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SC Issues New Guidelines and Technical Note to Enhance the Quality and Diversity of Investment Advisory

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The Securities Commission Malaysia (SC) today released new Guidelines to strengthen the role of investment analyst firms and their analysts as a reliable source of investment information for the public.

The SC also issued a Technical Note to provide details on the licensing requirements for those providing digital investment advice. This is in line with the SC’s agenda to create a digitally inclusive ecosystem for the capital market.

Both developments support a key thrust of the Capital Market Masterplan 3 to provide investors with better and greater access to quality investment advice and increased diversity to meet their emerging needs through a more digitally inclusive ecosystem.

“Investment advisers play an important role in the capital market by providing valuable insight and information for investors to assess investment opportunities. That is why the SC expects them to exercise reasonable care and diligence in providing research-related services,” said the SC Chairman, Dato’ Seri Dr. Awang Adek Hussin.

“The SC is also cognisant of the shift in the investment advisory landscape. The emergence of digital advisory models that combine technology and investment expertise is expected to further strengthen the provision of accessible and quality advice to investors,” he added.

Guidelines on Market Conduct and Business Practices for Investment Analysts and Their Analysts (IA Guidelines)

The IA Guidelines outline the core principles and minimum standards that must be observed by holders of a Capital Markets Service License (CMSL) and a Capital Markets Service Representative’s License (CMSRL) who issue or promulgate research reports in carrying out the regulated activity of providing investment advice.

Investment analyst firms and their analysts are expected to have high standards of integrity and competence in providing research-related services to ensure the objectivity and quality of their research reports and recommendations.

They will be given a six-month period to familiarise themselves with the IA Guidelines, which take effect on 8 June 2023.

Enabling Digital Advisory Business Models

The SC is facilitating applicants seeking to carry out the business of investment advice through the use of automated, algorithm-based tools to meet the different needs of investors.

With the release of the Technical Note today, a party proposing to undertake digital investment advisory services and requiring dispensation or waiver of certain licensing requirements, which include minimum financial requirements and competency thresholds, can submit an application for waiver to the SC.

In considering such an application, the applicants are required to demonstrate how their digital innovations can benefit their targeted investors while possessing the requisite technological capabilities.

Both the IA Guidelines and the Technical Note are available on the SC website at https://www.sc.com.my/regulation/guidelines/investment-advisers.

About the Securities Commission Malaysia:

The Securities Commission Malaysia (SC), a statutory body reporting to the Minister of Finance, was established under the Securities Commission Malaysia Act 1993. It is the sole regulatory agency for the regulation and development of capital markets. The SC has direct responsibility for supervising and monitoring the activities of market institutions, including the exchanges and clearing houses, and regulating all persons licensed under the Capital Markets and Services Act 2007. More information about the SC is available on its website at www.sc.com.my. Follow the SC on twitter at @SecComMy for more updates.

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