Issued by the Kuala Lumpur Stock Exchange

The Kuala Lumpur Stock Exchange (KLSE or Exchange), in its ongoing effort to strengthen the industry, is instituting incisive new measures to further enhance transparency in the stock market.

The new measures will be initiated through changes in the rules, regulations and procedures of the Exchange, its clearing house - the Securities Clearing Automated Network Services Sdn Bhd (SCANS) and the central depository - Malaysian Central Depository Sdn Bhd (MCD). These changes and amendments have been duly approved by the Securities Commission.

These measures, to take effect from September 1, 1998, are detailed in the enclosed attachment. The new measures are targeted to meet two key objectives:

    • To ensure an orderly and fair market in the trading of Malaysian securities.
    • To improve overall market transparency in the Malaysian capital market.

These measures are in line with objectives of the National Economic Recovery Plan (NERP) to restore market confidence. It is also consistent with the KLSE's statutory duty as outlined in Section 9B of the Securities Industry Act 1983 (SIA) to ensure an orderly and fair market in the securities that are traded through its facilities. In upholding this duty, the KLSE is also obligated to curb and prevent activities which may amount to assisting in the establishing, operating or maintaining a stockmarket that is not the stockmarket of the Exchange as prohibited under Section 7 (1) of the SIA.

In implementing these measures, stockbroking companies are required to take the necessary steps to ensure that they are not assisting any persons to create another market for Malaysian securities. The relevant rules and procedures of the central depository, MCD, are also amended accordingly to reinforce the achievement of this objective without impinging on the rights of depositors as shareholders.

KLSE's Executive Chairman Dato' Mohd Azlan Hashim said the challenging demands in the present environment necessitate the swift implementation of these measures.

"We understand industry participants might be concerned at the relatively short time in which these measures are implemented.

"We realise, however, that industry participants are faced with similar urgent circumstances -- circumstances that can be addressed and eventually overcome by these measures. These measures, which have been set out to benefit all parties affected, should be supported and endorsed by all industry participants -- investors, stockbrokers, public-listed companies and relevant authorities -- in order for them to achieve the desired impact " he said.

The technical infrastructure and operational procedures to undertake the implementation of the new measures by the KLSE, SCANS and MCD have been developed and completed.

Detailed regulations and instructions on the new measures have been sent to all stockbroking companies and relevant industry participants whilst briefings on the new measures to these groups have been organised to commence from Tuesday, September 1, 1998.

KLSE has also set up the KLSE Helpline for general enquiries on the new measures beginning Tuesday, September 1, 1998 as follows:

Tel: 03-468 0755, 03-469 4363 & 03-206 3518
Time: 9:00 a.m. to 6:00 p.m. (Weekdays)
9:00 a.m. to 1:00 p.m. (Saturdays)

For enquiries specific to MCD and the CDS accounts, the number is:
Tel: 03-206 2099
Time: 9:00 a.m. to 6:00 p.m. (Weekdays)
9:00 a.m. to 1:00 p.m. (Saturdays)

All lines will also be operational between 1pm to 2pm within the stated schedule.

In total, the measures implemented are intended to benefit the industry, including retail and institutional investors, stockbroking companies and public listed companies. It will also assist the relevant regulatory authorities in the discharge of their responsibilities.

Among the many benefits that the measures seek to bring about are enhanced transparency in share trading, enhanced investor protection, cost efficiency and overall greater efficiency in the system.

In improving transparency in share trading, the measures seek to enhance the 'know-your-client rule' by identifying the particulars of counterparties to trades. In addition, all off-market transactions must be done as direct business cleared and settled through SCANS to ensure greater accountability and disclosure without compromising client and investor confidentiality.

In expanding one of KLSE's key objectives of investor protection, the new measures reduce any possible adverse impact on our market from improper dealings that may be conducted off-market.

The new measures will further move MCD towards reaching its long-term objective of full immobilisation of shares traded on the KLSE, in line with internationally accepted standards.

The new measures are also part of the effort to fully develop MCD as a central depository that will encourage the broadest direct and indirect industry participation possible, ultimately resulting in cost efficiency whilst improving overall system efficiency.

Dato' Mohd Azlan Hashim said in addition to contributing to market reform and building confidence, the measures will lay a blueprint to encourage the development of more measures for a progressive stockmarket.

"These measures are necessary and needed to be implemented now, without delay, whilst we are on the road to recovery. Ultimately, these measures will form part of an overall reform structure to rebuild a market that is well-regulated, efficient, cost-effective and secure for local and foreign, institutional and retail investors alike," he said.


Effective 1st September 1998

1. Trading of Listed Securities

    • All dealings in securities listed on the Exchange must be effected only through the KLSE or through a stock exchange recognised by the KLSE.
    • Except as otherwise permitted, all dealings in KLSE securities must be effected only through the KLSE's trading system.
    • A stockbroking company (SBC) shall not deal in securities on behalf of a client if it has reason to believe that the transaction is intended to facilitate the dealing in securities or dealing in interest in securities on a stock exchange not recognised by the KLSE.

2. New Disclosure Requirements

    • Know your client rule - SBCs must take all reasonable steps to obtain all essential particulars and information of their clients.
    • A client, in dealing in securities listed on the KLSE on another person's behalf, must disclose the identity of that person to the SBC.
    • For the opening of new nominee accounts, the account opening forms shall state the full name and other particulars of the beneficiary.
    • For all existing nominee accounts, the name and other particulars of the beneficiary must also be stated in full.
    • Each CDS account operated by a nominee can only have one (1) beneficiary. In respect of nominee accounts which are presently shared by more than one (1) beneficiary, new accounts must be opened to comply with the new requirements.
    • For pledged security accounts, nominees must state "PLEDGED SEC A/C" followed by the full name of the beneficiary.

3. Off-Market Business and its Clearing and Settlement

    • SBCs are permitted to engage in off-market dealing only in the form of direct business (i.e. crossings and married deals).
    • All direct business must be cleared and settled through SCANS, the recognised clearing house, in accordance with the principles of the Fixed Delivery and Settlement System (e.g. T+5 settlement system, etc.)
    • A clearing fee of 0.05% of the value of the contract (subject to a minimum of RM25 and a maximum of RM250) will be imposed for all direct business.
    • The commission chargeable by SBCs on direct business is negotiable.

4. New Issues of securities

    • All new issues of securities by public listed companies (PLCS) must be made 'by way of crediting the securities into the CDS accounts of the securities holders These new securities may arise from rights issues, bonus issues, private placements, special issues, ESOS, conversion of debt securities / warrants / TSRs, share swaps, or any other corporate activities.
    • PLCs are not permitted to issue certificates to the securities holders in respect of any new issue of securities.

5. Mandatory Deposit

    • Shareholders of companies which have been approved for listing on the KLSE must deposit their share certificates with MCD within the Prescribed Period.
    • Holders of share certificates of companies currently listed on the KLSE must deposit their share certificates with MCD.

6. Withdrawal

    • With immediate effect, all withdrawals of securities will be prohibited, except for the circumstances allowed in the notice issued by the KLSE (e.g. to facilitate share buy back; conversion of debt securities; the process of company restructuring; rectification of errors, etc.)
    • This prohibition is pursuant to the directive from the KLSE in exercising its powers under Section 24 of the Securities Industry (Central Depositories) Act 1991.

7. Ordinary Transfer

    • The "Reason for Ordinary Transfer" column must be completed in all Transfer Request Forms.
    • For details of the approved reasons for transfer, please refer to your SBC, or contact the KLSE Helpline.

8. Express Transfer

    • The "Reason for Express Transfer" column must be completed in all Express Transfer Request Forms.
    • For details of the approved reasons for transfer, please refer to your SBC, or contact the KLSE Helpline.

Effective 8th September, 1998
1. Ordinary Transfer

    • All ordinary transfer requests must state reasons and be supported by relevant documents.

2. Express Transfer

    • The express transfer facility, which is an online transfer facility, will be suspended.

Kuala Lumpur Stock Exchange
31 August 1998


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