The Securities Commission Malaysia has amended the requirements for conducting seminars on equity or derivatives trading by a holder of a Capital Markets Services Representative license (“authorized representative‘) revising his Guidance note on providing investment advice (‘Guidance note‘) and Market Conduct and Business Practices Guidelines for Brokerage Firms and Authorized Representatives (‘Guidelines‘) with effect from April 4, 2022.
Amended paragraph 3.3 of the guidance note allows a licensed representative to conduct equity or derivatives trading seminars if he is representing the holder of a capital markets services license who is his principal (‘the main‘), and such conduct is incidental to his role as an authorized representative.
Prior to the revision of April 4, 2022, paragraph 3.3 of the guidance note clarified that “incidental” means the circumstances in which the authorized representative provides advice in his capacity as an authorized representative or employee of the principal and only to its customers. The April 4, 2022 revision removed the phrase “and only to its customers‘ of paragraph 3.3 of the guidance note. From now on, an agent can lead seminars on the trading of shares or derivatives for people who are not his clients provided that he does so as a representative of the principal.
At the same time, the guidelines have been amended to introduce a new section 9A which sets out requirements for the provision of investment advice by an authorized representative. Some of the requirements in Section 9A are:
- an authorized representative may only offer investment advice on listed securities to any person in his capacity as an authorized representative of the principal (‘authorized activity‘);1
- the agent must:
- Obtain prior approval from the principal’s senior management to undertake the authorized activity;
- keep a record of the authorized activity and related material, including presentation material; and
- comply with any other terms or conditions that may be imposed by the principal.2
- the Authorized Representative shall not charge or collect any fees in connection with the Authorized Activity, including for any related materials;3
- the principal, in approving the authorized representative under point 2 above and continuing to permit the authorized representative to undertake the authorized activity, must ensure that the authorized representative:
- is competent and possesses the necessary skills and expertise reasonably expected of a person carrying out the authorized activity;
- complies with relevant securities laws and guidelines in carrying out authorized activity; and
- maintains records of relevant approvals and documents related to investment advice;4
- the principal must have adequate policies and procedures in place to ensure that the authorized representative complies with point 4 above.5
The changes introduced by Article 9A of the Guidelines aim to ensure that the principal exercises adequate supervision over the authorized representatives whom it authorizes to carry out the authorized activity.