Page 44 - SC SCAR 2023 ENGLISH Flipbook

PART 2 REGULATORY PERFORMANCE AND OUTCOMES
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SECURITIES COMMISSION MALAYSIA ANNUAL REPORT 2023
Supervision of Exchanges and Financial Market Infrastructures
Under securities law, the SC is responsible for approving and supervising operators of securities and derivatives exchanges as well as financial market infrastructures such as clearing houses and central depositories (approved institutions).
As the sole integrated exchange group in Malaysia, Bursa Malaysia is subject to statutory requirements such as operating a fair and orderly market, acting in the public interest with particular regard for the protection of investors, ensuring prudent risk management as well as ensuring sufficient financial, human and other resources.
In 2023, the SC conducted regular supervisory engagements with Bursa Malaysia on issues including governance, risk management, internal audit and controls, commercial strategy, and the effectiveness of its frontline regulatory framework. Such engagements are complemented by ongoing reviews of regulatory submissions and onsite regulatory assessments (RA) on approved institutions.
In January 2023, the SC concluded its RA on the Bursa Suq Al-Sila (BSAS) platform operated by Bursa Malaysia Islamic Services Sdn Bhd (BMIS), a wholly-owned subsidiary of Bursa Malaysia. The assessment focused on processes and procedures in relation to the onboarding of participants, as well as the adequacy and effectiveness of controls in monitoring participants’ ongoing adherence with the platform’s rules and other applicable Shariah requirements.
While there were no immediate concerns regarding the integrity of the overall structure and system of BSAS, several recommendations were made to Bursa Malaysia, including enhancing BMIS’ human resource management and succession planning, as well as strengthening and streamlining the processes for onboarding and supervising its participants.
In June 2023, the SC also conducted a high-level dialogue with the Bursa Malaysia board of directors. The engagement served as a platform for the leadership of both organisations to exchange insights on strategic issues and regulatory concerns.
Supervision of Recognised Market Operators
The regulatory framework for RMOs was designed to be commensurate with the value proposition of this market segment, counterbalanced against risk factors such as size, structure, range of products and services, as well as participant demographics.
The SC’s supervisory approach aims to ensure that RMOs continue to operate in a fair and orderly manner in adherence with these regulatory expectations. Supervisory tools deployed include regular engagements with RMOs, reviews of regulatory submissions and assessment of complaints. Focus areas in 2023 include governance, risk management, client/issuer onboarding and due diligence, as well as cyber security and systems integrity.
In May 2023, the SC conducted a thematic review on RMOs’ compliance with the SC’s Guidelines on Prevention of Money Laundering and Terrorism Financing for Reporting Institutions in the Capital Market and the SC’s Guidelines on Implementation of Targeted Financial Sanctions relating to Proliferation Financing for Capital Market Intermediaries (AML Guidelines).
The thematic review focused on the emerging risks of legal persons and legal arrangements as well as anti- bribery and corruption. The findings from this review provided the basis for several recommendations relayed by the SC to the RMOs during the annual supervisory engagements.
This exercise also formed part of the SC’s continuous communication with the RMOs to enhance their understanding of the SC’s supervisory expectations, which will facilitate their efforts to ensure ongoing compliance. Moving forward, the SC will continue to monitor the RMOs to ensure that any gap identified is addressed in a timely manner for effective mitigation and management of AMLCFT/PF risks.
Given the growth in the digital assets segment, the SC also intensified its oversight on operators of digital asset exchanges (RMO-DAX) to ensure that key elements of their business operations, including governance, policies and procedures, systems and actual practices, are aligned with applicable regulatory and supervisory requirements.