Islamic Finance - Capital market oversight (Malaysia).
The Securities Commission is in charge of regulating the financial markets in Malaysia (SC). The SC is a self-funding statutory agency with the authority to conduct investigations and impose penalties to oversee the Malaysian capital market. It was created on March 1, 1993, in accordance with the Securities Commission Act of 1993. The SC reports to the Minister of Finance, and its annual financial reports are laid before parliament. Among the many regulatory duties performed by the SC are the following: • registering authority for prospectuses of corporations other than unlisted recreational clubs; approving authority for corporate bond issues; supervising exchanges, clearing houses, and central depositories; regulating all matters pertaining to securities and futures contracts; controlling takeovers and mergers of businesses; regulating all matters pertaining to unit trust schemes; licensing and overseeing all licensed individuals; promoting self-regulation; and ensuring. The SC's primary duty of protecting the investor underpins all of these duties. The SC is required by law to stimulate and promote the growth of the securities and futures markets in Malaysia in addition to carrying out its regulatory responsibilities. The SC has issued a few specific guidelines to govern the Islamic Capital Market (ICM) in Malaysia, including Practice Notes 18 (PN18) and 19 (PN19), which are related to Shari'ah-based unit trust schemes and stipulate that when issuing Islamic bonds, independent Shari'ah advisers must be hired (as stated in the July 2000 Guidelines on the Offering of Private Debt Securities). Practice Note 2 (PN2), which addresses the issuance of ringgit-denominated Islamic bonds for a multilateral development bank or a multilateral financial institution in Malaysia, was released by the SC in November 2004. Contrary to the banking sector, Islamic capital market activities were not subject to separate legislation. All institutions participating in the ICM must follow SC regulations for these activities. Malaysia has always used a dual financial system, with distinct laws governing the banking and Takaful industries. The Securities Commission regulates the capital market and, when necessary, adds further rules. The majority of this legislation, which has developed to make it easier to harmonize regulations and processes within Islamic financial services, relates to domestic activities. It offers a thorough regulatory framework that reflects traditional best practices while being tailored to the unique requirements of the Islamic finance sector. As Malaysia strives to become a centre for Islamic finance worldwide, more reforms are likely. More flexibility in terms of international licensing requirements and ease of doing business, as well as adequate incentives for investors and market participants in foreign currency-denominated Islamic financial operations, are anticipated as part of these improvements.
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