The Securities Commission Malaysia (SC) announced the liberalisation of its regulatory framework to facilitate greater retail access to the RM1.3 trillion Malaysian bond and sukuk market. The liberalisation forms part of the SC’s continued efforts to further develop this market, currently the third largest in Asia (relative to GDP) and the world’s largest sukuk market.
The liberalised framework will allow a more efficient issuance process for corporate bonds and sukuk to be offered to retail investors. Qualified issuers no longer need to make disclosures through a prospectus, and are only required to issue a product highlight sheet. The range of corporate bonds and sukuk that can be offered to retail investors has also been expanded beyond plain vanilla bonds.
In addition, the SC is introducing a new seasoning framework to enable retail investors to access existing corporate bonds and sukuk which are currently traded by sophisticated investors in the over-the-counter (OTC) market. Under this framework, corporate bonds and sukuk that are eligible for retail investment must have been in the market for at least 12 months, and have a minimum credit rating of A, among other requirements.
In tandem with these measures, distributors of corporate bonds and sukuk in the OTC market are required to observe the sales practices prescribed by the SC, such as the requirement to undertake necessary client on-boarding assessment and ensure fair treatment of investors.
The liberalised framework for retail investors is complemented by the centralised online information platform, Bond + Sukuk Information Exchange Malaysia (BIX Malaysia), established by the SC in November 2017. BIX Malaysia enables investors to obtain necessary information on ringgit bonds and sukuk to assist in their investment decisions.
The liberalised framework consists of the new Guidelines on Seasoned Corporate Bonds and Sukuk and amendments to Guidelines on Issuance of Corporate Bonds and Sukuk to Retail Investors, the Guidelines on Sales Practices of Unlisted Capital Market Products, as well as Division 2 of the Prospectus Guidelines, which will come into effect on 11 October 2018.