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					Chairman’s Statement
     SECURITIES COMMISSION ANNUAL REPORT 2004




                                             CHAIRMAN’S STATEMENT




     In 2004, all key sectors of the Malaysian capital market          The year 2004 saw 72 IPOs which raised a total of
     were further strengthened, driven by the momentum set             RM4.0 billion, as against 58 which raised RM4.0 billion
     in 2003. This enabled the Commission to pursue the                the year before. As at end-2004, there were 963 listed
     next phase of the capital market developmental agenda.            companies with a total market capitalisation of RM722
     The focus of most of our activities was on further                billion, an increase of 57 companies (2003: 906) and a
     improving market liquidity, promoting value creation              gain of 13% in market capitalisation from 2003 (market
     and operational efficiency among intermediaries and               capitalisation as at end-2003: RM640.28 billion).
     improving our network internationally. Needless to say,
     surveillance and enforcement activities also kept us very         New issuance of PDS in 2004 totalled RM36.3 billion
     busy throughout the year.                                         compared to RM51 billion in 2003, while issuance
                                                                       of government bonds remained high at RM49 billion
     Our activities in 2005 will continue to underscore our dual       compared to RM46.3 billion in 2003.
     responsibility in developing and regulating the Malaysian
     capital market. From a developmental perspective we have          Average daily trading value on Bursa Malaysia increased to
     identified a further set of CMP recommendations for               RM980 million from RM840 million in 2003. Market
     implementation in 2005. As we move further into the               volatility declined over the same period.
     DBR environment, our regulatory efforts will focus on
     post-approval surveillance and enforcement. In allowing           Derivatives market activity also continued to improve.
     issuers and intermediaries to have easier access to the capital   Average monthly trading volume in KLCI futures rose
     market, we are placing our trust on their integrity and           by approximately 230% from 27,602 average monthly
     professionalism. However, if they breach that trust we will       trading volume in 2003 to 90,702 in 2004. Average monthly
     take them to task.                                                trading volume in 3-year MGS futures rose by about 85%
                                                                       from 195 to 361 contracts.
     To achieve these objectives, we will continue to strengthen
     our capacity and capabilities. In particular, we will enhance
     our resources and skills, and leverage on IT to ensure that       Initiatives and Achievements in 2004
     we are able at all times to effect credible surveillance,
     investigation and enforcement, while pursuing the CMP             Against the backdrop of steady improvement in both
     recommendations.                                                  primary and secondary market activities, the Commission
                                                                       was able to effectively pursue our developmental, regulatory
                                                                       and operational agenda for 2004, while strengthening our
     Market Performance in 2004                                        networks internationally.

     I am happy to note that there was considerable improvement
     in both fund-raising and secondary market trading                 Continuing the Developmental Agenda
     activities in 2004, despite continuing uncertainty in the
     global market.                                                    The year 2004 was a transition year in the implementation



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                                                                                     SECURITIES COMMISSION ANNUAL REPORT 2004




of the CMP. We moved from the initial phase (2001–2003)          particularly those based on the Syariah principles of
to the next phase (2004–2005). We saw major programmes           mudharabah or musyarakah. Pre-IPO assessment of
initiated in the initial phase coming to fruition, even as we    Syariah compliance, as well as measures to ensure greater
further initiated new programmes aimed at enhancing              tax neutrality for Islamic debt securities were also introduced.
market liquidity, promoting value creation and strengthening
global networks.                                                 The Commission also continued to play a prominent
                                                                 role in promoting the importance of the ICM globally.
The demutualisation of the exchange and the establishment        During the year, IOSCO published a report driven by a
of the CMDF in the early part of the year were significant       Commission-led task force on issues related to the
capital market milestones which set the stage for other          development of the global ICM.
developmental efforts.

To further liberalise market access and enhance international    The Regulatory Agenda – Strengthening
compatibility and connectivity, the policy of allowing five      Frameworks, and Intensifying Surveillance and
foreign stockbroking companies and five foreign fund             Enforcement Actions
management companies to operate in Malaysia was
announced. Equity ownership was also liberalised for             Surveillance and enforcement remain the core of the
VCCs, as well as for futures brokers, futures fund managers      Commission’s regulatory role. In 2004, our efforts were
and futures trading advisers.                                    focused on strengthening the regulatory framework,
                                                                 enhancing institutional capacity and arrangements, and
Concurrently, further measures to increase the level of          intensifying enforcement actions for a wide range of securities
competitiveness of stockbrokers were also implemented.           offences.
Key measures included a more liberal branching policy and
a more flexible capital framework.                               The framework for the enforcement of securities laws was
                                                                 substantially enhanced to allow for more effective action
To further increase the depth and breadth of the market, a       on corporate improprieties. Provisions significantly
facilitative framework for issuing ringgit bonds by              strengthening corporate governance and investor protection
supranationals was introduced. This showed almost                were introduced at the beginning of the year, including
immediate results with the issuance of ringgit-denominated       whistle-blowing, and wider civil and administrative
bonds by the Asian Development Bank and International            actions. The Commission established the Post-Approval
Finance Corporation towards the end of the year. On the          Surveillance Action Team (PASAT) to step up vigilance on
derivatives market, the crude palm kernel oil futures            the quality of information submitted and disclosed.
contract was introduced while in the area of collective
investments, several tax transparency measures to reinvigorate   Further, a tripartite High-Level Enforcement Committee
REITs were announced.                                            on Corporate Governance chaired by the Commission
                                                                 was established by the Prime Minister. This committee
Consistent with our objective of leveraging on technology        provides a high-level platform for sharing of information
to enhance access to and quality of capital market products      with the CCM and Polis Di-Raja Malaysia to facilitate
and services, the Guidelines on Online Transactions of and       investigations into corporate crimes. In addition, a dedicated
Online Activities in Relation to Unit Trusts were introduced.    court for capital market offences as proposed by the
                                                                 Commission was approved.
The Malaysian ICM also saw significant developments
in 2004. The Guidelines on the Offering of Islamic Securities    Enforcement actions were intensified. Key actions included
were introduced to facilitate the development of a wider range   the criminal prosecution of professional advisers of PLCs
of innovative and sophisticated capital market products,         for flouting corporate disclosure-related laws, as well as of


                                                                                                           CHAIRMAN’S STATEMENT     vii
       SECURITIES COMMISSION ANNUAL REPORT 2004




       directors of companies for securities fraud and misutilisation   pre-emptive actions will be used, given the higher levels of
       of funds.                                                        accountability and integrity that are necessary as we move
                                                                        further into the DBR environment.

       Enhancing Operational Efficiency                                 The Commission will also facilitate the transformation of
                                                                        industry business models to help market intermediaries
       Continuing the re-engineering of internal management and         cope with competitive challenges posed by a dynamic and
       processes led to a further substantial reduction in the          changing financial landscape.
       processing time of corporate proposals, resulting in shorter
       time-to-market for various fund-raising activities.              To strengthen the position of the market regionally,
                                                                        the Commission will focus on improving the market
       Meanwhile, prudent management of the Commission’s                framework and creating a more conducive environment for
       administrative and personnel expenses further enhanced           shareholder value creation.
       operational cost-effectiveness.
                                                                        The Malaysian capital market must also become
                                                                        internationally competitive. This hinges on addressing
       Strengthening Our Networks Internationally                       issues of compatibility in order to have greater connectivity
                                                                        with the rest of the world. The Commission will continue
       The Commission maintained a strong international presence        to work closely with regulatory counterparts and participate
       in 2004, continuing to play a lead role in IOSCO, and being      actively in international fora. We will further leverage on
       involved in the work of ASEAN, ASEAN+3, APEC and                 our areas of strength, such as the ICM, and education and
       WTO. The Commission had been both a contributor to, as           training.
       well as a beneficiary of international capital market-related
       activities, such as the ASEAN+3 Bond Market Initiative, the      Even as we continue to implement the CMP, we will ensure
       OECD Asian Roundtable on Corporate Governance and                that we remain prepared and sufficiently agile to meet the
       the APEC Financial Regulator’s Training Initiative.              demands of changing circumstances and unanticipated
                                                                        events. To this end, we will continue to enhance
                                                                        organisational effectiveness through continuous business re-
       Moving Forward in 2005                                           engineering. Major projects that will be undertaken include
                                                                        enhancing risk management, managing intellectual capital
       Following on from the initiatives and achievements of            and strengthening internal processes, as well as further
       2004, the Commission will continue to implement identified       leveraging on IT to enhance capacity, capability and
       programmes in the CMP in 2005.                                   effectiveness.

       In particular, we will continue to focus on visible and
       credible surveillance and enforcement to further promote         Conclusion
       market integrity and build investor confidence. Enforcement
       capacity will be further augmented in terms of skill sets,       The CMP continues to steer the work of the Commission
       and by leveraging on technology, we will be well-equipped        not only in developing but also in protecting the integrity
       to anticipate market threats, detect and deter corporate         and improving the quality of the Malaysian capital market.
       transgressions, and further improve discipline among             Industry players should strive to position the market well,
       market players. We will not hesitate to use the range of         leverage on strengths, and meet international standards and
       enforcement powers available to us. Where necessary,             requirements. The Commission, in turn, will embrace




viii   CHAIRMAN’S STATEMENT
                                                                                  SECURITIES COMMISSION ANNUAL REPORT 2004




continuous organisational change and transformation, and        Last but not least, I would like to thank the staff of the
be progressive, dynamic and flexible in facing the challenges   Commission for their hard work which has enabled the
of a changing financial and regulatory landscape.               Commission to grow from strength to strength.

Members of the Commission and SAC have continued to
selflessly share their time and expertise in guiding the
Commission. I thank them for their dedication and               MD NOR MD YUSOF
commitment.                                                     January 2005




                                                                                                      CHAIRMAN’S STATEMENT   ix

				
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