SC issues new guidelines to enhance quality of investment advisory

THE Securities Commission Malaysia (SC) yesterday 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.

In a statement yesterday, the SC said this is in line with its agenda to create a digitally inclusive ecosystem for the capital market.

Both developments, it said, 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,” SC chairman Datuk Seri Dr Awang Adek Hussin (picture) said.

“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.

IA Guidelines

The Guidelines on Market Conduct and Business Practices for Investment Analysts and Their Analysts (IA Guidelines) outline the core principles and minimum standards that must be observed by holders of a Capital Markets Service Licence (CMSL) and a Capital Markets Service Representative’s Licence (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 June 8, 2023.

Enabling Digital Advisory Business Models

The SC is facilitating applicants who seek 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 yesterday, 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 — TMR