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A targeted enforcement strategy is one that is defined by enforcement priorities, capacity and risk appetite. Greater alignment of enforcement priorities to the insights derived across the regulatory value chain, ranging from regulations to authorisation to supervision, enables a more cohesive effort to shape industry behaviour while enabling greater synergies across the SC. With defined priorities, enforcement resources can be allocated more effectively, and where relevant, the use of cross-functional taskforces can be leveraged for greater regulatory efficiency. For example, a cross-functional taskforce was set up to enable the SC to respond to the increasing numbers of scams and unlicensed activities in the market in a more agile manner.
The SC’s enforcement strategy will also be guided by the intended enforcement outcomes, which outlines key considerations to determine the course of regulatory actions taken – be it administrative sanctions, civil actions or criminal charges. These considerations include litigation risks as well as the level of desired deterrence to the offenders and other industry players. Moving forward, the SC will continue to expand the use of administrative sanctions and penalties to strengthen deterrence against market misconduct and breaches in securities law. The SC will also continue to pursue restitution as an effective enforcement tool that not only hold offenders accountable for financial losses suffered by victims, but also generate a deterrent effect. In recent years, the SC has stepped up efforts on disgorgement of illegal profits to compensate investors who have suffered losses as a result of transgressions.
The SC today adopts a set of criteria when triaging for the opening of a formal investigation. This shapes the use of enforcement resources as well as the type of enforcement actions to be undertaken, and typically considers, among others, the seriousness of the misconduct, public interest as well as the availability and quality of evidence to prove misconduct. Once a formal investigation is opened, the SC conducts the necessary investigations within a time charter defined by the complexity of the case.
To achieve swifter outcomes, there are opportunities for the SC to enhance parts of its enforcement value chain. For example, a more efficient triage process can lead to greater efficiency in enforcement actions. This can benefit from process improvement initiatives or a greater use of analytics. The efficiency of investigations can also be further enhanced through various other means, including the expansion of enforcement tools and through greater use of technology. For transgressions originating outside Malaysia, the SC will continue to leverage IOSCO Multilateral Memorandum of Understanding for cross-border investigation.
Efforts to expand the suite of enforcement tools will be pursued to expedite the investigation process and case resolution. For example, some jurisdictions offer prospective defendants the chance to explain themselves and offer information, where relevant, to dispute the facts put forth by the regulator. The use of such tools could potentially reduce time spent validating facts, thus expediting the investigation of a case. In another example, enforceable undertakings by companies or individuals provide the regulator with flexibility to negotiate the terms of an undertaking with the culpable party. Such tools can provide regulators with the balance needed to achieve the appropriate remedial outcomes of investor protection while still managing the timeliness of regulatory action. In this regard, the SC will explore more alternatives in enforcement solutions, relevant to the local context, which can enable greater expediency in the investigation or case resolution process.
Technological advancements will be a key enabler towards more efficient enforcement actions. In developed markets, advanced analytics play a critical role in detecting anomalies that may warrant additional inquiry – be it trading patterns, disclosure patterns in financial statements or behavioural patterns of intermediaries in their submissions to regulators. In some cases, advanced analytics are used to generate leads for swift enforcement actions. In this respect, both the SC and AOB will pursue the greater use of analytics to
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