SIDREC gives investors an avenue for redress in monetary disputes arising from capital market investments.
By Helena Hon
With the Securities Industry Dispute Resolution Center (SIDREC) having moved into its eighth year of establishment, its vision and mission of providing members and the investing public a trusted, independent and impartial dispute resolution avenue for monetary claims relating to capital market products and services, has taken ground, incorporating a wider scope of responsibilities and ensuring they remain relevant to the needs of today’s digital economy.
SIDREC was established by the Securities Commission Malaysia (SC) as part of its investor protection framework. In the digital era, boundaries are becoming blurred, changing how the financial markets as a whole do business. This has created new opportunities and challenges for both capital markets participants and investors while also requiring regulators including dispute resolution bodies such as SIDREC, to keep up with the changing landscape.
As SIDREC Chairman Dato’ Ranita Mohd Hussein said in the recently launched SIDREC Annual Report 2017, “The Securities Commission Malaysia (SC) has been proactive in facilitating the digital space tempered with the appropriate level of controls and oversight. In the last couple of years, it launched frameworks for equity funding platforms, peer-to-peer lending, digital investment managers (or robo advisers as they are often referred to) to provide more opportunities and access points between the market and investors, and a greater variety of investment choices to the investing public. Concurrently, it gives rise to the need for the investor protection eco-system to evolve to remain effective in contributing to market self-discipline, ethical practices and investor confidence.”
For sure, the number of cases including enquiries and claims received by SIDREC have increased over the years. Most notable is the 82% increase between 2016 and 2017, as stated in their Annual Report. Smart Investor took the opportunity to speak to SIDREC Chief Executive Officer, Sujatha Sekhar Naik to discuss how they were beefing up to cope, not just with the increase in cases but also with the changing rules of engagement required to deal with the onslaught of new and innovative investment products and choices in this digital age.
Sujatha Sekhar Naik: “Yes, we think the increase will continue and as our scope grows to cater to developments in the market and regulatory framework, the increase will have a natural impetus of its own. So, we do need to ensure we are appropriately resourced.
“As you know, we started operations as a very small four-man outfit in 2011. We have grown since then to reflect the resource needs and the scope of work to be undertaken. We are still in the process of recruiting. It is difficult to find the mix of knowledge and skills we need − both alternative dispute resolution (ADR) skills as well as capital market knowledge and experience. For our case managers, the primary component is the capital market experience. If we have that, then we can provide the ADR training.
“Our Mediators and Adjudicators on the other hand must have both, to be on our panel. So, capacity in terms of regulatory and market knowledge and experience is important. Given the wide scope of our purview, in a market that is constantly developing, together with finding people with the right experience and skill sets, we have to concurrently ensure the continued relevance of our expertise and the sustainability of the quality of our service.
“It is to this end, that we have a structured training programme that embeds Continuing Professional Development to ensure our case managers, mediators and adjudicators remain in-step with market and regulatory developments. This includes keeping ourselves updated on new products including those on the digital space. This has been possible, with the help of the Capital Market Development Fund (CMDF) funding and the support of the SC.
“Additionally, we also ensure that we can allow for logistical flexibilities through technology. To enable investor claimants to be able to access our services cross-border, or across state lines, domestically, we are able to conduct mediations and adjudications by Skype or conference call, as long as we have a peer or trusted entity in the other state (if in Malaysia) or country, who can provide us a secure venue for the session.”
SIDREC’s evolution includes the expansion of its purview to cover commercial banks, Islamic banks and specified development financial institutions as well.
Additionally, they have also increased the claim limit of their Mandatory Scheme up to RM250,000 and under, as well as introduced a new service called the Voluntary Scheme for disputes relating to claims exceeding RM250,000, and there are provisions for court-referred cases as well.
Sujatha Sekhar Naik: “I would encourage both the market intermediaries who are our members and investors with disputes (involving monetary loss) that they have not been able to resolve, to seek our assistance. They would receive the help of professionals who have expertise both in dispute resolution as well as the capital markets. So, they will receive very informed expert help.
“We have to date managed to resolve more than 90% of our disputes through case management or mediation. And if that fails, parties would still able to have closure, as the matter proceeds to adjudication. The adjudicator’s decision is final if the investor claimant accepts it.
“The claimants, where they have been successful, would have received compensation. If not, they would have at least the satisfaction of knowing their case was given a fair and impartial hearing, and they are either way, able to move on with their lives. They would also be able to go forward, better informed on the product they invested in, the market process, their rights and what steps they ought to have taken that could have helped them or mitigated the loss.
“For members (licensed market intermediaries), they are able to resolve the dispute with their client and also move on. They can trust that the process is fair and impartial and as such, if the client is successful, they are only paying what is due. And if the decision is in the member’s favour, they have the satisfaction of that validation.”