Disclosure Requirements - Malaysia
Disclosure Category: 1
According to the Securities Industry (Central Depositories) (Exemption) Order 2005 in accordance with the Securities Industry (Central Depositories) Act 1991 ( “SICDA”) and Companies Act 2016, the Government Funding Act 1983 and Loan (Local) Act 1959, the Central Bank of Malaysia Act 2009 and the Financial Services Act 2013, Clearstream Banking S.A. (“CBL”) falls under a legal obligation of disclosure in the case of holdings of Malaysian listed securities and unlisted fixed income securities eligible in the scripless securities depository system (“SSDS”) and of deposits in Malaysian Ringgit (“MYR”).
Consent
In order to comply with the legislation as mentioned above, customers holding Malaysian listed securities or unlisted fixed income securities (SSDS-eligible) or deposits in MYR or entering into transactions in the Malaysian domestic market must consent and are hereby deemed to consent to the required legal disclosure. Such consent includes the appointment of the requestor (for example, the issuer or its agent) as their attorney-in-fact, under power of attorney, to collect from CBL the required information to be disclosed. Customers not willing to give this consent cannot hold such securities/financial instruments nor have such deposits in their accounts with CBL.
Disclosure requirements
Customers are advised that, under local regulations, Bursa Malaysia Depository Sdn. Bhd. (“Bursa Depository” ), the Securities Commission (“SC”), Bursa Malaysia Securities Bhd. (“Bursa Securities”), Bank Negara Malaysia (“BNM”), the issuing company and the registrar of companies (Companies Commission of Malaysia – “CCM”), is entitled to require CBL, through its local custodian, on request and/or on a regular basis, to disclose information or documents relating to the ultimate beneficial owners of the listed securities, unlisted fixed income securities (SSDS-eligible) and/or deposits in MYR held in CBL omnibus and/or segregated accounts maintained with its local custodian.
Background and legal basis
Listed securities
The disclosure for listed securities is mandatory under the Securities Industry (Central Depositories) (Exemption) Order 2005 issued in accordance with Section 62A of the Securities Industry (Central Depositories) Act 1991 (“SICDA”) to Bursa Depository and is applicable to all securities listed on the Malaysian Stock Exchange.
Under Section 56 of the Companies Act 2016, the registrar of companies and the company itself each have a right to request the bare trustee (the nominee whose name appears in the company’s records as the registered shareholder of such shares in trust at the absolute disposal and for the benefit of another) or the end-investor/beneficial owner to disclose the beneficial owners of the holding.
Additionally, CBL’s appointed custodian, as the registered holder, will have to provide the requested information (the identity and holdings of customers holding applicable positions and this may be up to ultimate beneficial owner level) to the issuer/Bursa Depository upon receipt of the information provided to CBL by its customers.
Unlisted fixed income securities (SSDS-eligible)
The monthly disclosure for unlisted fixed income securities (SSDS-eligible) is made in accordance to the Government Funding Act 1983 and Loan (Local) Act 1959 and Section 78(2) of the Central Bank of Malaysia Act 2009 to BNM. Under these regulations, BNM is entitled to require CBL and/or its customers on a monthly basis, the disclosure of any data, information or document related to the positions recorded with the local custodian by CBL. This obligation of disclosure covers, without being limited to, the identity and holdings of customers, as well as the identity of the beneficial owners of such recorded positions.
Deposits in Malaysian Ringgit (MYR)
The monthly disclosure for deposits in Malaysian Ringgit (MYR) is made in accordance to Section 78(2) of the Central Bank of Malaysia Act 2009 to BNM. Under this regulation, CBL is under an obligation to disclose the identity and MYR closing balance of customers.
Sanctions
CBL will not be responsible for any penalties or sanctions or associated costs that could be imposed upon CBL’s safekeeping account with its appointed custodian due to a customer's failure to comply with one or more disclosure requirements. Such penalties, sanctions or associated costs will be automatically passed on to the failing customer. The customer undertakes to hold CBL harmless and to indemnify CBL from any loss, claim, liability or expense asserted against or imposed upon CBL as a result of the customer failure, whatever the failure, to comply with these disclosure requirements
Listed securities
When a participant fails to comply with the disclosure requirements (including, but not limited to, late disclosure) of the Securities Commission for listed securities, Bursa Depository may take one or more of the following actions as appropriate under the Securities Industry (Central Depositories) (Exemption) Order 2005 in accordance with Section 62A of the Securities Industry (Central Depositories) Act 1991 ("SICDA"):
- Prohibiting the maintenance of any Exempt Authorised Nominee (as defined in the Securities Industries (Central Depositories) (Exemption) Order 2005) securities accounts for CBL held by CBL's appointed custodian; and/or
- Prohibiting the maintenance of any Exempt Authorised Nominee (as defined in the Securities Industries (Central Depositories) (Exemption) Order 2005) securities accounts for CBL with any other custodians/local brokers; and/or
- Specifying any or all securities accounts held by CBL's appointed custodian for CBL be suspended for such period as may be specified by Bursa Depository.
In addition to the above, Subsection 25A(3) of the Securities Industry (Central Depositories) Act 1991 provides that any violation of the above is punishable by a fine of up to MYR 3 million, a jail term of up to 10 years or both.
Unlisted fixed income securities (SSDS-eligible)
When a participant fails to comply with the disclosure requirements (including, but not limited to, late disclosure) on unlisted fixed income securities (SSDS-eligible), under the Government Funding Act 1983 and Loan (Local) Act 1959, BNM may take one or more of the following actions as appropriate:
- To fine the participant for an amount not exceeding MYR 10 million; or
- Where relevant, if the disclosure is related to a cash account or a loan account, to fine the participant for an amount not exceeding ten times the balance in such account or outstanding loan amount, whichever is the greater; and/or
- To seek for imprisonment for a term up to fifteen years.
When a participant fails to comply with the disclosure requirements (including, but not limited to, late disclosure) on unlisted fixed income securities (SSDS-eligible), under Section 78(2) of the Central Bank of Malaysia Act 2009, BNM is entitled to fine the relevant person, to which it has requested some information under the aforesaid section, up to a maximum of MYR 1 million.
Deposits in Malaysian Ringgit (MYR)
When a participant fails to comply with the disclosure requirements (including, but not limited to, late disclosure) on deposits in Malaysian Ringgit (MYR), under Section 78(2) of the Central Bank of Malaysia Act 2009, BNM is entitled to fine the relevant person, up to a maximum of MYR 1 million.
Obligation to report threshold crossings
Shareholding of 5% and above
Section 137 of the Companies Act 2016 imposes an obligation on individuals and corporations that have an interest in 5% or more of the voting shares of a Malaysian incorporated public company (whether listed or unlisted) to disclose that interest to the relevant public company and to the CCM.
Note: "Voting shares" means, for the purposes of these disclosure requirements, an issued share to which there is attached a right to vote.
According to Section 136 of the Companies Act 2016, a substantial shareholder is defined as:
- A person who has an interest in one or more voting shares in a company and the number or the aggregate number of such shares is not less than 5% of the total number of all the voting shares included in the company; or
- Being a company the share capital of which is divided into two or more classes of the shares, if the person has an interest in one or more voting shares include in one of those classes and the number or the aggregate number of such shares is not less than 5% of the aggregate number of the total number of all the voting shares included in that class of shares.
On the occasion of a transaction that changes a shareholder's status or interest as a substantial shareholder as defined in Sections 137-139 of the Companies Act 2016, the shareholder must use the appropriate form to notify the subject company (in the original) as follows
- In the case of a company whose shares are quoted on a stock exchange, within three days after the person becomes a substantial shareholder (notwithstanding that the person has ceased to be substantial shareholder before the expiration of the notice period), acquires or disposes of voting shares, ceases to be a substantial shareholder in the company (Form 29-A); or
- In any other case, within five days after the person becomes a substantial shareholder, acquires or disposes of voting shares, ceases to be a substantial shareholder (Form 29-A);
sending copies of the notification, in each case, to the CCM, per Section 141 of the Companies Act 2016 at the following address:
Director
Registration Services Division
Companies Commission of Malaysia
Level 19, Menara SSM@Sentral
No 7, Jalan Stesen Sentral 5
Kuala Lumpur Sentral
50623 Kuala Lumpur
While the holder continues to own 5% or more of the voting shares before entering upon a new transaction, reporting is required for each change or cessation of substantial shareholdings within the time frame described above.
Sanctions
Under Sections 137 (5), 138 (4) and 139 (3) of the Companies Act 2016, the penalty for non-compliance with substantial shareholding disclosure is a fine not exceeding MYR 1 million, upon conviction, and the penalty for continuing the offense is a fine not exceeding MYR 1,000 (one-thousand) for each day of non-compliance after the conviction.
Additionally, under Section 591 of the Companies Acts 2016, it is an offence to make or authorise the making of a statement that a person knows is false or misleading and that person may be liable, upon conviction, to imprisonment for a term not exceeding ten years or to a fine not exceeding MYR 3 million or both.
Obligation to report repurchase agreement (REPO) transactions
Unlisted fixed income securities (SSDS-eligible)
Pursuant to Sections 140 (1), 143 and 144 of the Financial Services Act 2013, BNM has issued the Policy Document on Repurchase Agreement Transactions which imposes an obligation on participants that are licensed banks and licensed investment banks in Malaysia:
- to report their REPO transactions involving unlisted fixed income securities (SSDS-eligible) to the Bursa Malaysia Electronic Trading Platform; and
- to disclose the details of their REPO transactions involving unlisted fixed income securities (SSDS-eligible) in BNM’s Statistical Mart for Analysis and Reporting (STATsmart).
The report of the REPO transactions to the Bursa Malaysia Electronic Trading Platform is to be submitted within 10 minutes of the transaction and must include the information below:
- Details of the underlying securities, such as the name, ISIN and quantity;
- The start date and end date of the REPO transaction;
- The REPO rate;
- The price of the securities; and
- The margin applied by the dealer to the REPO amount.
The disclosure of the details of the REPO transactions to BNM’s STATsmart is to be submitted, using the appropriate disclosure template from BNM, within 21 days after the end of each reporting month.
Sanctions
When a participant fails to comply with the reporting and/or disclosure requirements of REPO transactions on unlisted fixed income securities (SSDS-eligible), under Section 140 (5) of the Financial Services Act 2013, BNM is conferred the power to take one or more of the actions stipulated in 234 (3) of the same Act. This may include, but is not limited to:
- making an order in writing requiring the person in breach:
- to comply with; or
- to do or not to do any act in order to ensure compliance;
- imposing a monetary penalty:
- not exceeding MYR 5 million, in the case of a breach that is committed by a body corporate or unincorporated; or MYR 1 million in the case of a breach that is committed by any individual, as the case may be;
- which shall not exceed three times the gross amount of pecuniary gain made or loss avoided by such person as a result of the breach; or
- which shall not exceed three times the amount of money which is the subject matter of the breach,
whichever is greater for each breach or failure to comply;
- reprimand in writing the person in breach or require the person in breach to issue a public statement in relation to such breach, if it is in the opinion of BNM that such breach is relevant for the information of the general public;
- make an order in writing requiring the person in breach to take such steps as BNM may direct to mitigate the effect of such breach; or
- make an order in writing requiring an authorised person, an operator of a designated payment system, a registered person or a market participant to remedy the breach including making restitution to any other person aggrieved by such breach.
Additionally, under Section 143 (8) of the Financial Services Act 2013, it is an offence to make or authorise the making of a statement that a person knows is false or misleading and that person may be liable, upon conviction, to imprisonment for a term not exceeding eight years or to a fine not exceeding MYR 25 million or both.