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FINANCIAL LAW - Securities Law
Related Topics : Banking Law . Offshore Banking Law . Broker Disputes . Commodities Law . Investment Terms . Raising Capital . Securities Law . Buying On Hire Purchase . Exchange Control Rules . Danaharta Act


SECURITIES INDUSTRY


Overview

Malaysia has two stock markets, the Kuala Lumpur Stock Exchange ("KLSE") and the Malaysian Exchange of Securities Dealing and Automated Quotation ("MESDAQ"). Stock markets are established under the SIA. The SIA is enforced by the Securities Commission.

Stock markets and market intermediaries, such as brokers, fund managers and investment advisers are licensed and regulated under this Act.


Regulated Activities

Brokering

All dealers in securities are require to obtain a dealers licence. A dealer is a corporation which carries on a business of dealing in securities

"Dealing in securities" includes the act, whether as an agent on behalf of another or as a principal, of buying and selling securities, underwriting securities, offering or inducing any person to buy or sell securities. It is also includes dealings in derivative contracts that are linked to fluctuations in the value of securities or the yield of securities.

Exempt dealers include persons who carry on a business of dealing in securities as principal (i.e., not on behalf of another) through the holder of a dealer's licence. In other words, no one who does not have a dealer's licence may carry on the business of buying or selling securities except where all transactions are made through a licensed dealer.

Foreigner may hold shares in dealers subject to a ceiling of 49%.

Advising on securities

An investment advisers licence is required for anyone who wishes to be involved in the business of (a) advise other concerning securities or (b) providing reports and analyses on securities.

Certain types of persons are excluded from this requirement, such as holders of other types of licensees under the SIA (when the investment advise was given incidentally), licensed banks, newspaper publishers and lawyers.

Fund Management

A fund manager is a person who manages a portfolio of investments in securities on behalf of another, whether or not such management is on a discretionary basis.


Prudential Requirements

Minimum Financial Requirements

All licensed persons are required to meet such minimum financial requirements as may be prescribed by regulations or in the rules of a stock exchange.

Client monies

All monies received by a dealer must be deposited in a client trust account.  Client monies cannot be used to pay the debts of the dealer.  Such monies may only be withdrawn in accordance with written instructions of the client, for defraying brokerage and other charges or in accordance with law.


Offenses

Some offenses relating to stock market trading are described below:

False trading and market rigging

It is an offense to create (a) a false or misleading appearance of an active trading in any securities on a stock market or (b) a false or misleading appearance of a market for, or the price of, any securities. It is also an offense to artificially influence the price or movements in price of any security.

Stock market manipulations

Generally speaking, it is an offense to transact in securities so as to raise, lower or stabilize the price of securities if the purpose of such action is to induce other persons to transact in securities.

False or misleading statements

A person shall not make a statement or disseminate information that is false or misleading and which is likely to induce others to buy or sell securities or to raise, lower or stabilize the price of securities.

Fraudulently inducing persons to deal in securities

A person shall not induce another to deal in securities by (a)intentionally making misleading, false or deceptive statements, promises or forecasts, (b) dishonestly concealing material facts, (c) recklessly making any false or deceptive statements, promises or forecasts, or (d) recording or storing information which such person knows to be materially false or misleading.

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