company was formerly known as Malaysian Central Depository Sdn. Bhd. and changed its name in May, 2004. It was incorporated in 1987 and is based in Kuala Lumpur, Malaysia. Bursa Malaysia Depository Sdn. Bhd. operates as a subsidiary of Bursa Malaysia Bhd. Functions of BMD Sdn Bhd ❖ operates and maintains a central depository for securities listed on the securities exchange.  Foreign Investment Committee (FIC) 32  Non-citizens who wish to invest or own a property have to refer to the FIC  FIC provide the guideline on the acquisition of property by local and foreign interests ownership from one party to another  Acquisition means any transaction involving transfer of property   RESTRICTIONS 33 Foreign interest is not allowed to acquire:  residential unit under the category of low and medium low cost as determined by the State Authority;  properties built on Malay reserve land;  properties allocated to Bumiputera (Bumiputera quota) in any property development project as determined by the State Authority;  stall and service workshop;  agricultural land developed on the basis of the homestead concept; and  properties gazetted under National Heritage Act 2005.  CONDITIONS FOR ACQUISITION 34 Equity Conditions  Companies which do not have any Bumiputera equity or having less than 30% Bumiputera equity, are required to have or to increase the Bumiputera equity to at least 30%. The remaining equity shareholding can be held either by local interest, foreign interest or by both;  Companies with Bumiputera equity shareholding of 30% or more, but less than 51% are required to maintain at least 30% Bumiputera equity at all times;  Companies which already have Bumiputera equity shareholding of 51% or more, will be required to maintain at least 51% Bumiputera equity at all times;  INDIVIDUAL TUTORIAL 35 1) FIN346 – MARCH 2015 (PB: Q1 c,d,e) 2) FIN345 – MARCH 2013 (PB:Q4) (PC: Q2 a,b,c) 3) FIN345 – SEPT 2011 (PB: Q1)