Local & Global News

Bursa: Business Rules

Revamped to Strengthen
Standards of Business Conduct
and Efficiency for Brokers
SC: SIDREC to Start Operations
SC: Direct Retail Participation
in Corporate Bonds


Anti-Money Laundering News

5-Year Jail Term and RM1
Million Fines for Money
Laundering
Father and 2 Daughters to
Enter Defence Against Money
Laundering Charges


Islamic Finance News

Indonesia Plans to Offer Tax
Incentives for Islamic Finance




Ethics & Governance News

Former Directors Jailed and Fined for Stock Market Manipulation
SC: High Court Allows the SC's Appeal in MEMS Technology Case
SFC: Former Bank Employee Banned for Forgery
SFC: Community Services Sentence for False Trading
SEC: Alcatel-Lucent Charged with FCPA Violations
SEC: Former Carter's Executive Charged With Fraud and Insider Trading
FSA: Investment Banker, Wife and Friend in Insider Dealing Case
FSA: RBS and NatWest Fined for Poor Complaint Handling



PATRON

TAN SRI AZMAN HASHIM


ADVISOR
Maheswari Kanniah
~ RHB Investment Bank

CHIEF EDITORS
Rueben Panchadcharam
~ AmInvestment Bank

Suzana Ahmad
~ MIMB Investment Bank

CONTRIBUTORS

Wan Hashimah Ahmad Merican
~ Affin Investment Bank

Teow Leong Wah
~ Alliance Investment Bank

Geetha Sivapathasundram
~ CIMB Investment Bank

Jessie Peter
~ ECM Libra Investment Bank

Chen Mun Peng
~ HwangDBS Investment Bank

Khaw Lin Lin
~ Hong Leong Investment Bank

Zainap bt Abdul Majid
~ Kenanga Investment Bank

Zainal Adnan bin Zakaria
~ Maybank Investment Bank

Bakri Jamaluddin
~ MIDF Amanah Investment Bank

Chin Pik Yuen
~ OSK Investment Bank

Abdul Jalil bin Marzuki
~ Public Investment Bank

Disclaimer & Confidentiality Statement
The information depicted herein has been obtained from sources believed to be reliable but have not been
independently verified and consequently no representation or warranty is made to their accuracy, correctness or
completeness, and they should not be relied upon as such. Malaysian Investment Banking Association (MIBA)
disclaims all liability for any direct or consequential loss arising out of or in respect of the use of this newsletter
or its contents.

This newsletter is of a general nature and is intended to update on compliance related issues as part of MIBAs
ongoing training and education objective and to promote effective compliance culture. It should not be viewed
as a substitute for professional advice on any subject covered herein.


Issue 2/2011
2 February 2011


2011 2011 2011 2011

Issue 2/2011
2 February 2011

Page 1

Local & Global News

Bursa: Business Rules Revamped to Strengthen Standards of Business Conduct and Efficiency
for Brokers

Bursa Malaysia has on 3 January 2011, issued a public consultation paper seeking feedback on the proposed
amendments to the Rules of Bursa Malaysia Securities Berhad (Rules) which are aimed at facilitating
greater effectiveness for market regulation and greater efficiency in the business conduct of securities
brokers, also known as Participating Organisations (POs).

The significant changes in the proposal are as follows:

strengthening of the POs governance framework,
enhancing framework for self-regulation by the POs and key personnel of POs registered with the
Exchange (registered persons);
clarifying the powers of the Exchange to regulate the market, the POs and registered persons;
enhancing investor protection framework through enhancements in the framework for risk
management, conflicts management and the standard of conduct of POs and dealers representatives;
promoting innovation by providing POs with greater flexibility to manage and operate their business
based on their business model, activities and risk profile whilst not compromising on regulatory
objectives;
simplifying, streamlining and enhancing efficiency in processes, application and reporting requirements;
and
streamlining clearing and settlement rules and clarifying rules on novation of on-market transactions.

Source: Bursa Malaysia




SC: SIDREC to Start Operations

The Securities Industry Dispute Resolution Centre (SIDREC) is on track to start operations in early 2011
following the gazette of the Capital Markets and Services (Dispute Resolution) Regulations 2010 which came
into effect on 30 December 2010. SIDREC is the first dispute resolution body catered exclusively to address
small claims in the Malaysian capital market.

SIDREC provides a mediation and adjudication mechanism aimed at investors who have claims of
RM100,000 or less arising from transactions involving capital market products and/or services. In essence,
SIDREC will provide dispute resolutions in any dealing or transaction involving capital market products or
services between clients and their securities brokers, futures brokers, fund managers and unit trust
management companies. The decision and award granted by SIDREC is binding on the capital market
licence holder. However, the claimant is free to pursue his claim in court if he is dissatisfied with the
mediators decision.

The facility is provided free to eligible individuals and sole proprietorships. One of SIDRECs immediate
priorities is to educate the investing public on SIDRECs functions and how it can help investors.

Source: Securities Commission Malaysia


MALAYSIA
MALAYSIA

Issue 2/2011
2 February 2011

Page 2

Local & Global News

SC: Direct Retail Participation in Corporate Bonds

The SC has on 12 January 2011, announced that the guidelines and framework for direct retail participation
in corporate bonds will be issued by year-end. Issues like investor protection and investor education will be
sorted out before allowing investors to invest directly in this asset class.

The regulator views that it is now timely to widen the investor base and investment spectrum given the
growing maturity of the Malaysian capital market, in particular the corporate bond market. An option which
is being considered in relation to the same is to provide the infrastructure which can facilitate direct
participation of retail investors in new issues.

For retail investors, investing in corporate bonds will provide a viable opportunity to seek higher returns in
consideration of some exposures to credit and market risks. At present, Malaysian retailers can only
participate through bond unit trust funds and exchange traded funds. In other developed bond markets in
Asia such as South Korea, Japan and recently Singapore, retail investors are able to trade in bonds directly
on the exchange or over the counter (OTC) market.

Source: The StarBiz_




MALAYSIA

If you encounter difficulty, If you encounter difficulty, If you encounter difficulty, If you encounter difficulty,
don't change your decision t don't change your decision t don't change your decision t don't change your decision to go. o go. o go. o go.
Change your direction to get there. Change your direction to get there. Change your direction to get there. Change your direction to get there.

Zig Ziglar Zig Ziglar Zig Ziglar Zig Ziglar

Issue 2/2011
2 February 2011

Page 3

Anti-Money Laundering News

5-Year Jail Term and RM1 Million Fines for Money Laundering

Two (2) unlicensed land brokers were sentenced to a five (5)-year jail term and fined RM1 million each by
the Kuala Lumpur Sessions Court on 23 December 2010, for an offence under Section 4(1) of the Anti-
Money Laundering and Anti-Terrorism Financing Act 2001 (AMLATFA) which were committed more than six
(6) years ago.

The two (2) were charged with sixteen (16) counts of money laundering involving sums of more than RM4
million as follows:

1. Gan Kiat Bend, faced four (4) money laundering charges involving RM2.4 million; and
2. Ismail Husin faced twelve (12) charges involving RM2.85 million.

According to the facts of their cases, they were involved in the sale and purchase of land and falsifying of
land ownership, with the proceeds paid to both of them. They were alleged to have committed the offence
between 19 November 2003 and 9 January 2004.

They were both granted a stay of execution pending their appeals to the High Court. Nevertheless, Gan Kiat
Bend and Ismail Husin were ordered to pay RM2.4 million and RM2.6 million respectively as penalty or levy
for the laundered money involved under Section 283 of the Criminal Procedure Code.

Source: http://www.thestar.com.my/New Straits Times



Note:

Gan Kiat Bend and Ismail Husin were initially charged with money laundering when their respective cases were
brought to the court on 5 February 2005 and 4 May 2005 respectively. The charged imposed on Gan Kiat Bend
has made him the second person after Dr. Hamimah Idruss, to be charged under the AMLATFA.

Section 4(1) of AMLATFA prohibits any person from engaging in, or attempting to engage in, or abetting the
commission of money-laundering activities. A charge under this Section carries a maximum jail sentence of five
(5) years or a maximum fine of RM5 million.



MALAYSIA

Issue 2/2011
2 February 2011

Page 4

Anti-Money Laundering News

Father and 2 Daughters to Enter Defence Against Money Laundering Charges

Datuk Adzhar Sulaiman (Datuk Adzhar), owner and general manager of a car rental agency, and his two
(2) daughters, Noradzma and Noradzrin, have been ordered by Sessions Court on 14 January 2011, to enter
their defence against a total of 360 money-laundering charges involving RM59 million.

The three (3) were alleged to have used the money from illegal proceeds to buy insurance coverage, various
investment products, thirty-eight (38) lots of land in Perak and Pahang, and transferred the sum into the
accounts of a family-owned firm, Noradz Travel & Services Sdn Bhd's (Noradz) subsidiaries.

Datuk Adzhar and Noradzma were said to have committed the illegal deposit-taking offences while holding
their respective positions in Noradz, at the company premises at Pandan Jaya between July 2006 and
October 2008.


Source: www.thestar.com.my




SC: Perpetrator of Ponzi Scheme Jailed

The SC has on 10 January 2010, secured a deterrent sentence against Raja Noor Asma Raja Harun (Raja
Noor Asma), the director of FX Capital Consultant (M) Sdn Bhd (FX Consultant) and FX Consultant, of a
total one hundred (100) years in prison, two (2) years imprisonment for each of the fifty (50) counts of
money-laundering under the AMLATFA. These sentences run concurrently and as such, Raja Noor Asma will
only have to serve two (2) years of imprisonment.

In addition, Raja Noor Asma was also fined RM5 million and jailed a total of twenty (20) years for operating
a ponzi scheme that duped over 4000 investors throughput Malaysia between February 2007 and May 2008
to trade in more than RM100 million worth of Crude Palm Oil Futures contract. This marks one of the
heaviest punishments against a capital market offender, reflecting the gravity of the offence.

The court also instructed approximately RM8.3 million frozen under AMLATFA to be forfeited.

The SC, which carried out the trial jointly with the Attorney General's Chambers, had urged the court to
impose a deterrent sentence as the scheme involved a large amount of investors' funds. The custodial
sentence meted out by the court serves as a stern warning to future offenders that violation of the public
trust will not be treated lightly by the courts.

Source: Securities Commission Malaysia

MALAYSIA
MALAYSIA

Issue 2/2011
2 February 2011

Page 5

Islamic Finance News


Indonesia Plans to Offer Tax Incentives for Islamic Finance

The Indonesian central bank plans to submit proposals to offer tax incentives for Islamic Finance. This is
expected to spur sukuk issuance in Indonesia, which was 32% that of Malaysia in 2010. Tax issues have
been the main reason for the lack of sukuk issuance in Indonesia.

Data show that sales of Shariah-compliant debt rose 56% to 26.2 trillion Rupiah ($2.9 billion) in Indonesia in
2010, compared with an 11% drop to 28.5 billion Ringgit ($9.3 billion) in Malaysia.

HSBC Holdings Plc and Citigroup Inc., the third- and eighth-biggest sukuk underwriters in 2010 respectively,
said the plan will boost sales of Islamic debt from the nation with the worlds biggest Muslim population.

Bank Indonesia is also streamlining the approval process for new Islamic banking products. A 10-member
joint-committee including representatives from the central bank, the national Shariah board and the
Indonesian Association of Accountants will start work from January 2011. Under the existing system,
products have to be first reviewed for compliance with Shariah law by the panel of scholars and then Bank
Indonesia.

Source: www.bloomberg.com





Global

Source : http://www.LearnIslamicFinance.com

Hawalah :

Literally, it means transfer, legally, it is an agreement by which a debtor is freed from a debt by
another becoming responsible for it, or the transfer of a claim of a debt by shifting the
responsibility from one person to another contract of assignment of debt. It also refers to the
document by which the transfer takes place.


Issue 2/2011
2 February 2011

Page 6

Ethics & Governance News

Former Directors Jailed and Fined for Stock Market Manipulation

Two (2) former executive directors of Impetus Group as follows, were jailed and fined for stock market
manipulation offences:

Name Length of Jail Sentence Fines Imposed
Datuk Philip Wong Chee Kheong
(Dato Philip)
Twenty Four (24) months RM3 million
Francis Bun Lit Chun (Francis) Three (3) months RM2 million

Both Dato Philip and Francis had created a misleading appearance of active trading of Suremax Group Bhd
(Suremax) shares by buying and selling through nine (9) CDS accounts. They were said to have committed
the offence by indirectly being concerned in transactions of sale and purchase of Suremax that did not
involve any change in the beneficial ownership of the said shares.

The two (2) were accused of committing the offence together with businessman Ivan Ng Chong Yeng
between 24 November 2004 and 22 March 2005.

Source: http://www.thestar.com.my


SC: High Court Allows the SC's Appeal in MEMS Technology Case

The High Court has on 11 January 2011, allowed SCs appeal against the Sessions Court's sentence on Ooi
Boon Leong (Ooi) and Tan Yeow Teck (Tan), the former directors of MEMS Technology Berhad (MEMS
Technology). The Court had upheld the original fine of RM300,000 and further enhanced the sentence with
a six (6) months imprisonment term each.

Ooi and Tan had earlier pleaded guilty before the Sessions Court in February 2010 and were fined
RM300,000 each. Ooi and Tan had been charged in April 2009 under S122B(b)(bb) of the Securities Industry
Act (SIA) 1983 for authorizing the furnishing of misleading information to Bursa with regard to MEMS
Technologys' reported revenue of RM73.4 million which was contained in its unaudited Condensed
Consolidated Income Statements for the twelve-month period ended 31 July 2007. The revenue was
misleading as it included 41% of fictitious sales amounting to RM30.17 million.

Source: Securities Commission Malaysia



SFC: Former Bank Employee Banned for Forgery

A former employee of CITIC Ka Wah Bank Limited (CITIC Ka Wah), Peggy Yam Chin Yui (Yam), was
banned by the Securities and Futures Commission (SFC) on 29 December 2010 from re-entering the
industry for eighteen (18) months for forging her colleagues signatures on banking documents.

Based on the evidence gathered by the Hong Kong Monetary Authority (HKMA) which referred the case to
the SFC, Yam was found to have deliberately circumvented her employers internal control procedures in
relation to verification of banking documents. CITIC Ka Wahs internal procedures required that banking
documents be initialed by designated bank officers to verify their accuracy or authenticity. Between August
and December 2006, Yam forged the initials of three (3) fellow bank officers on six (6) different occasions
on thirteen (13) banking documents.

Yam admitted that she forged her colleagues initials on the relevant documents to speed up processing of
the relevant transactions and to avoid troubling her colleagues.

Source: http://www.sfc.hk/
Malaysia
Hong Kong
Malaysia

Issue 2/2011
2 February 2011

Page 7

Ethics & Governance News





SFC: Community Services Sentence for False Trading

A retail investor, Chiu Yat Man (Chiu), was sentenced to one hundred and twenty (120) hours of
community services for false trading in derivative warrants, after he pleaded guilty to fourteen (14) counts
of false trading contrary to section 295 of the Securities and Futures Ordinance.

Chiu was found to have placed forty-one (41) single board lot buy orders and eight (8) single board lot sell
orders in four (4) derivative warrants, on fourteen (14) trading days between August and November 2009.
Most of the single board lot buy orders were accompanied by much larger sell orders at slightly higher
prices, which pushed up the nominal prices of the warrants and subsequently enabled Chiu to sell his
holdings in the warrants that he bought earlier at lower prices.

Meanwhile, the single board lot sell orders placed by Chiu were accompanied by much larger buy orders at
slightly lower prices which pulled down the nominal prices of the relevant warrants so that he could buy
them more cheaply.

Chiu made a profit of $44,969 as a result of his manipulation in these derivative warrants.

The SFC alleged that Chius orders gave the investing public a false impression that there was genuine
demand for the relevant warrants at such high prices and genuine supply of the relevant warrants at such
low prices.

Source: http://www.sfc.hk/





SEC: Alcatel-Lucent Charged with FCPA Violations

The Securities and Exchange Commission (SEC) has, on 27 December 2010, charged Paris-based
telecommunications company Alcatel-Lucent, S.A. (Alcatel) with violating the Foreign Corrupt Practices Act
(FCPA) by paying bribes to foreign government officials to illicitly win business in Latin America and Asia.

The SEC alleged that:

Alcatels subsidiaries used consultants who performed little or no legitimate work to funnel more than
$8 million in bribes to government officials in Costa Rica, Honduras, Malaysia, and Taiwan between
December 2001 and June 2006, in order to obtain or retain lucrative telecommunications contracts and
other contracts.

all of the bribery payments were undocumented or improperly recorded as consulting fees in the books
of Alcatels subsidiaries and then consolidated into Alcatels financial statements. The leaders of several
Alcatel subsidiaries and geographical regions, including some who reported directly to Alcatels
executive committee, either knew or were severely reckless in not knowing about the misconduct.

Alcatel agreed to pay more than $45 million to settle the SECs charges, and pay an additional $92 million to
settle criminal charges.

Source: http://www.sec.gov/


Hong Kong
USA

Issue 2/2011
2 February 2011

Page 8

Ethics & Governance News


SEC: Former Carter's Executive Charged With Fraud and Insider Trading

The SEC has on 20 December 2010, charged a former Executive Vice President of children's clothing
marketer Carter's Inc. (Carter), Joseph M. Elles (Elles) for engaging in financial fraud and insider trading.
Elles misconduct was alleged by the SEC to have caused an understatement of Carter's expenses and a
material overstatement of its net income in several financial reporting periods.

According to the SEC's complaint, Elles:

conducted his scheme from 2004 to 2009 while serving as Carter's Executive Vice President of Sales;
fraudulently manipulated the dollar amount of discounts that Carter granted to its largest wholesale
customer in order to induce customers to purchase greater quantities of Carter's clothing for resale;
concealed his misconduct by persuading the customer to defer subtracting the discounts from payments
until later financial reporting periods. He created and signed false documents that misrepresented to
Carter's accounting personnel the timing and amount of those discounts; and
realized sizeable gains from insider trading in shares of Carter's common stock during the fraud.

Between May 2005 and March 2009, Elles realized a profit before tax of approximately $4,739,862 from the
exercises of options granted to him by Carter and sales of the resulting shares. Each of these stock sales
occurred prior to the company's initial disclosure relating to the fraud on 27 October 2009, immediately after
which the company's common stock share price dropped 23.8%.

The SEC also announced that it has entered a non-prosecution agreement with Carter, which is the first
since the announcement of the SEC's new cooperation initiative earlier this year, under which the Atlanta-
based company will not be charged with any violations of the federal securities laws relating to Elles'
unlawful conduct.

Source: http://www.sec.gov/





FSA: Investment Banker, Wife and Friend in Insider Dealing Case

Christian Littlewood, a senior investment banker and former UK Financial Services Authority (FSA)
Approved Person, his wife Angie Littlewood (also known as Siew Yoon Lew and Angie Lew) and a family
friend Helmy Omar Saaid have on 10 January 2011, pleaded guilty to eight (8) counts of insider dealing
contrary to section 52 of the Criminal Justice Act 1993. They were alleged to have made approximately
590,000 profit from the trades.

The offences related to trading in a number of different London Stock Exchange and AIM listed shares
between 2000 and 2008 and were only brought to an end when the City of London Police working with FSA
staff arrested the Littlewoods in March 2009. The third defendant Helmy Omar Sa'aid was returned to the
UK in March 2010 following the execution of a European Arrest Warrant in Mayotte, one of the Comoros
Islands.

Source: http://www.fsa.gov.uk/



USA
Australia

Issue 2/2011
2 February 2011

Page 9

Ethics & Governance News


FSA: RBS and NatWest Fined for Poor Complaint Handling

The FSA has on 11 January 2011, fined Royal Bank of Scotland (RBS) and National Westminster Bank
(NatWest) 2.8 million for multiple failings in the way they handled customers complaints, responding
inadequately to more than half the complaints reviewed by the FSA.

The FSAs investigation found that there was an unacceptably high risk that customers may not have been
treated fairly due to a number of failings within the banks approach to routine complaint handling,
including:

delays in responding to customers;
poor quality investigations into complaints, with complaint handlers failing to obtain and consider all the
appropriate information when making their decision;
issuing correspondence that failed to fully address all of the concerns raised by customers and failed to
explain why complaints had been upheld or rejected;
customers not receiving their Financial Ombudsman Service (Ombudsman) referral rights within the
appropriate time period;
failure to provide adequate training and guidance to complaint handling staff, on how to properly
investigate a complaint; the monitoring of complaint handling in branches and the management
information produced was ineffective in assessing whether customers were being treated fairly; and
failure to ensure that complaint handlers properly reviewed complaints taking account of all relevant
factors.

53% of the complaint files reviewed by the FSA showed deficient complaint handling; 62% showed a failure
to comply with FSA requirements on timeliness and disclosure of Ombudsman referral rights; and 31% failed
to demonstrate fair outcomes for consumers.

The failings in the complaints handling processes of RBS and NatWest were uncovered during the FSAs
review of complaints handling in the UKs major retail banks. As a result of the thematic review, five (5)
banks have undertaken significant action to improve their complaint handling.

The banks agreed to settle at an early stage in the investigation and therefore qualified for a 30% reduction
in penalty. Without this discount, a financial penalty of 4 million would have been imposed on the banks.

Source: http://www.fsa.gov.uk/





Australia

Issue 2/2011
2 February 2011

Page 10

REGULATORY ALERT

GUIDELINES
BNM


5 January 2011

Capital Adequacy Framework
for Islamic Banks (CAFIB) -
Disclosure Requirements (Pillar
3)

The Guidelines:

Were first issued by BNM in July 2010.
Form part of the Capital Adequacy Framework for Islamic Banks which specifies the disclosure
requirements for credit risk under the standardized approach, market risk under the standardized
and internal models approach and operational risk under the basic indicator or standardized
approach.
Specify that in addition to the minimum disclosure requirements on risk exposures, risk
management practices and capital adequacy, Islamic banking institutions are required to disclose
on the management of Profit Sharing Account Investment and key aspect of Shariah
Governance.

Highlights of the Latest Update

The Guidelines have been updated to include the Internal Ratings-Based (IRB) Approach for
Credit Risk, including the relevant Appendices.

4 January 2011

Classification and Impairment
Provisions for Loans/ Financing

The Guidelines

Were first issued by BNM in January 2010.
Set out the minimum requirements on classification of impaired loans/financing, provisioning for
impaired loans/financing and expectations that must be met by banking institutions with the
adoption of FRS 139 Financial Instruments: Recognition and Measurement.

Highlights of the 17 December 2010 Update

The guidelines have been updated to clarify BNMs expectations in relation to the classification of
rescheduled and restructured facilities, and where a loan/financing that is individually assessed
for impairment does not result in impairment provisions.
Rescheduled and restructured facilities can only be reclassified as non-impaired when
repayments based on the revised or restructured terms have been observed continuously for a
period as determined by the banking institutions policy on rescheduled and restructured facilities
In principle, loans/financing that have been rescheduled and restructured shall not lead to
improved classification immediately upon perfection of the relevant documentation in relation to
the rescheduling and restructuring exercise.

4 January 2011

Risk-Weighted Capital Adequacy
Framework and Capital
Adequacy Framework for
Islamic Banks (General
Requirements and Capital
Components)

The Guidelines

Are applicable to all banking institutions licensed under BAFIA and all Islamic banks licensed
under Islamic Banking Act 1983.
Specify that Banking institutions (BIs) are required to comply with the Risk-Weighted Capital
Ratio (RWCR) requirement at all times for all its business operations in Malaysia and overseas.
The general treatment on equity investment is as provided in paragraph 4.2 of the Framework.
Also specify that additionally BIs are also required to maintain a minimum RWCR of 8% at all
times at these business operations.

Highlights of the 3 January 2011 Update

BNM has clarified that the amount of collective impairment provisions and regulatory reserves
attributable to loans classified as impaired but not individually assessed for impairment shall be
excluded from general provisions recognized under Tier 2 capital.
The new addition is in line with the latest amendment to BNMs Guidelines on Classification and
Impairment Provisions for Loans/Financing. This is however, not applicable for banking
institutions which have implemented IRB approach for credit risk.







Issue 2/2011
2 February 2011

Page 11
GUIDELINES
4 January 2011

Guidelines on Corporate
Governance for Licensed
Institutions (LIs)

The Guidelines

Are applicable to all Institutions licensed under BAFIA; bank holding companies/financial holding
companies as defined in paragraph 1.01 of the Guidelines; and any other institution specified by
BNM.
Prescribe the broad principles and minimum standards as well as specific requirements for sound
corporate governance required to be observed by LIs and Bank Holding Companies
(BHC)/Financial Holding Companies (FHC).
Focus on the main areas of sound corporate governance namely board matters, management
oversight, accountability and audit and transparency.
Incorporate the various forms relating to the appointment of directors and Chief Executive
Officers of LIs and BHC/FHC.

Highlights of revisions to the Guidelines

Summary of Update Updated Paragraph/Revision
Additional paragraph 2.27A was
introduced to emphasize on the
importance of effective separation
between oversight and management in
cases where directors consists of
executives from the parent or related
entities.

Where directors on the board of a Licensed Institution
also include executives from the parent or related
institution (e.g. regional office), the board of the
Licensed Institution must be able to demonstrate that
an effective separation between oversight and
management is maintained in the overall balance
between executive directors and non-executive
directors on the board. This should take into account
the extent to which the executives from the parent or
related institutions assume accountability for decisions
and actions within the Licensed Institution directly or
indirectly, through reporting and decision making
structures. Where such accountability is assumed,
compensating measures must be put in place such as
by having a higher balance of independent directors
on the licensed institutions board to ensure effective
oversight.

Enhancements to paragraph 2.37
which emphasizes on the
independence of the Chairman.

There shall be clear separation between the roles of
Chairman and CEO, to ensure an appropriate balance
of role, responsibility, authority and accountability.

The Chairman of the board should be in a non-
executive capacity and should not have an executive
position or responsibility at the parent or related
institutions. A non-executive Chairman can play a
crucial role to encourage a healthy debate on issues
and brings to the board a healthy level of scepticism
and independence. The responsibilities of Chairman
and CEO should be clearly defined.

Amendments to paragraph 2.59 to
remove expectations on the
appointment of deputy Chief Executive
Officer (CEO) and Chief Financial
Officer.

Deputy CEO and CFO (or other equivalent
designations whatever they may be called) are critical
positions in a Licensed Institution and both positions
are delegated with significant powers by the board.
Therefore, it is of crucial importance for a Licensed
Institution to appoint a qualified person to hold the
position. Bank Negara Malaysia will complement the
Nominating Committee of the Licensed Institution by
conducting limited vetting on the proposed
candidates. In this regard, Licensed Institutions are
required to submit relevant information as required by
Bank Negara Malaysia.







Issue 2/2011
2 February 2011

Page 12
GUIDELINES

Summary of Update Updated Paragraph/Revision
With this enhancement, the circular
BNM/RH CIR 007-1 entitled
Amendments to the Application Form
BNM/APP for the
Appointment/Reappointment of
Chairman, Directors and CEOs has
been withdrawn to avoid duplication.

Enhancements to the Form BNM/DIR which provides
guidance to the Nominating Committee in preparing
assessments on candidates for the position of
Director, Chairman or CEO (refer Attachment 1 of the
Guidelines).


Effective Date: 24 December 2010

CIRCULARS
BNM


4 January 2011

Revised Fees for Selected
Services under RENTAS, eSPICK
and FAST Systems

The Circular is applicable to all members of systems operated by MyClear namely RENTAS,
eSPICK and FAST systems (collectively known as MyClear systems).
The Circular informs all members of MyClear systems on the implementation of the revised fees
for the selected services provided by MyClear systems and the revision to the penalty charges.
The revised fees structure and penalty charges are as per Attachment I of the Circular and shall
be read together with the existing fees and charges stipulated in the respective rules of MyClear
systems.

Effective Date: 3 January 2011
4 January 2011

Disclosure of Customer
Information

The Circular authorizes the disclosure of information or document relating to the affairs or
account of a customer of the financial service provider when such information or document is
required for the purposes and to persons specified in paragraph 6.2 of the Circular and subject
to conditions as stated therein.
The Circular also require that financial service providers establish policies and procedures in
respect of disclosure of customer information to any external parties.

Effective Date: 1 February 2011

Bursa


11 January 2011

Clearing Circular No. 01/2011
Change in Margin Rate

The margin rates in Clearing Circular No. 01/2011 will be applicable to all contracts which remain
open at the close of business on Thursday, 13 January 2011 and will continue to apply until further
notice.
11 January 2011

CDS Circular No.
ADA/DOD/0001/2011 Counter
Notification


Bursa Malaysia has prescribed the securities for the securities of CENTURY SOFTWARE HOLDINGS
BERHAD (5195) which are proposed to be listed on the Main Market of its Official List (Prescribed
Securities), to be deposited with Bursa Malaysia Depository Sdn Bhd.

3 January 2011

Trading Circular 1/2011 -
Emergency Trading
Arrangement
All Trading Participants (TPs) are advised to have a backup facility in place to cater for trading
interruptions due to either an order management system (OMS) or site failure. This is to
prevent trading operations for the TP to be affected under such circumstances.
All TPs are strongly encouraged to have an emergency trading arrangement with at least one
other TP to conduct trading on behalf under such circumstances. It is preferable and
recommended that the other TP selected for the emergency trading arrangement maintain a
different OMS. This will reduce the possibility that the appointed TP will also encounter the same
problem.
Another alternative is for the TP to maintain a backup OMS.
TPs who currently do not have such an arrangement in place should implement the
recommended arrangement as soon as possible.



Issue 2/2011
2 February 2011

Page 13

CONSULTATION PAPERS
Bursa


5 January 2011

Consultation Paper- Revamp of
the Rules of Bursa Securities
Bursa Malaysia issued the CP seeking public feedback on the proposed amendments to the Rules
of Bursa Malaysia Securities Berhad aimed at facilitating greater effectiveness for market
regulation and greater efficiency in the business conduct of Participating Organisations.
Public feedback is also sought for the proposed consequential and other amendments to the
Rules of Bursa Malaysia Securities Clearing Sdn Bhd.
The significant amendments proposed cover the following:

Rules of Bursa Securities Rules of Bursa Clearing (S)
Powers of the Exchange;
Admission of Participating Organizations
(POs) and Registered Persons;
Obligations of Registered Persons;
Organization structure of a PO;
Governance of a PO;
Conduct of a PO;
Trading;
Defaulters List;
Conduct of other business activities:
Financial requirements; and
Transitional provisions.

Reflecting the delivery and settlement
obligations between Bursa Clearing (S)
and Clearing Participants which are going
to be removed from the Rules of Bursa
Securities as discussed below; and
Clarifying the provisions relating to the
novation of an onmarket transaction
especially in relation to the exact point in
time the novation occurs and the delivery
of securities under a novated contract.











MAULIDUR RASUL MAULIDUR RASUL MAULIDUR RASUL MAULIDUR RASUL
- -- - 15 February 2011 15 February 2011 15 February 2011 15 February 2011 - -- -

Issue 2/2011
2 February 2011

Page 14





Question 1

What is the extent of disclosure under section 91 of Capital Market and Services Act (CMSA)?

The purpose of section 91 is to draw the attention of clients of a registered person to the potential conflict of interest when the
registered person makes a recommendation, to buy, sell or hold any particular securities that the registered person also has interest in.
For this purpose, a general disclosure that the registered person and its employees may at any time, in the course of its trading and
banking business, hold positions, trade or otherwise effect transactions, for its own accounts or the accounts of customers, in the
relevant securities, would allow clients to make further reasonable enquiries as appropriate to establish the nature and extent of the
conflict. The provision is not intended to compel registered persons to make disclosures to other interbank players or institutional
investors that can be reasonably used by them to secure a market advantage.

As an example, the registered person may disclose its interest in the securities in the following manner:
Bank A is the principal advisor and is one of primary subscribers to the issuance of these securities. Following this, we hold proprietary
positions on the securities. Bank A and its employees are engaged in securities trading and banking activities. In the ordinary course of
its trading and banking business, Bank A or its employees have traded and may in the future trade or otherwise effect transactions, for
its own accounts or the accounts of customers, on the securities.

The example above is merely a guide and not intended to prescribe how disclosures are to be made by Registered Persons (RPs).



Question 2

What can be construed as a recommendation under section 91?

A recommendation applies to any circulars or other similar written communications regardless of channels (e.g. e-mail) used. However, in
the case of bought deals, both written as well as oral recommendation are subjected to the requirement for disclosure.



Question 3

Under what circumstances does the restriction under subsection 91(5) of the CMSA apply?

This requirement applies only to an underwriting agreement. However, in the case where such agreement exists, it does not prevent a
registered person from making an offer to sell or make a recommendation with respect to the underwritten securities within 90 days
provided it is accompanied by a proper disclosure to the effect that the offer or recommendation relates to the underwritten securities.



Question 4

Would section 97 apply in cases where both parties are either a registered person or a CMSL holder?

No, section 97 would not apply to transactions where both parties are either a registered person or a CMSL holder. In addition, section 97
also does not apply to transactions between a registered person and a client where the registered person is acting in substance as an
agent for the client to facilitate settlement in relation to dealing in securities through RENTAS.


Source: Bank Negara Malaysia & Securities Commission

GUIDELINES ON INVESTOR PROTECTION (PART 2)

Issue 2/2011
2 February 2011

Page 15


The two (2) largest and most influential systems of competition legislations
are US Sherman Antitrust Act (Sherman Act) and European Union (EU)
competition laws which were based on the European Commission Treaty on
the Functioning of the European Union (EC Treaty).

There are three (3) main objectives which have been significantly considered
by the regulators in US and EU countries when determining the outcome of
competition cases as follows:

1. Prohibition of agreements or practices which could restrict free trading and competition between businesses, including repression of
free trade caused by cartels.
2. Ban of abusive behavior by a corporation dominating a market, or anti-competitive practices which tend to lead to such a dominant
position.
3. Supervision of mergers and acquisitions of large corporations, including some joint ventures, which may threaten the competitive
process.

CASE STUDIES ON THE IMPLEMENTATION OF COMPETITION LAWS

The following examples provide implementation of competition or antitrust laws in the countries where the three (3) objectives have
been adopted. The cases may involve different nature of businesses but similar principles have been applied.


FACTS OUTCOME

US CASES

1. Standard Oil Co. of New Jersey v. US
Standard Oil was using its stranglehold on refining capacity to
begin integrating backward into oil exploration and crude oil
distribution and forward into retail distribution of its refined
products to stores and eventually, service stations throughout
US.

Standard Oil allegedly used its size and clout to undercut
competitors in a number of ways that were considered anti-
competitive, including:
underpricing; and
threats to suppliers and distributors who did business with
its competitors.

The US Supreme Court found Standard Oil guilty of
monopolizing the petroleum industry through a series of
abusive and anti-competitive actions.

It was concluded that the Standard Oil conduct had
resulted in monopoly or its consequences (i.e. higher
prices, reduced output, and reduced quality).

Standard Oil was then required to be divided into several
competing firms.
2. United States v. Microsoft











Microsoft was accused of abusing monopoly power on Intel-
based personal computers in its handling of operating system
sales and web browser sales.

The main issue was whether Microsoft was allowed to bundle
its flagship Internet Explorer (IE) web browser software
with its Microsoft Windows operating system.

It was alleged that the bundling was responsible for
Microsoft's victory in the browser wars as every Windows user
had a copy of IE.

It was further alleged that Microsoft's practice has unfairly

restricted the market for competing web browsers that were
slow to download over a modem or had to be purchased at a
store.

The US Department of Justice (DOJ) has reached a
settlement with Microsoft in 2001 requiring the company
to:
share its application programming interfaces with
third-party companies; and
appoint a panel of three (3) people who will have full
access to its systems, records and source code for
five (5) years in order to ensure compliance.

The DOJ stated that the requirements were intended to
ensure stringent oversight procedures and explicit
requirements to prevent Microsoft from engaging in
monopoly.

To date, Microsoft is still negotiating to lessen the
settlement agreement.






K
KKN
NNO
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WWL
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DDG
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MAIN OBJECTIVES OF REGULATING COMPETITION



Issue 2/2011
2 February 2011

Page 16

FACTS OUTCOME

EU CASES

1. EU Microsoft Competition Case


The European Commission (EC) alleged that Microsoft has
abused its dominant position in the market.

It started with a complaint from Novell that Microsoft was
blocking its competitors out of the market through anti-
competitive practices. The complaint centered on the license
practices in 1993 which required royalties from each computer
sold by a supplier of Microsoft's operating system, whether or
not the unit actually contained the Windows operating
system.

In 1998, Sun Microsystems made another complaint on the
lack of disclosure of some of the interfaces to Windows NT.

In 2003 the EC ordered Microsoft to offer a version of
Windows without Windows Media Player and the
information necessary for competing networking software
to interact fully with Windows desktops and servers.

Further, in March 2004, the EC ordered Microsoft to pay
497 million, the largest fine ever handed out by the EC
at the time, in addition to the 2003 penalties.

In 2007, the EC upheld its previous decision following an
appeal by Microsoft.
2. Lombard Club Cartel Case (Austria)
The Lombard Club Cartel is a club established with Austrian
banks members.

The Club stated in its notes of meeting that its objective to
exchange experience in relation to interest rates has
repeatedly proved to be a useful means of avoiding
uncontrolled price competition.

The EC seized documents showing that the banks were aware
of the antitrust implications of their behaviour.

For example, one participant suggested at a cartel meeting
that for precautions "no more minutes should be kept of such
meetings". The legal department of one of the banks was also
consulted on the matter and recommended a "destruction of
all existing records".

The EC imposed fines totalling 124.2 million on eight
Austrian banks for their participation in the wide-ranging
price cartel across Austria. The banking cartel was also
ordered to be disbanded in 2002.

3. Royal Bank of Scotland (RBS) Case (UK)


The United Kingdom Office of Fair Trading investigated
individuals in RBS's Professional Practices Coverage Team on
alleged unilateral disclosure (generic and specific) confidential
future pricing information to their counterparts at Barclays
Bank. The information was later taken into account by
Barclays when determining its own pricing.

Disclosures by RBS took place in a number of contacts
involving information on the pricing of loan products to large
professional services firms, such as solicitors, accountancy
and real estate firms, in which RBS and Barclays are the main
providers.

RBS admitted to breaches of the competition law and
agreed to pay a fine of 28.59 million.
4. Autorit de la Concurrence Fines 11 French Banks 384.9 million (France)
The French banks met and colluded so as to collectively
define the functioning details of the new system. Together,
they decided to raise several fees.

They were accused of the following infringements:
charging unjustified 0.043 fee on 80% of the checks
exchanged in France; and
enforcing two (2) additional fees for related services' (i.e.
reversals services) which were still collected at the time
the Autorit handed down its decision.





For the first infringement to competition rules, the fines
amounted to 381.1 million.

For the second infringement to competition rules, the
fines amounted to 3.8 million. The Autorit concluded
that level of the fees charged was not proportionate to
the costs incurred by the banks and ordered revision of
the fees by taking the costs of the most efficient bank as
a benchmark.

Issue 2/2011
2 February 2011

Page 17

FACTS OUTCOME

ASEAN CASE

1. Pestbusters Case (Singapore)
Six (6) companies have colluded to submit tenders or
quotations for termite treatment projects involving the use of
Agenda (i.e. a type of pesticide) on six (6) different
projects.

In each of the projects, the first company was already
providing pest control services or had recommended the use
of Agenda to the customer. The first company would then
inform some or all of the other companies of the project via
email, phone or SMS to request them, in effect, to submit bids
at prices higher than its own bid price, thereby increasing its
chances of winning the job.

The first company would also let them know the price of its
bid or the prices at which they should quote. The others
would either agree to the request, thus giving the first
company the assurance that there would be no competition,
or they would simply submit higher bids.

Since the competing bids from the other companies were
neither priced independently nor with the aim of winning the
bids, the customers therefore did not receive competitive
proposals.

The Competition Commission of Singapore imposed
financial penalties totalling S$262,759.66 on the six (6)
companies for infringement of section 34 of the
Competition Act 2004.

Section 34 of that Act prohibits agreements between
undertakings, decisions by associations of undertakings,
or concerted practices which have as their object or effect
the prevention, restriction or distortion of competition
within Singapore. This would include practices such as
bid-rigging or collusive tendering.