Download Regulating the Malaysian Capital Market

Developments in Malaysian
Corporate Governance
The Regulatory Perspective
Nik Ramlah Mahmood
Agenda
Overview of Reform Agenda
The Rights and Equitable Treatment of Shareholders
The Role of Stakeholders in Corporate Governance
Disclosure and Transparency
The Responsibilities of the Board
Other Initiatives
Way Forward
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Malaysia has a strong legal and
institutional framework for corporate
governance
Legal framework based on traditions of
common law legal system
Comprehensive array of statutes
Supported by traditional common law remedies
Established institutions like courts and
regulatory agencies
Overview of Reform Agenda
3
Even prior to the crisis the basic regulatory
framework was being continuously reviewed and
updated
Move to Disclosure Based Regulation (DBR)
Strengthening Accounting Standards
Financial Reporting Foundation (FRF)
Malaysian Accounting Standards Board (MASB)
Review of Takeovers and Mergers
Code
Strengthening insider trading laws
Requirement for independent directors
& audit committee
Overview of Reform Agenda
4
A three-pronged approach was adopted after
the crisis
Swift
implementation
of measures to
address specific
weaknesses
Pursuit and
review
of on-going
programmes
A holistic
approach to
address medium
to longer term
issues
Overview of Reform Agenda
Finance Committee Report
on Corporate Governance
1999
Capital Market Masterplan
2001
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Rights And Equitable Treatment Of
Shareholders
Common law and statutory remedies are continuously enhanced
Existing common law & statutory
protection
• Related party & substantial
property transactions – enhanced
disclosure & approval requirements
 Directors fiduciary duties
• Revamped Takeovers & Mergers
Code
• One share one vote rule
• Shareholder rights at AGM
• Related and substantial party
transactions
• Oppression remedy
• Common law Derivative
Action
• Proposed codification of directors
fiduciary duties
Shareholder Activism – formation of
Minority Shareholder Watchdog Group
(MSWG)
• Proposed best practices for
institutional investors
• Statutory derivative actions
• Cumulative voting – being studied
6
Role of stakeholders and other ‘enforcers’
Stakeholders and other ‘enforcers’ must play their role…..
Watchdogs & Gatekeepers
Range of laws
pertaining to
various stakeholder
rights &
obligations,
consumer rights,
labour rights and
environmental
issues
Regulators
Corporates
Creditors
Professionals
Investors
Boards
Auditors
All market participants
Regulatory and other efforts
• Civil action
- Market manipulation & Insider trading
- Enhanced prospectus disclosure
obligations on directors, officers
and advisers
- Right to compensation
• Enhancement of audit quality and independence
• Facilitation of efforts of MSWG
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Disclosure And Transparency
Are essential pre-requisites to effective CG…..
Directors certification of
accounts - 1965
MASB established –
Mandatory compliance
to accounting
standards- 1997
Quarterly reporting - 1999
Transparency in share ownership –
1998
Directors statement on internal
controls - 2001
Annual Report –
financial statements
Directors and CEOs to disclose
interests in PLCs - 1998
Continuous disclosure
framework – listing
requirements
Revamped Takeovers & Mergers
Code – 1999
Substantial
shareholding disclosure
Mandatory disclosure on extent of CG
Code Compliance - 2001
Move towards DBR
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Responsibilities Of The Board
Are also continuously enhanced…..
Directors Fiduciary duties
– common law and
statutory obligations
Directors eligibility
Power to Bar/suspend
directors
Best Practices –Code on
Corporate Governance 2000
Enforcement – Accountability
of principal officers /
controlling stakeholders
Power to Bar/suspend
directors - enhanced
Mandatory Independent
directors – 1987
Independent directors – 1/3rd
requirement 2001
Directors certification of
accounts - 1965
Audit Committee –
composition & function 2001
Audit committees
mandatory – 1994
Directors statement on
internal controls 2001
Best Practices –Guidelines
on Internal Audit Function
2002
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Responsibilities Of The Board
Training and awareness programmes are vigorously pursued….
Training and Awareness Component
 Mandatory Accreditation Programme (MAP) for directors of PLCs
 Continuing Accreditation Programme (CEP) for directors of PLCs
 Securities Industry Development Centre
 Malaysian Institute of Corporate Governance
 Industry Corporate Awards
Ongoing changes to the law
• Codification of directors duties
• Business judgment defence
• Enhancement and rationalisation of related part and substantial
property transaction provisions in Companies Act 1965
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Regulatory Reform Efforts Are
Supported By Other Initiatives
Acceleration
of corporate
restructuring
Appointment
of
professional
managers
Stepping Up on Enforcement
SC’s supervisory and
enforcement capabilities
civil enforcement powers in
relation to insider trading
provisions
Ongoing
education and
awareness
programmes
Engagement
with
constituents
Powers to impose civil penalties
Compounding powers enhanced
11
Corporate Governance Initiatives in
Malaysia – a snapshot
True and fair certification by Directors on financial statements
Audit Committee Requirement
Independent Accounting Standard Setting Board
Directors and CEOs to disclose interests in PLC
Quarterly Reporting
Revamped Takeovers & Mergers Code
Code on Corporate Governance
Mandatory disclosure on CG Code compliance
Establishment of MSWG
Mandatory Accreditation Programme for Directors
Internal Audit guidelines for PLCs
1965
1994
1997
1998
1999
1999
2000
2001
2001
2001
2002
12
Way Forward - Ongoing commitment
 To continue to facilitate the hybrid vigour of a
multi pronged approach in efforts to enhance CG
 To further build on the recommendations of
Report on Corporate Governance (1999) and the
Capital Market Masterplan(2001) within a holistic
framework for longer-term market development
13
Thank you
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