Recommendation 1 Recommendation 2 Recommendation 3 Recommendation 4

Recommendation 5 Recommendation 6 Recommendation 7 Recommendation 8

Market selection

Recommendation 4

Each market must have clear rules assuring investor protection by safeguarding participants from the financial risks of failed settlement and ensuring that listed companies are required to follow sound policies on corporate governance, transfer of economic benefits and shareholder rights.

1.	Does the depository or the market have securities lending and borrowing schemes in place, and are these open to all market participants and their settlement agents?	No. Although the rules for Securities Borrowing and Lending (SBL) and Regulated Short Selling (RSS) are in place, both actions have been suspended since August 1997. However, under the Malaysian Capital Market Masterplan, there is a recommendation to re-introduce SBL and RSS activities by 2002.
2.	Does the settlement system mark fail trades to market and collect margin from the failing counterparty to protect the innocent counterpart's interest?	Late settlements attract a daily penalty charge – half of which is paid to the disadvantaged Currently, the settlement system does not mark failed trades to market nor does it collect margin. If trades fail due to failure to deliver shares, there will be an automatic buy-in. If failure is due to non-payment, selling out of securities will be effected.
3.	Does the market operate a guarantee fund or have an equivalent procedure to protect against the cost of failed transactions; and which sectors of the market does it cover?	Yes. SCANS assures payment once shares are cleared through its system. In addition, a RM500 million Standby Fund can be drawn down to honour trades in the event of failure of a stockbroking company to settle trades. SCANS is also in the process of setting up a RM100 million Clearing Guarantee Fund which is scheduled to be established in 2001 KLSE also has a Compensation Fund for investors that have suffered losses due to, inter-alia, stockbroking company insolvency, employee misconduct, fraud and defalcation.
4.	Are the stock transfer agents (share registrars) linked electronically to the depository?	Only Malaysian Share Registration Services (MSRS) is electronically linked to MCD. There is no electronic link with other registrars at present. However, all data exchanges are in the form of electronic media such as tapes and diskettes.
5.	Is there a legal maximum time period to complete ownership transfers in the books of the issuer? If so, does market practice adhere to the deadline?	According to the Rules of MCD, MCD is required to ensure same day transfer of shares if the ordinary transfer request is to be keyed into the system by 12.30 p.m. Debiting and crediting of shares arising from trade settlement are executed on T+3 upon completion of MCD's batch run. All participants generally adhere to these requirements.
6.	Are investors entitled to all benefits arising on a security from the point of purchase; and how are any rules enforced?	Yes. Once a CDS account is credited by 0900 on T+3, the investor’s name will appear on the Register of Depositors for entitlements accruing to the security.
7.	Is proxy voting permissible in the market and can such proxies be lodged by post or other remote delivery method?	Yes, proxy voting is possible and the appointment of proxy can be done via post.
8.	Are there binding rules in the market stating the minimum and maximum lapsed time between the announcement and completion of key events, including registration, the calling of shareholder meetings, the payment of dividends or interest, rights issues, tender offers and other voluntary corporate actions?	KLSE Listing Requirements specifically provide for the following in respect of the minimum and maximum lapsed time for the completion of key events: Dividends are to be paid not less than 3 months from the date of declaration or date which approval is obtained in a general meeting; In respect of a rights issue of shares, the listed issuer is to ensure that there is at least 22 clear market days between the book closing date and the last date for acceptance and payment. The period between the making of its announcement of the book closing date for the rights issue and the book closing date must not be less than 12 clear market days; Similarly, the period between the making of its announcement of the book closing date for a bonus issue of securities and the book closing date must not be less than 12 clear market days. The listed issuer is also required to allot and issue securities, despatch notices of allotment and make an application for the quotation of such securities within 10 market days of the book closing date.
9.	Are all voluntary corporate actions advised through a central mechanism assuring consistent information to all investors?	Yes. Corporate announcements are disseminated to the public via a web-based electronic system called KLSE LINK. The KLSE LINK is accessible by the public free of charge.
10.	Is information on corporate actions available electronically, and is the minimum lapsed time for responding to such actions sufficient to enable all domestic and foreign investors to respond in a timely and considered fashion?	Yes. KLSE LINK is an electronic, web-based system. Yes. Corporate action announcements are mostly made after the market is closed for the day.