FINANCIAL MARKETS IN MALAYSIA

Transcription

1 FINANCIAL MARKETS IN MALAYSIA LOW CHEE KEONG mm BEc, LLB, Postgrad Dip Comm Law (Monash), LLM (Hong Kong) Advocate & Solicitor of the High Court of Malaya Associate Professor in Corporate Law School of Accountancy Chinese University of Hong Kong I Malayan Law Journal Sdn Bhd Kuala Lumpur 2000

2 Contents Foreword Preface Acknowledgments About the Contributors Figures Abbreviations v vii ix xi xxvii xxxi 1. Regulatory Matrix and Structure of Financial Markets in Malaysia 1 Introduction 1 Banking Sector 3 Non-banking Financial Intermediaries 4 Financial Markets 5 Understanding the Regulatory Matrix 8 Concluding Note 12 PART A: THE PRINCIPAL REGULATORS 2. Treasury 17 Brief Historical Overview 17 Organizational Structure 21 Role Functions and Powers Relating to the Capital Markets 25 Statistics 28 Recent Initiatives and its Impact Bank Negara Malaysia 31 A Brief Historical Review of the Central Bank of Malaysia 31 Details of the Organization Structure Securities Commission 40 Introduction 40 Organizational Structure 41 Recent Developments in the Malaysian Capital Market 42 Regulatory and Developmental Initiatives 52 Going Forward 61 XXI

3 xxii Contents PART B: STOCK AND FUTURES EXCHANGES 5. Kuala Lumpur Stock Exchange 67 History 67 Organization Structure of KLSE 71 Market Performance 75 KLSE's Rules and Regulations pertaining to Membership and Listing 77 Trading on the KLSE 83 Recent KLSE Initiatives 88 Strengthening the Capital Market 93 Future Challenges and Conclusion Malaysian Exchange of Securities Dealing & Automated Quotation 99 Why MESDAQ? 99 Investing in MESDAQ Companies Kuala Lumpur Options and Financial Futures Exchange 121 Historical Development and Overview 121 Organizational Framework 123 Regulatory Structure 126 Self-regulatory Organization 127 Product Line 127 Membership 130 Licensing Requirements 131 Trading System 133 Trading Process 133 Types of Orders 135 Transaction Costs 136 Inter-broking Business 138 Clearing and Settlement Process 138 Risk Management 140 Common Bond Mechanism 141 Impact of Capital Controls on Derivatives' Industry 142 KLOFFE - The Future Commodity & Monetary Exchange of Malaysia 147 Introduction 147 Membership and Organization Structure 148 Functions of the Exchange 151 Market Performance 160 Recent Initiatives and Future Plans 163

4 Contents xxiii PART C: DEBT MARKETS 9. Role, Powers and Functions of Bank Negara Malaysia in the Debt Markets, 177 Introduction 177 Malaysian Government Securities Market 178 Private Debt Securities Market 181 A Review of Recent Initiatives Implemented and their Effects 185 Future Plans and Challenges Malaysian Rating Corporation Berhad 190 Historical Overview 190 Organizational Set-up 192 The Role and Functions of MARC in the Context of the Malaysian Capital Market 194 MARC's Rating Products 195 Three-year Statistical Review 206 Reyiew of Recent Initiatives Rating Agency Malaysia Berhad 211 Development of the Malaysian Bond Market 214 Growth of the PDS Market 217 Role of RAM in the Capital Markets 218 Functions of Credit Rating 219 RAM's Rating Process 219 Rating Methodology 221 Key Risk Factors of Selected Industries 222 Rating Symbols and Definitions 223 Initiatives, Effects and Proposals 225 Conclusion 227 PART D: TAXATION 12. Inland Revenue Board 231 Establishment of IRB 231 Organizational Structure of IRB 232 An Overview of Taxation in Malaysia 235 Taxes on Securities Transactions 236 Stamp Duty 239 Real Property Gains Tax 239 Recent Initiatives Labuan International Offshore Financial Centre 241 Introduction 241 Labuan as an IOFC 241

5 xxiv Contents Regulatory Authority of Labuan IOFC 242 Progress of Labuan IOFC 244 Regulatory Framework of Labuan IOFC 247 Taxation in Labuan IOFC 257 Prudential Regulations in Labuan 258 Submission of Information 261 Labuan as a Funding Centre 261 Labuan as an International Islamic Finance Centre 263 Proposed Establishment of an International Islamic Money Market 265 Labuan as a Financing Centre for BIMP-EAGA 266 Implications of the New Exchange Controls Rulings on Labuan IOFC 267 Conclusion 268 PART E: ROLE OF THE PROFESSION 14. Role and Functions of Legal Advisers 271 Introduction 271 The Listing Process 271 Meeting the Listing Requirements 272 Restructuring Prior to Listing 273 Implementing the Restructuring 276 Due Diligence and the SC Submission 277 Post-approval Implementation 281 The Memorandum and Articles of Association and Electronic Shares 283 Preparing the Prospectus 284 The Underwriting Agreement and the Public Offering Role and Functions of Merchant Banks 290 Introduction 290 Regulatory Framework 294 Scope and Nature of Professional Services' 297 Specifics of the Role of a Merchant Bank 300 Current Issues and Future Prospects 307 Conclusion Role and Functions of Reporting Accountants 310 Introduction 310 Initial Discussion 311 Further Discussions 312 Final Preparations for Listing 316 Preparation of Key Documents 316 After Approval from SC 323

6 Contents xxv Short Form Accountant's Report 323 Report on Profit Forecasts 324 Report on Proforma Balance Sheets 325 Review of Prospectus 325 Post Listing/Continuing Obligations 326 Reporting Requirements 327 Change in Nature of Activities 330 Corporate Governance 330 Conclusion 331 PART F: THE WAY AHEAD 17. Globalization and Malaysia 343 Introduction 343 Some Meanings of Globalization 345 Key Drivers in Globalization of Financial Markets 348 Implications for Regulators in Information Age 351 Implications for Business: Globalization as a Business Mandate 352 Strategic Response to Globalization 356 Conclusions Mechanisms and Policies for National Economic Recovery 368 Objectives of the NEAC 368 Structure of the NEAC 369 Membership of the NEAC 370 National Economic Recovery Plan 372 Thrusts of the Recovery Plan 376 Recovery Management Measures 383 Financing the NERP 384 Conclusion Strengthening the Banking Sector 387 Introduction 387 Overview of Problems 388 Banking Sector Restructuring 390 Interaction between Danaharta, Danamodal and the CDRC 398 Merger of Banking Institutions 399 Conclusion Pengurusan Danaharta Nasional Berhad 406 Introduction 406 Governance 407

7 xxvi Contents Role and Function 410 Funding 412 Legislative Framework 414 Acquisition Approach and Methodologies 416 Profit Sharing Agreement with FIs 417 Payment 418 Asset Management and Disposal Strategies 419 Asset Disposal Strategies 420 Recent Developments Primary Offers of Securities and the Internet 422 Introduction 422 Efficiency Gains 424 Technological Distinctions 426 Prospectus Provisions of Companies Act Section 32 of Securities Commission Act 1993 and Problem of Offshore Internet Offerings 430 Conclusions Corporate Governance in Malaysia 436 Introduction 436 Code on Corporate Governance 438 Survey of Institutional Groups 443 Initiatives for Reform 445 Conclusion Epilogue 453 Introduction 453 Overview of Principal Changes 454 Challenges in the New Millennium 466 Index