SC liberalises bond and sukuk investment rules


The Securities Commission Malaysia (SC) has liberalised its regulatory framework to facilitate greater retail access to the RM1.3 trillion Malaysian bond and sukuk market.

The new measures state that qualified issuers no longer need to make disclosures through a prospectus and are only required to issue a product highlight sheet.

The range of corporate bonds and sukuk that can be offered to retail investors has also been expanded beyond plain vanilla bonds, the SC noted in an exchange filing yesterday.

The liberalisation measures are part of its continued efforts to further develop the market, currently the third-largest in Asia (relative to GDP) and the world’s largest sukuk market.

“The new framework will allow a more efficient issuance process for corporate bonds and sukuk to be offered to retail investors,” the SC noted in a statement yesterday.

The liberalised framework consists of the new Guidelines on Seasoned Corporate Bonds and Sukuk and amendments to Guidelines on Issuance of Corporate Bonds and Sukuk to Retail Investors, the Guidelines on Sales Practices of Unlisted Capital Market Products, as well as Division 2 of the Prospectus Guidelines, which will come into effect on Oct 11, 2018.

The liberalised framework for retail investors is also complemented by the centralised online information platform, Bond + Sukuk Information Exchange Malaysia — established by the SC in November 2017 — which enables investors to obtain necessary information on ringgit bonds and sukuk to assist in their investment decisions.

The SC is introducing a new seasoning framework to enable retail investors to access existing corporate bonds and sukuk which are currently traded by sophisticated investors in the over-the-counter (OTC) market. Under this framework, corporate bonds and sukuk eligible for retail investment must have been in the market for at least 12 months and have a minimum credit rating of A, among other requirements.

Distributors of corporate bonds and sukuk in the OTC market are required to observe the sales practices prescribed by the SC, including the requirement to undertake necessary client on-boarding assessment and ensure fair treatment of investors.