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EXAMINATION STUDY GUIDE:
     STOCK MARKET &
      SECURITIES LAW
        (MODULE 6)

           [Applicable to Examinatio...
1.   Notice to readers/candidates:


     •         Purpose of these updates is to reflect the provisions of the Capital
 ...
Futures Broker(s) Licence                The Capital Markets Services Licence
                                            ...
4.   Topic 1: Overview of the Malaysian Stock Markets


     (a)    Topic Objectives, Page 1-1:


            Bullet 1
   ...
(f)    Suggested Answers to Activities, Page 1-18:


            Activity 1
            Paragraph 1, to replace s.2 of the...
Capital Markets and Services Act 2007 (CMSA)
      On 28 September 2007, the Capital Markets and Services Act
      (CMSA)...
Formerly the training and education arm of the Securities
      Commission established in July 1994, it was known as the
 ...
6.   Topic 3: Business Structures


     (a)    Subtopic 1.4 Collective Investment Vehicles, Unit Trusts, Page 3-3:


    ...
Property transactions involving directors which are substantial,
      where such a transaction (for the buying or selling...
Paragraph 1
      To amend A person can only be Executive Director Dealing and
      remain as one if he holds a valid dea...
A participating organisation shall in the case of a Non-universal
      Broker have at least two (2) heads one of whom sha...
Where there is a total vacancy in the office of the compliance
            officer, the function of the compliance officer...
(c)   Subtopic 1.3 Issues Guidelines and the Listing Requirements of Bursa
      Malaysia Securities Berhad, Failure to Co...
(h)   Subtopic 1.5 Preparing the Prospectus, Content, Page 4-12


      Paragraph 1
      To replace with s. 44 of the SCA...
(k)   Subtopic 1.5, Preparing the Prospectus, Civil Remedy, Page 4-13


      Paragraph 1
      To replace the SCA also pr...
8.   Topic 5: Trading on the Secondary Market


     (a)   Subtopic 2 The Trading System, Page 5-5


           Paragraph ...
(e)   Subtopic 3.3 Defaults, Page 8-10


      To renumber Activity 2 as Activity 1


(f)   Subtopic 5.3 Issue Contract No...
(k)    Subtopic 5.8 Maintain Separate Client Accounts, Page 8-15


             Paragraph 1
             To amend (ss.44 a...
(c)   Subtopic 2.2 Securities Industry Act 1983, Page 9-6


      Paragraph 1
      Bullet 1, to replace s. 86 with s. 177...
(e)    Subtopic 2.4 Reasonable Basis and “Know Your Client” Rule,
             Liability, Page 9-7


             Paragrap...
12.   Topic 11: Securities Offences


      (a)    Contents Page


             Subtopic 1
             To amend Section 8...
(e)   Subtopic 1.3 Section 85 – Stock Market Manipulation, Page 11-6


      Heading. to amend Subtopic 1.3 Section 85 to ...
(j)   Subtopic 1.7 Section 88 –Dissemination of Information About Illegal
      Transactions, Page 11-8


      Heading, t...
(m)   Subtopic 1.8 Insider Trading, Information Generally Available, Page
      11-11


      Paragraph 1, to replace s.89...
(t)   Subtopic 1.9 Penalties for Contravention, Civil Proceedings, Page 11-
      13 to 11-14


      Paragraph 1
      To...
(v)   Subtopic 3 Other Offences Relating to False and Misleading
      Statements, Page 11-15


      Bullet 1, to amend s...
Paragraph 4
             To amend The amendments to the SIA and SCA in 1998 enhance the
             enforcement powers of...
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EXAMINATION STUDY GUIDE: STOCK MARKET

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Transcript of "EXAMINATION STUDY GUIDE: STOCK MARKET "

  1. 1. EXAMINATION STUDY GUIDE: STOCK MARKET & SECURITIES LAW (MODULE 6) [Applicable to Examination Study Guide Module 6 – 2nd Print, 2006 (Revised)] UPDATES PURSUANT TO THE CAPITAL MARKETS AND SERVICES ACT 2007 Copyright 2007 Securities Industry Development Corporation 3, Persiaran Bukit Kiara Bukit Kiara, 50490 Kuala Lumpur This document consists of 27 pages including the cover page
  2. 2. 1. Notice to readers/candidates: • Purpose of these updates is to reflect the provisions of the Capital Markets and Services Act 2007 (CMSA). • All corrections are highlighted in bold. Please ensure that the relevant topics are updated accordingly. 2. All topics: (a) The existing terms as stipulated in Column 1, where used, unless otherwise stipulated, to be replaced with the new terms as stipulated in Column 2: Column 1 Column 2 Fund Manager(s) Person(s) who carries(carry) on the Futures Fund Manager(s) business of fund management Fund Manager(s) Licence The Capital Markets Services Licence Futures Fund Manager(s) Licence (CMSL*) for carrying on the business of fund management Fund Manager’s Representative(s) Representatives of person(s) who Futures Fund Manager’s carries(carry) on the business of fund Representatives management Fund Manager’s Representative(s) The Capital Markets Representatives Licence Services Licence (CMSRL*) for carrying on Futures Fund Manager’s the business of fund management Representatives Licence Dealer(s) Person(s) who carries(carry) on the business of dealing in securities Dealer(s) Licence The Capital Markets Services Licence (CMSL*) for carrying on the business of dealing in securities Dealer’s Representative(s) Representatives of person(s) who carries(carry) on the business of dealing in securities Dealer’s Representative(s) Licence The Capital Markets Services Representatives Licence (CMSRL*) for carrying on the business of dealing in securities Futures Broker(s) Person(s) who carries(carry) on the business of trading in futures contracts 2
  3. 3. Futures Broker(s) Licence The Capital Markets Services Licence (CMSL*) for carrying on the business of trading in futures contracts Futures Broker’s Representative(s) Representatives of person(s) who carries(carry) on the business of trading in futures contracts Futures Broker’s Representative(s) The Capital Markets Services Licence Representatives Licence (CMSRL*) for carrying on the business of trading in futures contracts Investment Adviser(s) Person(s) who carries(carry) on the Futures Trading Adviser(s) business of investment advice Investment Adviser(s) Licence The Capital Markets Services Licence Futures Trading Adviser(s) Licence (CMSL*) for carrying on the business of investment advice Investment Representative(s) Representatives of person(s) of a Capital Markets and Services Representative’s Futures Trading Adviser’s Licence (CMSRL**) who carries(carry) on Representative(s) the business of investment advice Investment Representative(s) The Capital Markets Services Licence Representatives Licence (CMSRL*) for carrying on the business of investment Futures Trading Adviser’s advice Representative(s) Licence Futures Industry Act 1993/FIA/FIA Capital Markets and Services Act 1993 2007/CMSA/CMSA 2007 (CMSA) Securities Industry Act Capital Markets and Services Act 1983/SIA/SIA 1983 2007/CMSA/CMSA 2007 (CMSA) * CMSL may be used throughout the Study Guide in place of Capital Markets and Services Licence ** CMSRL may be used throughout the Study Guide in place of Capital Markets and Services Representative’s Licence 3. Introduction (a) Study Guide Outline, Page iii: To amend Topic 10: Licensing as follows: Topic 10: Licensing - The Licensing Handbook 3
  4. 4. 4. Topic 1: Overview of the Malaysian Stock Markets (a) Topic Objectives, Page 1-1: Bullet 1 To replace Securities Commission Act 1993 (SCA) with Capital Markets and Services Act 2007 (CMSA) (b) Subtopic 1.1 What are Securities, Page 1-2 Activity 1 Paragraph 1, to replace s.2 of the Securities Commission Act 1993 (SCA) with s.2 of the Capital Markets and Services Act 2007 (CMSA) (c) Subtopic 1.3 What is a Stock Exchange, Page 1-3 Paragraph 2, to replace s. 9B with s.11 (d) Subtopic 1.3 What is a Stock Exchange, Malaysian Exchange of Securities Dealing and Automated Quotation Berhad (MESDAQ), Page 1-3 Paragraph 1, to retain the SIA Paragraph 2 To amend MESDAQ is designed as an “incubator” exchange …to regulate its participants and monitor market activities. as follows:- MESDAQ is designed as an “incubator” exchange in respect of the development of Malaysian capital markets, with the exchange practicing full disclosure based regulation and acting as a frontline regulator. It has statutory responsibilities to regulate its participants and monitor market activities. (e) Subtopic 4.3 Intermediaries – Structure of Stockbroking Companies, Page 1-15 Paragraph 3, to replace s.18(1)(a). with s.61 4
  5. 5. (f) Suggested Answers to Activities, Page 1-18: Activity 1 Paragraph 1, to replace s.2 of the Securities Commission Act 1993 (SCA) with s.2 of the Capital Markets and Services Act 2007 (CMSA) 5. Topic 2: Regulation of the Securities Industry (a) Subtopic Overview, Topic Objectives, Page 2-2: To delete Bullet 21 to 23 (b) Subtopic 1.4 Securities Industry Law, Page 2-6: Figure 1(2) Licensing, to be replaced with the following tables: SC CMSA One Capital Markets Licence for: - dealing in securities - trading in futures contracts - fund management - advising on corporate finance - investment advice - financial planning (c) Subtopic 1.4 Securities Industry Law, Page 2-8: To add the following paragraph after The Approach to Regulation of Stock Markets in Malaysia: 5
  6. 6. Capital Markets and Services Act 2007 (CMSA) On 28 September 2007, the Capital Markets and Services Act (CMSA) came into effect and repealed the Securities Industry Act 1983 (SIA) and the Futures Industry Act 1993 (FIA). The CMSA accords greater protection to investors by: • enhancing the SC’s power to take civil action and administrative actions, • allowing the SC to recover three times the amount of losses through civil action for a wider range of market misconduct including market manipulation, • requiring application monies of sophisticated investors to be held on trust in fund raising exercises, • enhancing the standards of trustees for debenture holders, and • extending investor protection provisions to clients of financial institutions. A key CMSA measure benefiting capital market intermediaries is the introduction of the single licensing regime. Under the single licensing regime, a capital market intermediary will only need one licence to carry on the business in any one or more regulated activity. (d) Subtopic 1.4 Merit-based Regulation, Page 2-8: Paragraph 2, to replace s.32(4) of the SIA with s.212(4) of the CMSA (e) Subtopic 1.4 Development of Securities Industry Development Centre (SIDC) as a Premier Capital Market Education Centre, Page 2-11: Heading To amend Securities Industry Development Centre to Securities Industry Development Corporation Paragraph 1 and 2 to be deleted and replaced with the following: The Securities Industry Development Corporation (SIDC), incorporated in March 2007, is the leading capital markets education, training and information resource provider in ASEAN. 6
  7. 7. Formerly the training and education arm of the Securities Commission established in July 1994, it was known as the Securities Industry Development Centre. The new SIDC’s objective remains to create investor awareness; raise professional standards; and enhance skills of Malaysian capital market participants as well as training and developing Malaysian and emerging market regulators. (f) Subtopic 2.2 Bursa Malaysia Securities Berhad, Participantship of Bursa Malaysia Securities Berhad, Page 2-13: Paragraph 1 To amend The participating organisation shall at all times satisfy the financial requirements …, in the case of universal brokers (executive director dealing, operations and compliance)(see Rule 302.1). as follows:- The participating organisation shall at all times satisfy the financial requirements set by the Rules of Bursa Malaysia Securities Berhad, have at least two Heads (Head of Dealing and Head of Operations) or three, in the case of universal brokers (Head of Dealing, Head of Operations and Head of Compliance)(see Rule 302.1). (g) Subtopic 2.2 Bursa Malaysia Securities Berhad, Accounts, Reports and Supply of Information by Participants, Page 2-17: Paragraph 2 Bullet 3, to delete executive-director operations and replace with head of operations (h) Suggested Answers to Activities, Page 2-29 to 2-30: Activity 5 To replace s.127 with s.378 To replace s.38 with s.90 To replace s.83B with s.141(3) To replace s.11B with s.30 To replace s.28 with s.80 To replace s.121A. with s.366 7
  8. 8. 6. Topic 3: Business Structures (a) Subtopic 1.4 Collective Investment Vehicles, Unit Trusts, Page 3-3: Paragraph 3 To replace the Securities Commission Act 1993 (SCA) with the Capital Markets Services Act 2001 (CMSA) (b) Subtopic 1.4 Collective Investment Vehicles, Property Trusts/Real Estate Investment Trusts (REITs), Page 3-3 to Page 3-4: Heading, to delete Property Trusts/ Paragraph 1, to delete a property trust/ Paragraph 2 To delete property trust funds/ To delete property trust industry and replace with REIT industry Paragraph 3, to replace all references to property trusts with REITs (c) Subtopic 4.1 Directors, Page 3-14: Paragraph 1 To amend add unless he is appointed or reappointed in accordance to s.129(6) of the CA. after or a subsidiary of a public company (d) Subtopic 4.6 Prohibitions, Page 3-18 to 3-19: Paragraph 2 Bullet 2, to be deleted Bullet 3, to be deleted Bullet 4, to delete which will be material and adverse to the company Bullet 6, to amend Property transactions involving directors which are substantial … and the further exceptions to this general rule in s.132F. as follows:- 8
  9. 9. Property transactions involving directors which are substantial, where such a transaction (for the buying or selling of property that is not a cash asset) can only be entered into if the company has given approval in a general meeting. See s.132E and the further exceptions to this general rule in s.132F Bullet 7-to delete (e) Subtopic 4.7 Corporate Governance, Page 3-19 to 3-20: Paragraph 2 Bullet 1 – to replace Principles - Part 1 with the following:- Principles - Part 1 sets out broad principles of good corporate governance for Malaysia. The objective of the principles is to allow companies flexibility in applying the principles according to the varying circumstances of individual companies. Companies will be required by the Listing Requirements of Bursa Malaysia to include in their narrative statements, have applied the relevant principles in the annual report. This is to secure sufficient disclosure so that investors and others can assess companies’ performance and governance practices, and respond in an informed way. Bullet 2, to replace Best Practices in corporate governance - Part 2 with the following:- Best Practices in corporate governance - Part 2 sets out best practices for companies. It identifies a set of guidelines or practices intended to assist companies in designing their approach to corporate governance. While compliance with best practices is voluntary, companies are required as a provision of the Listing Requirements of Bursa Malaysia to state in their annual reports, the extent to which they have complied with the best practices set out in Part 2 and explain the circumstances justifying departure from such best practices. To add an additional Bullet 3 as follows: - Exhortations to other participants - Part 3 are not addressed to listed companies but to investors and auditors to enhance their role in corporate governance. These principles are voluntary. (f) Subtopic 5.1 Management Structure, Executive Director Dealing, Page 3-21: Heading To amend Executive Director Dealing to Head of Dealing 9
  10. 10. Paragraph 1 To amend A person can only be Executive Director Dealing and remain as one if he holds a valid dealer’s representative licence issued by the SC under the SIA and continue to an executive director of the participating organisation. as set out below:- A person can only be Head of Dealing and remain as one if he holds a valid Capital Markets and Services Representative’s Licence (CMSRL) for carrying on the business of dealing in securities issued by the SC under the CMSA. (g) Subtopic 5.1 Management Structure, Prohibited Conduct, Page 3-21: Paragraph 1 To replace Division 1 Part IX of the SIA with Division 1 Part V of the CMSA (h) Subtopic 5.1 Management Structure, Audit, Page 3-22: Paragraph 1 To replace s.43 with s. 108 T delete Read s. 43(4) and identify the parties for which accounts must be kept by the dealer. Paragraph 2 To replace s.44 with s. 111 (i) Subtopic 5.4 Directors, Executive Directors, Page 3-25 to Page 3-26: Heading To amend 5.4 Directors with 5.4 Heads and delete Executive Directors Paragraph 1 To replace A participating organisation shall have at least two executive directors … as Bursa Malaysia Securities Berhad thinks fit. with the following:- 10
  11. 11. A participating organisation shall in the case of a Non-universal Broker have at least two (2) heads one of whom shall be the head of dealing responsible for the activities relating to dealing in securities and the other as Head of Operations and in the case of a Universal Broker have at least three (3) heads namely the Head of Dealing, the Head of Operations and the Head of Compliance. If at any time, the minimum number of Heads falls below the prescribed numbers, Bursa Malaysia Securities Berhad may allow the participating organisation to continue carrying on the business of dealing in securities for such period not exceeding three (3) months. Paragraph 2 and Bullet 1 to 5 To delete the entire paragraph 2 and bullets and replace with the following:- Please refer to the Rules of Bursa Malaysia Securities Berhad, the Licensing Handbook and the CMSA for the requirements to be appointed as a Head of a Participating Organisation. Paragraph 3 To delete paragraph 3 and replace with the following:- An individual holding the position as head of a participating organisation must do so on a full-time basis and shall not be engaged in other businesses or hold shares in, or be a director of a company without the prior approval of Bursa Malaysia Securities Berhad. Paragraph 4 To replace executive-director of operations with head of operations Paragraph 5 To replace Any director of operations with Any heads of participating organisations To delete from his directorship (j) Subtopic 5.5 Compliance Officer, Page 3-26 to 3-27 Paragraph 2 To amend Where there is a total vacancy …(Rule 309.5 of the Rules of Bursa Malaysia Securities Berhad). as follows:- 11
  12. 12. Where there is a total vacancy in the office of the compliance officer, the function of the compliance officer shall be temporarily assumed by any of the officers who is carrying out the compliance functions for the Universal Broker, Investment bank or Non-Universal Broker, as the case may be, or in the absence thereof, the Head of the Internal Audit (Rule 309.5 of the Rules of Bursa Malaysia Securities Berhad). Paragraph 3 To delete and the executive-director operations (k) Subtopic 6 In Summary, Page 3-28 Paragraph 2, to amend directors to heads of operations 7. Topic 4: Capital Raising on the Primary Market (a) Subtopic 1.3 Issues Guidelines and the Listing Requirements of Bursa Malaysia Securities Berhad, The Role of the Securities Commission, Page 4-4 Paragraph 1 To replace s. 32 of the Securities Commission Act 1993 (SCA) with s. 212 of the Capital Markets Services Act 2007 (CMSA) and s.32(2) of the SCA with s. 212(2) of the CMSA Paragraph 2 To delete In line with the requirements of the SCA, (b) Subtopic 1.3 Issues Guidelines and the Listing Requirements of Bursa Malaysia Securities Berhad, Decision on Proposals Page 4-5 Paragraph 1 Bullet 1, to add subject to such terms and conditions as it deems fit after the proposal Paragraph 4 To replace s.32(7) of the SCA with s.212(7) of the CMSA 12
  13. 13. (c) Subtopic 1.3 Issues Guidelines and the Listing Requirements of Bursa Malaysia Securities Berhad, Failure to Comply, Page 4-6 Bullet 7 To replace SCA or Securities Industry Act 1983 (SIA) with CMSA (d) Subtopic 1.3 Issues Guidelines and the Listing Requirements of Bursa Malaysia Securities Berhad, What Are the Listing Requirements of Bursa Malaysia Securities Berhad, Page 4-6: Paragraph 1 To replace the relevant provisions of the SCA with the relevant provisions of the CMSA (e) Subtopic 1.4 The Adviser, Role of the Advisor, Page 4-10; Paragraph 3 To replace s.32B of the SCA with s. 214 of the CMSA (f) Subtopic 1.4 The Adviser, Operations of the Advisory Activities in a Participating Organisation, Page 4-11; Paragraph 2 To delete Bullet 3 (g) Subtopic 1.5 Preparing the Prospectus, Page 4-11 to 4-12; Paragraph 1 To replace references to SCA throughout this paragraph with CMSA To replace s.46 with s.237 To replace s.49 with s.240 To replace s. 50(6) with s. 241(6) Paragraph 3 To replace references to Division 3 of the SCA throughout this paragraph with Division 3 of Part VI of the CMSA To replace s. 41 of the SCA with s.232 of the CMSA 13
  14. 14. (h) Subtopic 1.5 Preparing the Prospectus, Content, Page 4-12 Paragraph 1 To replace with s. 44 of the SCA with s.235 of the CMSA (i) Subtopic 1.5 Preparing the Prospectus, Registration, Page 4-12 Paragraph 1 Bullet 1 - to replace s.42(2)(a) with s.233(2)(a) Bullet 2 - to delete the word `true’ and to replace s.53(1) with s.244(1) and s.42(2)(b) with s.233(2)(b) Bullet 3 - to delete the word `true’ and to replace s. 42(2)(c) with s.233(2)(c) Bullet 4 - to replace s.42(2)(d) with s.233(2)(d) Paragraph 2 To replace s.42 of the SCA with s.233 of the CMSA Bullet 1 - to replace the SCA with the CMSA Paragraph 3 To replace s.43 of the SCA with s.234 of the CMSA Paragraph 4 To replace s.53(1) of the SCA with s.244(1) of the CMSA (j) Subtopic 1.5, Preparing the Prospectus, Liability, Page 4-13 Paragraph 1 To replace the requirements of the SCA with the requirements of the CMSA To replace s.55 of the SCA with s.246 of the CMSA Paragraph 2 To replace the SCA may also with the CMSA may also To replace s.58 of the SCA with s.249 of the CMSA To replace s.153 of the SCA with s.357 of the CMSA 14
  15. 15. (k) Subtopic 1.5, Preparing the Prospectus, Civil Remedy, Page 4-13 Paragraph 1 To replace the SCA also provides for with the CMSA also provides for To replace all references to s.57 throughout this paragraph with s.248 To replace s.155 of the SCA with s.358 of the CMSA Paragraph 2 To replace under the SCA with under the CMSA To replace s.54 with s.245 Bullet 1 - to replace Division 3 of the SCA with Division 3 of Part VI of the CMSA (l) Subtopic 1.5, Preparing the Prospectus, Restriction on Advertising, Page 4-13 Paragraph 1 and 2 To replace The SCA under s.50 with The CMSA under s.241 To replace all references to s.50 throughout this paragraph with s.241 (m) Subtopic 1.5, Preparing the Prospectus, Defence, Page 4-14 Paragraph 1 To replace The SCA has provided for with The CMSA has provided for To replace s.59 of the SCA with s.250 of the CMSA To replace s.55 with s.246 To replace s.57 with s.248 Paragraph 2 To replace ss.60-63 of the SCA with ss.251-254 of the CMSA 15
  16. 16. 8. Topic 5: Trading on the Secondary Market (a) Subtopic 2 The Trading System, Page 5-5 Paragraph 6 To add now set out under s. 11 of the Capital Markets Services Act 2007 (CMSA) after s. 9B of the Securities Industry Act 1983 (SIA) To add now set out under s. 7 of the CMSA after s. 7(1) of the SIA 9. Topic 8: Relationship Between Stockbroking Company and Client (a) Subtopic 2.1 Principal and Agent, Instructions, Pages 8-5 and 8-6 Paragraph 1, Bullet 1 To replace s. 43 of the SIA with s. 108 of the CMSA Paragraph 3 To replace s. 92 of the SIA with s. 93 of the CMSA Paragraph 4 To replace s. 40(7) of the SIA with s. 97(5) of the CMSA (b) Subtopic 2.2 Securities Industry Act 1983, Page 8-6 Bullet 1, to replace S. 39 with S. 91 Bullet 2, to replace S.40 with S. 97 Bullet 3, to replace S. 40A with S. 92 (c) Subtopic 2.3 Rules of Bursa Malaysia Securities Berhad, Page 8-7 Paragraph 5 To replace S. 11 with S. 354 (d) Subtopic 3.2 The Contract Note, Page 8-9 Paragraph 2 To amend s. 38 with s. 90 To delete Activity 1 16
  17. 17. (e) Subtopic 3.3 Defaults, Page 8-10 To renumber Activity 2 as Activity 1 (f) Subtopic 5.3 Issue Contract Note, Page 8-13 Paragraph 1 To amend s. 38 with s. 90 (g) Subtopic 5.4 Not to Compete with Client, Page 8-13 Paragraph 3 To amend s. 92 with s. 93 (h) Subtopic 5.5 Inform the Client When Acting as Principal, Page 8-13 to 8-14 Paragraph 1 and 2 To amend s.40(7) with s. 97(5) To amend s.40 with s. 97 Paragraph 3 To amend s.30 with s. 83 (i) Subtopic 5.6 Stockbroking Company Employee and Director Share Dealing Restrictions, Page 8-14 Paragraph 2 To amend s.30 with s. 83 (j) Subtopic 5.7 Due Care and Diligence, Page 8-14 Paragraph 3 To amend s.40A with s. 92 17
  18. 18. (k) Subtopic 5.8 Maintain Separate Client Accounts, Page 8-15 Paragraph 1 To amend (ss.44 and 44A) with (ss. 111 and 112) To delete Activity 3 and the content (l) Subtopic 7 Client’s Rights, Claims for Compensation Fund, Page 8-20 Paragraph 1 To amend s.61 with s. 141 To amend s. 72 with s. 152 (m) Subtopic 8 Keeping of Records, Page 8-21 Paragraph 1 To amend s.43 with s. 108 To delete Activity 4 and the content (n) Suggested Answers to Activities, Page 8-23 to 8-25 To delete Activity 1 and the content To renumber Activity 2 as Activity 1 To delete Activity 3 and Activity 4 and the content 10. Topic 9: Negligent Misstatement (a) Overview, Topic Objectives, Page 9-1 Bullet 4 To replace an investment adviser with a licensed person (b) Subtopic 2.1 Civil Liability Imposed by Statute, Page 9-6 Paragraph 1 To replace advisers with licensed persons or any other person 18
  19. 19. (c) Subtopic 2.2 Securities Industry Act 1983, Page 9-6 Paragraph 1 Bullet 1, to replace s. 86 with s. 177 Bullet 2, to replace s. 87 with s. 178 Bullet 3, to replace s. 87A with s. 179 Bullet 4, to replace s. 88A with s. 199 and s.86,87 or 87A with ss. 177,178 or 179 Bullet 5, to replace s. 88B with s. 182 and s.86,87 or 87A with ss. 177,178 or 179 Paragraph 2 To replace If a person suffered a loss or damage …all the elements of the tort of negligent misstatement with the following:- If a person suffered a loss or damage as a result of behaviour that would constitute an offence under s.177, 178 or 179, that person could bring an action for compensation under s.199, whether or not the other person has been charged, or whether or not a contravention has been proved. Paragraph 3 To replace advisers with licensed persons or any other person (d) Subtopic 2.4 Reasonable Basis and “Know Your Client” Rule, Page 9-7 Paragraph 1 To replace SS. 39 and 40A with SS. 91 and 92 To replace all references to an adviser with a licensed person To replace all references to the adviser with the licensed person Paragraph 2 To replace the entire paragraph with the following: Note that a recommendation can be made expressly or by implication 19
  20. 20. (e) Subtopic 2.4 Reasonable Basis and “Know Your Client” Rule, Liability, Page 9-7 Paragraph 1 To replace an adviser with a licensed person Bullet 1, to replace all references to adviser with licensed person Paragraph 2 To replace an adviser with a licensed person (f) Subtopic 2.4 Reasonable Basis and “Know Your Client” Rule, Defences, Page 9-7 to page 9-8 Paragraph 1 To replace the entire paragraph with the following:- It is a defence to a prosecution for contravention of s.91: • if the person making the recommendation did not know, and could not reasonably have been expected to know, of the interest when making the recommendation (s.91(2)) • if that person was merely a co-director and was not involved in the making of that recommendation (s.91(3)(c)) It is a defence to a contravention of s.91 and 92: • if a reasonable person in the client's circumstances could have been expected to have done the act (or omission) in reliance on the recommendation even if the licensed person had complied with s.92 (g) In Summary, Page 9-9 Paragraph 1&3 To replace an adviser with a licensed person 11. Topic 10: Licensing This entire Topic 10 to be deleted. Please refer to the Module 6 Study Outline for coverage of the Licensing Handbook for the purpose of this Module. 20
  21. 21. 12. Topic 11: Securities Offences (a) Contents Page Subtopic 1 To amend Section 84 to Section 175 To amend Section 85 to Section 176 To amend Section 86 to Section 177 To amend Section 87 to Section 178 To amend Section 87A to Section 179 To amend Section 88 to Section 181 (b) Subtopic 1.1 Short Selling, Page 11-3 and Page 11-4 Paragraph 3, to replace Section 41 with Section 98 Paragraph 4 To replace Section 41(4) with Section 98(4) To add new Bullet 5 as follows:- • The making or trading of futures contract or anything done in relation thereto. (c) Subtopic 1.1 Short Selling, Penalty, Page 11-4 Paragraph 1, to replace RM1 million with RM5 million (d) Subtopic 1.2 Section 84 – False Trading and Market-rigging Transactions, Page 11-5 Heading , to amend Section 84 to Section 175 Paragraph 1, to replace S. 84(3) with S. 175(1) Paragraph 2, to replace S.84(3) with S.175(3) Paragraph 3, to replace S.84(3) with S.175(4) Paragraph 5, to replace S.84(2) with S.175(2) 21
  22. 22. (e) Subtopic 1.3 Section 85 – Stock Market Manipulation, Page 11-6 Heading. to amend Subtopic 1.3 Section 85 to Subtopic 1.3 Section 176 Paragraph 1, to replace S. 85(1) with S. 176(1) (f) Subtopic 1.4 Section 86 – False or Misleading Statements in Relations to Securities, Page 11-6 Heading, to amend Subtopic 1.4 Section 86 to Subtopic 1.4 Section 177 (g) Subtopic 1.5 Section 87 – Fraudulently Inducing Persons to Deal in Securities, Page 11-6 to 11-7 Heading, to amend Subtopic 1.5 Section 87 to Subtopic 1.5 Section 178 Paragraph 5, to replace S. 87 with S. 178 (h) Subtopic 1.6 Section 87A –Use of Manipulative and Deceptive Devices, Page 11-6 to 11-7 Heading, to amend Subtopic 1.6 Section 87A to Subtopic 1.6 Section 179 Paragraph 1 Bullet 2 -to delete `does not’ and `or’ (i) Subtopic 1.6 Section 87A –Use of Manipulative and Deceptive Devices, Recent Cases, Page 11-7 Paragraph 1 s. 87A of the SIA to remain unamended and to add (now s.179 of the CMSA) after s. 87A of the SIA 22
  23. 23. (j) Subtopic 1.7 Section 88 –Dissemination of Information About Illegal Transactions, Page 11-8 Heading, to replace Section 88 with Section 181 Paragraph 1, to replace ss.84, 85, 86 and 87A with ss.175, 176, 177 and 179 (k) Subtopic 1.8 Insider Trading, SIA Provisions, Page 11-9 Heading To replace SIA Provisions with SIA (now CMSA) Provisions Paragraph 1 To retain references to SIA Paragraph 2 To retain reference to SIA and to add after Division 2 Part 9 of the SIA the following: (now Part V Subdivision 2 of the CMSA) Paragraph 3 To add of the SIA after ss.89 an 90 To add (now ss.183 and 200 of the CMSA) after (in ss.89 and 90) (l) Subtopic 1.8 Insider Trading, Insiders, Page 11-9 to 11-10 Paragraph 1 To replace s.89E(1) with s.188(1) Paragraph 2 To replace ss.89G and 89H with ss.190 and 191 Paragraph 4 To replace s.89G(3) with ss.190(3) and 191(3) Bullet 3- to replace was no so with was not so 23
  24. 24. (m) Subtopic 1.8 Insider Trading, Information Generally Available, Page 11-11 Paragraph 1, to replace s.89A with s.184 (n) Subtopic 1.8 Insider Trading, Material Effect on Price or Value of Securities, Page 11-11 Paragraph 1, to replace s.89B) with s.185 (o) Subtopic 1.8 Insider Trading, Reference to “Procure”, Page 11-11 Paragraph 1, to replace s.90A with s.201 (p) Subtopic 1.8 Insider Trading, Exceptions, Page 11-11 Paragraph 1, to replace ss.89I-89N with ss.192-197 (q) Subtopic 1.8 Insider Trading, Defence, Page 11-11 Paragraph 1, to replace s.89O with s.198 (r) Subtopic 1.8 Insider Trading, Recent Cases, Page 11-12 Paragraph 1 To amend s.89 with s.89 of the SIA (now s.183 of the CMSA) To retain s.90 of the SIA To add (now s.200 of the CMSA) after s.90 of the SIA (s) Subtopic 1.9 Penalties for Contravention, Criminal Sanctions, Page 11-12 Paragraph 1, to amend ss.88B and 89E(4) with ss.182 and 188(4) Paragraph 2, to amend s.125 with s.374 24
  25. 25. (t) Subtopic 1.9 Penalties for Contravention, Civil Proceedings, Page 11- 13 to 11-14 Paragraph 1 To retain the SIA To amend s.88A to the Act and replace with s.88A to the SIA (now s. 199 of the CMSA) To add (ss. 175, 176,177, 178, 179 and 181 of the CMSA) after ss. 84, 85, 86, 87, 87A and 88 Paragraph 2 To amend s.90 with s.200 of the CMSA To amend ss. 84, 85, 86, 87, 87A, 88 and 89E with ss. 175, 176,177, 178, 179 ,181 and 188 To add new paragraph after paragraph 2 as follows:- S.200(2)(a) of the CMSA allows the SC to recover an amount up to three times the pecuniary gain or loss avoided by a person who has contravened ss. 175, 176,177, 178, 179 ,181 Paragraph 3 To amend s. 90(1) with s.201(1) To amend s. 89E with s.188 Paragraph 5 To amend SS.90A(5) and 90A(6) with SS.201(5) and 201(6) Bullet 2-to amend RM500,000 with RM1 million (u) Subtopic 2 Other Offences Relating to Dealing, Page 11-14 Bullet 1, to amend s.12(1) with s.58(1) Bullet 2, to amend s.40 with s.97 Bullet 3, to amend s.92 with s.93 25
  26. 26. (v) Subtopic 3 Other Offences Relating to False and Misleading Statements, Page 11-15 Bullet 1, to amend s.22 with s.71 Bullet 2, to amend s.122B with s. 369 Bullet 3, to amend s. 32:s.32B of the SCA with s.212: s.214 of the CMSA Bullet 8, to amend s. 58 of the SCA with s. 249 of the CMSA (w) Subtopic 4.1 Destruction of Documents/Falsification of Records, Page 11-16 Paragraph 1 To replace ss. 122A and 122D of the SIA with ss. 368 and 371 of the CMSA (x) Subtopic 4.2 Failure to Co-operate with the SC, Page 11-16 Paragraph 1 Bullet 2, to amend s.128(3)(a) to s.128(7)(c) Bullet 3, to amend Obstruction or hindrance of the SC in the exercise of its powers: s.36(3)(b) of the SCA and replace with the following:- Obstruction or hindrance of SC’s Investigating Officer SC in carrying out an investigation: s.128(7)(b) of the SCA (y) Subtopic 4.3 Liability of Directors/Employers, Page 11-16 Paragraph 1 To amend s. 122 with s. 367 Paragraph 2 To amend a dealer, fund manager or investment adviser with a holder of a CMSL To amend s.122(3) with s. 367(3) Paragraph 3 To amend s.122C with s.370 26
  27. 27. Paragraph 4 To amend The amendments to the SIA and SCA in 1998 enhance the enforcement powers of the SC and Bursa Malaysia Securities Berhad, the central depository and the recognised clearing house to ensure that the provisions of the laws and rules of these self-regulatory organisations can be effectively enforced as follows:- The amendments to the securities laws enhances the enforcement powers of the SC and Bursa Malaysia Securities Berhad, the central depository and the recognised clearing house to ensure that the provisions of the laws and rules of these organisations can be effectively enforced. To delete The maximum fine that can be imposed on any person is RM1 million. The parties required to comply with the relevant rules have been widened to include advisers. (z) Subtopic 4.3 Liability of Directors/Employers, Other Enforcement Actions, Page 11-17 to 11-19 Paragraph 1 To replace s.100 with s.360 Paragraph 3 To replace Parts IV, V and VII with Parts II, III, VI, VII, X and XII Activity 1 and Suggested Answers to Activities To amend ss. 122A and 58 with ss.368 and 136 13. Topic 12: Take-overs In view of Division 2 of Part VI of the CMSA coming into force in 2008, this Topic 10 is to be retained unamended until further updates from SIDC. 27

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