Page 94 - CMP3

The SC’s enforcement function complements its supervisory strength, enabling it to balance market integrity with proportionality as well as ensure effective and credible deterrence. Past experiences as well as skills gained in pursuing insider dealing, market manipulation and money laundering investigations as well as prosecutions have also been beneficial in directing the SC’s enforcement approach, including the management of resources and selection of appropriate enforcement strategies. These will continue to be applied in the spirit of prioritising efficiency and efficacy in areas such as fraud, unlicensed activities, breach of fiduciary duties and protection of investors against vulnerabilities.
STAYING AHEAD OF THE CURVE
A constant feature of the future capital market will be its dynamism – the speed and frequency of change – which will present both growth opportunities and challenges for market participants and regulators. The proliferation of digital adoption in the capital market will give rise to more sophisticated forms of investment fraud and market misconduct. Growing complexities in investment products also expose investors, particularly those who are vulnerable and more susceptible, to exploitation, poor sales practices and misleading financial advice. Senior investors, in particular those with low financial literacy or those suffering from diminishing cognitive capacity, could be more vulnerable to financial abuse. There is also growing recognition globally that personal circumstances, be it the physical, mental or emotional state of a person, can affect judgement and decision-making capacity in financial transactions, making such person vulnerable to harm at the hands of irresponsible or purported financial service providers8,9.
The intermediation landscape is expected to be more modular and fragmented as new entrants equipped with digitally enabled business models continue to compete with traditional businesses. As intermediaries adapt their business models to remain relevant and competitive, the lines are blurring between entities undertaking banking and capital market activities. In turn, this growing trend poses new risk and challenges to investor protection, resulting in the need to rethink the effectiveness of the existing regulatory approach. The concept of entities versus activities-based regulatory architecture for the capital market will therefore require greater refinement in order to minimise regulatory arbitrage. It will also provide a level playing field for all intermediaries. A more efficient matrix form of supervision will also be required to balance the increasing focus on capital market activities with sufficient entity-level accountabilities.
The expansion of the supervisory scope demands greater efficiency as more businesses evolve in their business models and more entities expand into capital market activities. To become more efficient, regulators are taking a more proactive approach – one that focuses on preventive measures, rather than spending significant effort to address the repercussions of misconduct. As such, there is growing emphasis on governance to shape the culture and conduct of market participants. In this regard, more proactive engagements with market participants will be important to respond to key risks and changes in the market in a more agile manner. There is also a growing focus among global regulators to leverage supervisory technologies (SupTech) to improve the regulator-regulatee interaction and sharpen their focus on key risk areas.
Senior Investor Vulnerability, IOSCO, March 2018.
Financial Lives 2020 Survey: The Impact of Coronavirus, Financial Conduct Authority, 2020.
8 9
92 SECURITIES COMMISSION MALAYSIA