an industry engagement initiative by sidc • december 2015 • vol.1

an industry engagement initiative by SIDC 1

an industry engagement initiative by SIDC • December 2015 • Vol.1 Issue 2

engage@SIDC I December 2015 2

From the CEO’s DeskWelcome to the second issue of engage@SIDC! A bustling half year has passed since the launch of our e-newsletter – and in our commitment to become a more industry-focused capital markets learning and development solutions provider, we are back with more stories relevant to the capital markets industry as well as the various industry engagement initiatives and talent development collaborations we have been working on.

Digital disruption is a global phenomenon that has generated a tremendous amount of interest in the financial industry this year for its evolutionary and disruptive impact on the way traditional financial institutions do business. “Innovate or perish” is fast becoming the critical question facing industry players as the adoption of digital, real-time, and networked technologies, products, and services through interconnected systems and devices takes root at increasing speed.

engage@SIDC weighs in on this in our cover story “Digital Disruption: Game Changer for the Capital Market Industry”, as we explore the digital disruptors currently transforming the industry, their reverberating effects and positive benefits. Closer to home, we feature the World Capital Markets Symposium 2015 organised by the Securities Commission Malaysia (SC) in Kuala Lumpur, which highlighted the facilitative role the SC is playing to drive the development of fintech and digital innovation in the industry. We hope you will find these trending topics of relevance and interest.

We also cover SIDC’s first industry roundtable on “Bridging the Capital Market Talent Gap: Identifying Needs and Priorities”, organised as part of our Industry Insights series to engage industry leaders in a discussion on practical initiatives which can address the talent gap challenges faced by the industry. In addition, we bring you an

FForeword

update on the industry discussions and engagement sessions conducted to obtain industry input for the Industry Competency Framework we are developing for the Malaysian capital market industry. These initiatives give a broad perspective of the ways in which SIDC is working with the industry to bring about positive transformation in capital market talent development.

In professional development, find out more about the Capital Market Director Programme, a programme for all directors of licensed intermediaries launched in May to equip them with the required competencies of a board member. We also report on the Corporate Governance (CG) programmes conducted for directors at Bursa Malaysia that focused on the importance of corporate disclosure – in particular CG and non-financial information (NFI) – in the investment decision making framework. And for those who may be curious about how the SC Licensing Examinations are developed and administered with integrity, check out pages 30-31 in our Learning Updates sections where we invite you to take “A Closer Look at the SC Licensing Examinations”.

We hope you will enjoy the stories, articles and updates we have put together for your reading pleasure. As the year winds down, I would like to take this opportunity to wish you a bright and successful start to 2016. Happy New Year!

Azman Hisham Che DoiChief Executive Officer


From the CEO’s Desk 02

Digital Disruption: Game Changer for the 03Capital Market Industry

Friends with Benefits: The Symbiotic 07Relationship between Crowdfunding & P2P Lending with Traditional Financial Institutions

Fintech and Digital Innovation at World 09Capital Markets Symposium 2015

How Can Capital Markets Be More Human? 10

Development of an Industry Competency 12Framework for the Malaysian Capital Market

Bridging the Capital Market Talent Gap: 13Identifying Needs and Priorities- An Industry Roundtable

Capital Market Director Programme 14

Corporate Governance and Investment 15Decision-Making – What Directors Need to Know

The ASEAN Markets Programme Series: 16Highlighting the Growth and Opportunities in ASEAN

Building Talent for Islamic Finance 16

Inspirational Life Lessons from the 18Naked CEO

UNIMAS-SIDC’s International Conference on 19Contemporary Issues in Accounting and Finance 2015

CFO Dialogue 2015: Focus on Integrated 20Reporting

Financial Services Industry Aidilfitri 21Celebration

Forging Collaborations for the Enhancement 22of Assessment Methodologies

Starting Smart by Starting Right: 235 Investment Tips

Back to Basics: Continuing Professional 28Education (CPE)

A Closer Look at the SC Licensing 30Examinations

CContents


Digital disruption has enormous potential to reconfigure and radically improve the efficiency of global capital markets as it will give investors and businesses looking for capital, more direct, more immediate and cheaper access to each other. Speaking about the future of capital markets in the digital economy at the Distinguished Speaker Series at the Carnegie Mellon University in Australia in September 2015, Greg Medcraft, Chairman of ASIC (Australian Securities and Investments Commission) and Chair of the IOSCO (International Organization of Securities Commissions) noted that the attraction to digital disruption is in the opportunity it brings and that this is evidenced with the tripling of global investment in fintech ventures to US$12.2 billion in 2014, from US$4 billion in 2013.

The Securities Commission Malaysia (SC) has been playing an active role in encouraging the development of the fintech industry. At the World Capital Markets Symposium in Kuala Lumpur in September 2015, it launched aFINity@SC, the “Alliance of FinTech Community”, an initiative to catalyse greater interest towards the development of fintech by driving a network of fintech stakeholders to accelerate growth and innovation in the capital markets. This group of stakeholders will include innovators, entrepreneurs, established businesses, investors and other authorities to chart the fintech agenda together for Malaysia.

“Fintech is not only a growing trend, but one which is here to stay – given its significant potential to disrupt the business model of incumbents and appeal to a wider audience by promising user-friendly services that transcend demographic, geographical and infrastructure barriers,” said SC Chairman Dato’ Seri Ranjit Ajit Singh in his opening speech at the symposium. He also recognised that it was essential for policymakers and the private sector to work together to make the anticipated growth in fintech a reality.

Some of the notable digital distruptors are the blockchain technology, dark pools and high frequency trading (HFT), robo-advisors, to list a few.

The Blockchain Blowout

At the 2015 World Economic Forum in Davos, the blockchain was identified as one of the six megatrends shaping society with the potential to fundamentally change the capital markets and financial systems – by replacing the need for third-party institutions to provide trust for financial, contract and voting activities. Convinced by the potential of this technology,

Digital Disruption: Game Changer for the Capital Market Industry

CSCover Story


Wall Street banker Blythe Mathers – the ex-JPMorgan Chase managing director who had helped develop and mature the US$58 trillion credit-default swap market in the US prior to the sub-prime crisis – is now the CEO of a New York tech startup that is designing software enabling banks, investors, and other market players to use blockchain technology to change the way they trade loans, bonds, and other assets.

The blockchain is an electronic ledger of digital events where each event is connected to the prior one via a digital chain algorithm. Hence, it is a vehicle for holding records and transferring value and maintains a continuously growing list of data records. It is stored on computers of anyone who has interacted with it and is updated and replicated with each entry. These computers are decentralised and not owned or controlled by any one central entity.

Of HFTs, Dark Pools & the Chamber of Secrets

Nervous investors sent stocks in cybersecurity soaring on 8 July 2015 when the NYSE stock exchange halted trading in all securities for about four hours after a “major technical issue”. Speculations were rife that a cyberattack was upon the US given that on the same day, United Airlines grounded all its US flights for a couple of hours after a technical glitch and the Wall Street Journal’s homepage went down displaying a 504 error message. Although it was later reported that a software update gone awry had triggered the NYSE trading halt, there were other speculations that HFTs overloading the system further exacerbated the issue given the stranglehold that HFTs have on market activity. Most experts agree that high-speed trading algorithms are now conducting more than half of all US trading, as increasing numbers of HFTs move in and out of securities in a fraction of a second - practically in a flash.

HFT is really, really fast trading using costly, but superfast algorithms on

hardware that is co-located with the servers for the exchange to further speed up transactions so that they are in the order of magnitude of micro-seconds (1 milli-second = 1,000 micro-seconds). This allows high frequency traders to dominate trading as there is then information asymmetry (vis-à-vis other traders) which could be misused to manipulate the markets and deceive other market participants. One means of deception could be via “quote-stuffing” where the HFT floods the markets with information, for example by making thousands of small, unimportant offers causing normal traders to lose valuable milliseconds and respond too late to interesting propositions.

A “flash crash” saw the DJIA briefly plunge more than 1,000 points in May 2010, almost 9% of its value, temporarily wiping out nearly US$1 trillion in market value. To put things in perspective, the flash crash happened on the same day as the general elections in the UK (the second general election since WWII to result in a hung parliament) and there was rising anxiety about the Greek debt crisis. The media was rife with speculations of cyberattacks. This flash crash event, no doubt imprinted in our memory, is allegedly caused by “spoofing”. This happens when a number of over-priced offers can be generated and cancelled immediately before anyone purchases them, leaving behind the illusion of high demand. Other traders react to this illusion, thereby resulting in an increase in price for that offer. The spoofer can now use previously acquired options – bought at an unmanipulated market price – to make significant profits.

Investigations into dark pool shenanigans and the subsequent fines by regulators are becoming more commonplace events. Credit Suisse has reached a tentative agreement to pay around US$85 million to settle allegations that it didn’t fully disclose to its clients how its dark pool was operated. UBS was recently fined US$14 million for dark pool violations.

Dark pools are off-exchange, private stock markets (separate from the main public stock exchanges) where investors can trade large asset blocks in secret anonymously. There is a time delay or publication delay from the time the deal is completed till the time the market is informed that it is impossible to know exactly what is happening in the broader market at the moment the trade occurred.

Proponents of this Alternative Trading System (ATS) would argue that it was originally designed to enable institutional investors to anonymously trade large blocks of shares with the specific intention of executing an entire (large) trade at a fixed price, which would otherwise be rather difficult in a public and visible exchange, given the volumes being traded. Nevertheless, use of dark pools disrupts the orderly operations of markets when it is manipulated by the pool operators and predatory HFT participants. The lack of transparency to the public investors also erodes the confidence in the public exchanges.

And more … Lower-cost robo-advisors provide automated, algorithm-based scientific portfolio management advice based on basic investments in low-fee index and exchange-traded funds without the use of human financial planners, whose opinions could be skewed by their own risk appetite. This nascent, but expanding industry poses an increasing threat to fund managers, brokers and financial advisors in the wealth management industry – especially so with the looming generational shift of wealth from baby boomers to millennials. Incidentally, Asia’s ultra-rich are expected to pass along nearly US$1 trillion in the next 10 years and US$3 trillion in the next 30 years to the millennials who are more technology-savvy value-based investors.

According to the 2015 World Wealth Report from Capgemini and RBC Wealth Management, in Asia-Pacific excluding Japan, over 75% of the high net worth investors (HNWI) would consider using

CSCover Story


CSCover Story

an automated advisory service, although perversely less than 20% of wealth managers in the region think that their clients would do so. Asia Pacific was ahead in this sentiment compared to the other regions with a global average of about 49% of the HNWI showing a propensity for automated advisory services.

In mid 2015, Overstock, an online American retailer with a market cap of circa US$430 million, was the first to offer a US$25 million corporate bond in the form of a cryptosecurity to qualified institutional investors. In Overstock’s circular to hedge funds, private equity groups and other potential Wall Street investors, CEO Patrick Byrne “believes that cryptotechnology can do for the capital market what the Internet has done for consumers”. The five-year cryptobonds offer 7% p.a., are unsecured and have no covenants, except provisions of both puts (right of bondholders) and calls (right of Overstock). These are bearer securities, whose ownership and transfer is recorded on a blockchain-based initiative on an Overstock’s alternative trading system called T0.com.

Impact of the Big Disruption

Such disruptions have the potential to transform capital markets in these four aspects: efficiency and speed, disintermediation, reduced transaction costs and improved customer empowerment.

Efficiency and speed. Currently, settlement and registration systems take at least several days to settle trades when investors buy and sell debt and equity securities or transact derivatives – for domestic trades. Trades involving cross-border parties take even longer. The blockchain technology has the potential to automate this whole process to happen in near real-time.

Disintermediation. The mushrooming crowdfunding industry is founded in large part on the promise

an industry engagement initiative by SIDC


of disintermediation. Rather than raise capital through debt or through venture capitalists or angel investors, crowdfunding allows start-ups or scale-ups to get direct connections to the investors via an online platform, thereby bypassing the “trusted” third-party intermediaries.

Blockchain automates trust; it eliminates the need for “trusted” third-party intermediaries. In the traditional market, buyers and sellers can’t automatically trust each other, so they use intermediaries to help give them the comfort they need. With blockchain, the decentralised ledger offers this trust. Investors can deal with each other and with issuers in private markets directly.

Reduced transaction costs. Given the disintermediation, there is significant potential to reduce transaction costs for investors and issuers. This applies also to P2P Lending, where ”trusted” third-party intermediaries are removed, thereby investors can lend at an interest rate that is higher than the low savings rate that they would obtain otherwise, and borrowers could borrow at a rate that is lower than what would be obtained otherwise. A June 2015 report backed by Santander InnoVentures, the Spanish bank’s fintech investment fund, estimated that “distributed ledger technology could reduce banks’ infrastructure costs attributable to cross-border payments, securities trading and regulatory compliance by between $15-20 billion per annum by 2022”.

Customer empowerment. Because of the automated nature of the robo-advisors, investors have around-the-clock access to global markets at

their convenience via self-service portals and need not make regular quarterly or annual appointments with their financial advisors. The improved tools for market access gives results in increasing convenience and ease-of-use to further empower investors.

Benefits of the Digital Disruption

The benefits of the digital disruption in the capital markets are many-fold.

Investors will benefit from a bigger choice of asset classes in which to invest, at a lower cost, with greater expectations of higher than risk-free rate returns. In addition, it should become much easier and quicker to enter into or exit trades or investments with increased efficiencies and convenience. Investor experience will also improve with the investments made into the institutional client web portals that cross multiple products and services, addresses the full trade life-cycle and provide degrees of personalisation in terms of format and content.

It provides a de-risking strategy for governments (and ultimately the tax payers!). Today, banks are deemed too big to fail and are bailed out as we’ve witnessed in the recent past in catastrophic situations, for instance the conversion of Goldman Sachs and Morgan Stanley into traditional banks to accept the Troubled Asset Relief Program (TARP) and the hurried sale of Merrill Lynch to Bank of America. However, with increasing alternative players within crowdfunding or P2P lending that bridge the excess supply of liquidity from retail or institutional investors with those who are in need and are willing to pay for it,

this reduces the dependency on the big banks.

In Malaysia, where SMEs make up over 97% of the businesses but contribute only 33% to the GDP – a far cry from the 51% contribution of SMEs to GDP in high income countries and even below the 39% mark for middle income countries1 – disruptive technology is helping to fund the real economy and drive Malaysia’s economic growth by stimulating growth for entrepreneurs and SMEs. The regulatory support to enable alternative financial solutions such as crowdfunding and Intellectual Property financing schemes provide alternate avenues for SMEs to raise capital to fund growth.

With technology repeatedly demonstrating its ability to commoditise non-relationship based, low value added areas, the time is now for the capital market players to either make the substantial investments to achieve economies of scale, or concentrate on areas such as advisory and building the depth of client relationship – assets that cannot be commoditised. Lastly, regulation clearly has a crucial role to play, to ensure fair, orderly, transparent and efficient markets that ensures investor and consumer trust and confidence.

Preetha Nadarajah is a freelance writer based in Kuala Lumpur.

1 As shared by Mr Saifol Bahri Mohd Shamlan, Deputy CEO, Implementation, SME Corp, Malaysia during the Intellectual Property (IP) Financing 2014 Conference http://aicb.draftfcbstaging.com/IPC2014/media_ centre.html


Friends with Benefits:The Symbiotic Relationship between Crowdfunding & P2P Lending with Traditional Financial Institutions

The Global Financial Crisis resulted in the double whammy of financial institutions (FIs) not being able to lend to creditworthy borrowers and collapsed interest rates giving low returns to savers. Nowadays, with increased trust in Internet banking security and more accessible credit history and rating information via external bureaus, this perfect confluence of factors has made it a favourable environment for alternative financing (AltFi) solutions such as peer-to-peer lending (P2P lending) and crowdfunding to bridge the latent market demands and the supply of capital from non-institutional lenders.

P2P Lending

P2P lending is a form of online marketplace lending using data-driven online platforms that connect borrowers to lenders, thereby bypassing the traditional FIs. Historically, lenders were primarily individuals, but this has now shifted to institutional investors; hence the term P2P lending and marketplace lending are now synonymous.

Notable US-based P2P lenders are Lending Club and Prosper, who have issued more than US$12bn in loans since their inception in 2007 and 2006 respectively. Although the cumulative P2P lending in the UK stands at over US$4.8bn as of Q2 2015, on a per capita basis, the UK market is still larger than the US. In the unbanked third world countries where traditional FIs have not built the banking infrastructure to serve the poor, P2P lending could provide a massive opportunity for these nations to skip a generation, leapfrog online and provide access to capital to the needy and worthy.

The P2P online platform provider has lower overhead costs by virtue of being branch-less and via speedier use of electronic data sources and technology-enabled underwriting models to automate processes such as determining a borrower’s identity and credit risk. By moving lending online, not only does the P2P lender have a cost advantage of over 400 basis points over traditional FIs, the overall borrowing process is also sped up to be in a matter of days, rather than weeks. The speed, convenience and lower-cost factors make P2P borrowing attractive for borrowers. The lenders also gain from the higher interest rates with P2P vs the lower savings interest rates in a deposit account.

Crowdfunding

P2P lending is for personal or business loans, whereas crowdfunding for businesses is typically used for specific projects or ideas by private ventures in the start-up or early growth stages. “There are four variations of crowdfunding: donation-based, rewards-based, equity-based, debt-based – which range from being more philanthropic to more investment based respectively,” explained Umar Munshi, Co-founder of Kapital Boost SME Crowdfunding at the recent 10th Islamic Markets Programme at Securities Commission Malaysia. “For the donation or rewards based crowdfunding, the investors do not get paid interest, but instead receive recognition or rewards such as perks or gifts. Debt crowdfunding makes up two-thirds of the crowdfunding industry. With equity crowdfunding to support the early start-up phase of a business, the investor receives equity stake for the contribution

into a given private venture in exchange for the investment,” explained Umar.

Equity crowdfunding is nascent and Malaysia is the first country in Asia-Pacific to legislate equity crowdfunding with six equity crowdfunding operators approved for operations with the platform launches expected by end 2015. As part of Securities Commission strategy to democratise finance in Malaysia, it has spearheaded deep and broad engagements with various stakeholders ranging from global thought leaders, the Malaysian angel and VC networks and also the broader Malaysian public via consultation and working papers to propose the regulatory framework and elicit public feedback on this.

CSCover Story



“There are no clear current definitions of Islamic crowdfunding currently since it is very new. The Islamic crowdfunding platforms are those that are positioned as being Shariah compliant or follow the spirit of Shariah financing covering halal businesses, have a social impact and provide risk sharing,” explained Umar. Given Malaysia’s position as a leading marketplace for Islamic finance with Malaysia’s Islamic finance assets accounting for 25% or US$423 billion of total global Islamic finance assets at end 2014, Islamic crowdfunding could potentially be the next big thing in AltFi.

The benefits across both AltFi solutions for lenders are that it provides a new asset class to support further portfolio diversification in striving for higher returns in comparison to other asset classes such as savings accounts, money market accounts or bonds. Furthermore, nothing parallels the feel-good factor of being able to give back to the community or a cause or in supporting a start-up or SMEs with ventures that are close to our hearts.

Impact to Traditional FIs – Disrupt First, Displace Later?

With the increasing awareness of P2P lending and the crowdfunding space, depositors and investors are more likely to consider this alternate form of investment to diversify their portfolio. This reduces the deposits received by FIs, limiting their access to low-cost funds.

Similarly rather than initiate a relationship with an FI for venture financing, entrepreneurs may turn to the crowds for funding via crowdfunding. For example, in 2014, a relatively unheard of Ipoh-based company called Salutica Allied Solutions Sdn Bhd, raised over US$185,000 on Indiegogo, an international rewards-based crowdfunding platform. This was almost 400% over its original goal of raising US$28,000 to market FOBO, a tyre-pressure monitoring system using Bluetooth technology that allows monitoring via your smart phones.

However, given that the legislation of equity crowdfunding in Malaysia allows for a maximum of RM3 million capital within a 12-month period and thereafter, a further RM2 million, equity crowdfunding is suitable at the project onset. For further capital investment to support the next stages of growth, an entrepreneur would still need the support of angel investors, VCs or banks. In such cases, AltFi actually piggy backs on the existing ecosystem and complements it.

How can incumbents fight back?

Traditional FIs should not be underestimated. They have the depth-of-pockets to acquire fintech innovators in order to complement and supplement their product portfolio and to support their innovation process. For instance, in South Africa, Barclays acquired a 49% stake in P2P lender RainFin and in Australia, Westpac has acquired an equity stake in P2P lender Society One.

Partnering with traditional FIs could help give AltFis scale. Given that at the outset of any AltFi solution, when the acquisition costs are higher than the revenue generated, a network effect is required to generate large volumes in order to optimize underwriting and customer acquisition costs on the borrower side and acquisition costs on the lender side. Instead of playing the role of the intermediary, FIs can play the role of lead generation to AltFi solution providers and facilitate funding to the former’s own customers profitably. For example, in the UK Santander has partnered with P2P lender Funding Circle, where Santander proactively refers SMEs to Funding Circle and Funding Circle signposts borrowers to Santander when traditional banking services are required, such as international banking expertise.

As is the case in the US markets, although less so in the UK, traditional FIs could also become an institutional investor in using their capital to fund loans on P2P lenders. A case in point: 70% of US P2P lender Lending Club’s

loans are sold to institutional investors – hedge funds, insurance companies and banks.

Traditional FIs could also commission disruptive products that cannibalise their own business or also move into the online lending themselves as was announced by Goldman Sachs recently! Goldman Sachs, a leading mammoth investment bank is planning to build an online lending unit from scratch and launch it in 2016! Large banks are not as nimble and swift as the fintech players. Time will tell how well elephants can dance – to borrow a pun from Lou Gerstner’s book on leading a great enterprise through dramatic change.One thing is for sure, disruptive innovation will result in winners and losers; the rare few will remain unscathed or unaffected. As a crowdfunding industry player, Umar hopes to see a balance between sufficient and comprehensive regulation without stifling the industry’s potential. “Legislation and the degree of enforcement also need to be implemented along with the industry’s growth, with a tight feedback loop between regulators and platforms,” opined Umar.

Preetha Nadarajah is a freelance writer based in Kuala Lumpur.

CSCover Story

8 engage@SIDC I December 2015


Fintech and Digital Innovation at World Capital Markets Symposium 2015

FFeature

“Markets and Technology: Driving Future Growth through Innovation” was the theme of the biennial World Capital Markets Symposium (WCMS) 2015 held on 3 and 4 September in Kuala Lumpur, reflecting the growing importance placed on fintech as a driver of significant change in the way financial markets and market players are reinventing and reimagining their business models to capitalise on new opportunities and defend their business against potential risks.

Organised by the Securities Commission Malaysia (SC), the WCMS series is a platform to promote informed debate led by global opinion leaders, policy makers, influencers, business and market leaders, and this year featured international business leaders, tech experts and prominent personalities who shared their ideas and insights on digital innovations such as mobile money, big data and cloud, crypto-currencies and P2P lending platforms.

SC Chairman Dato’ Seri Ranjit Ajit Singh in his opening address acknowledged that fintech is a growing trend that is here to stay. “As a regulator, I strongly believe that we could play a facilitative role in a number of ways – be it by assisting businesses in navigating the regulatory environment, sponsoring accelerator programmes or strengthening the venture capital and private equity ecosystem to provide much-needed financing for fintech entrepreneurs,” he said. To generate greater interest in the development of fintech and drive growth and innovation in the industry within the network of fintech stakeholders, the SC announced the launch of the “Alliance of FinTech Community” or “aFINity@SC” initiative at the symposium. In its capacity as Chair of the Malaysian Venture Capital Development Council (MVCDC), the SC will coordinate with other authorities to pursue key deliverables which include raising awareness, forming hubs to organise and nurture the fintech ecosystem, and providing policy and regulatory clarity to promote responsible financial innovation in this sector.

aFINity@SC will also assist firms in navigating the regulatory environment by facilitating discussions between businesses and relevant authorities to ensure that potential regulatory and risk concerns are appropriately taken into consideration.


Purposeful investing needs re-thinking in the Digital Age

Human Governance is concerned with human well-being – of self and others. At its most fundamental level, Human Governance is about each individual human being choosing to be vigilant about making decisions that affirm the Common Good through an eternal engagement with their own souls, ‘conscience’ if you may. This includes the drive to excel and do one’s best. In Human Governance language, this set of characteristics is referred to as manifesting “Oneness, Wholeness and Excellence”, respectively.

Capital markets is about making an impact in the long term, and maximising returns. It often seems the latter regularly supersedes the former in priority, either consciously or unconsciously. Much has been discussed about in the area of purposeful investing – such as socially responsible investing, impact investing, sustainable and eco-friendly programmes, and even Shariah compliant investing – and how this can be achieved.

The digital age has added some new dimensions to this. The internet and its ancillary effects has not only disrupted the way we work, promote ideas and consume, but now also changed how we help the needy, redefined the dimensions of what is viable and expanded what it means to make investments.

Let’s take Kiva Microfunds (www.kiva.org) as an illustration. Founded in 2005 as a crowdsourced microfinance institution in San Francisco, Kiva had in 2015 ten years later, distributed over USD$750 million in loans from over 1.2 million lenders to over 1.6 million borrowers averaging US$415 each – with a repayment rate of over 98%.

How Can Capital Markets Be More Human?

FFeature

In comparison, over USD$12 billion was lent in 30 years to 8 million members by Grameen Bank (www.grameen.com), founded by Dr. Mohammad Yunus who was awarded the Nobel Peace Prize in 2006 for pioneering microfinance. He started by lending to poor women using university students when he returned to Bangladesh as a Professor of Economics at Chittagong University in the 1970s.

Kiva had utilized the full capabilities of the internet to reach lenders and borrowers in 83 countries worldwide with only 450 volunteers, while Grameen Bank is limited to Bangladesh.

Another example is Kickstarter (www.kickstarter.com), a pioneering crowdfunding platform, changed the perception of what it means to invest, allowing over 9 million people to pledge over USD$1.9 billion, funding 92 thousand creative ideas since its launch in 2009. In 2014 alone, 3.3 million investors around the world to pledged over USD$500 million to over 22 thousand projects.

The very disruptive nature of the internet has also brought forth new ways of looking at investing, expanding what it means by returns and for what purpose. Additionally the ability of the internet to dis-intermediate middlemen has allowed both Kiva and Kickstarter to flourish and reach directly to those in need on either ends of the value chain. Creative business modelling coupled with innovative design allowed their websites to provide just the right information and reach out to the right audience.

Ingenuity applied for a single purpose – allowing people with creative ideas to get funded, not through the arduous traditional route of venture capitalists, institutional investors or bankers, but through crowdsourcing, made frictionless


through the internet. The focus is the individual human being.

The founders of these companies used their conscience to capitalize on the best capabilities of the internet to improve the well-being of their users and borrowers – a manifestation of wholeness (conscience), excellence (utilizing the best of technology) and oneness (Common Good and shared prosperity) respectively.

It is all too easy to loose sight of the individual human when we talk about investment, especially when millions are at stake. These two examples show it is possible to keep the human being front and center. After all, what is business if not to improve the well-being of the human condition? Humans are producers, humans are consumers, humans are managers, leaders and workers.

Human Governance is about being human.

In the world of the internet, digital world and virtual reality, humans can be easily be forgotten, made into avatars or morphed into whatever you like. Investment and funding are merely vehicles to make more money, forgetting that ultimately the consumers and the actual providers of revenue are human.

What had previously been prohibitive to organize and fund is now possible at a fraction of the cost – to link between the haves with the have-nots as easily as within cities as well as between continents.

Purposeful investing isn’t only about generating high rates of return for the backers – although majority of investors look to having improved bottom lines in a monetary form as the primary purpose. It

has to shift to be about human well-being. With Human Governance, investors can focus on the well-being of society and individuals – beyond maximizing financial returns. Coupled with purposeful investing, backers naturally look to improving human well-being in both tangible and non-tangible forms while achieving financial returns that are not necessarily profit maximising for the investor. It will also will be sustainable for the company and employees.

Human Governance is the principle with which we can employ purposeful investing.

FFeature

About the Author

Tan Eng Tong, Suleyman. Mr Tan is currently the Chief Operating Officer at Putra Business School, Home to Human Governance. He had led teams around the world from USA to Europe and Japan to challenge the norm; held senior executive positions in MNCs like HP and Seagate to develop new hundred-million dollar businesses; helped build start-ups in Silicon Valley, Singapore and Beijing; and advised companies like AirAsia, Sony, Microsoft and Intel. He recently returned to Malaysia under TalentCorp to apply Human Governance principles to Putra Business School.

He is a Chartered Engineer (UK), graduated from Imperial College London, has an EMBA from Cranfield Business School in Bedford UK and is a certified Six Sigma Black Belt Champion.

He can be reached at [email protected]


NSIDC News

In April 2015, SIDC began a project to develop an industry competency framework (ICF) for the Malaysian capital market industry, which aims to serve as a comprehensive, practical, industry-driven and globally benchmarked guide that organisations can use to support their recruitment and remuneration strategies and structure staff’s career development. In addition to describing the requisite knowledge, skills and attributes for professionals in the capital market to perform regulated activities competently, it will set minimum competency requirements for entrance to the market, establish proficiency levels for talent development and facilitate the development of career pathways for market professionals. As it is developed not only to address current industry requirements but also to cater for possible future needs, the framework will be reviewed regularly to align with international best practices and ensure its ongoing relevance.

Development of an Industry Competency Framework for the Malaysian Capital Market

Together with the SMR Group, the consultant for this project, SIDC held numerous meetings and discussions with intermediaries as part of its data gathering exercise. Under Phase 1 of its data collection exercise, eight focus group discussion (FGD) sessions involving a total of 152 industry participants were conducted to gather qualitative information on all permitted and regulated capital market activities.

The initial findings from the FGD sessions were then shared with selected groups of intermediaries via panel interview sessions, with the aim of obtaining further input and clarification. So far, we have conducted eight panel interviews sessions. Apart from that, in July 2015, SIDC organised an ICF industry engagement session to share the objectives of the competency framework and to obtain industry input in developing this framework. This ICF industry engagement session was attended by 120 participants.

The ICF project is expected to be completed next year and will include elements such as performance criteria, learning outcomes and development guide, which will also form the basis for SIDC’s learning curriculum, fit-for-purpose learning and development solutions, capital market qualifications and SC Licensing Examinations.


NSIDC News

Bridging the Capital Market Talent Gap: Identifying Needs and Priorities- An Industry Roundtable

Talent gap challenges have been high on the agenda of employers in the capital market both at the national and global levels in recent years, with intense competition for qualified and competent capital market talent unabating domestically and internationally.

In view of the increasingly complex, high-risk and interconnected global environment we are operating in, initiatives to strengthen knowledge base and skills that support the expansion of the capital market into high value-add areas are crucial, as acknowledged in the

Securities Commission Malaysia’s Capital Market Masterplan 2.

Recognising that identifying industry needs and priorities is imperative if the capital markets industry is to move forward strategically in this war on talent, SIDC presented our first roundtable on “Bridging the Capital Market Talent Gap: Identifying Needs and Priorities” under our Industry Insights series on 11 June 2015 at the Mandarin Oriental Hotel, Kuala Lumpur. The roundtable, with the support of the Rating Agency of Malaysia (RAM) and Talent Corporation Malaysia (TalentCorp), successfully brought together C-suite and human resource representatives of more than a dozen capital market industry players to discuss and determine practical human capital development initiatives and solutions in countering challenges such as staff poaching, brain drain and business cost pressures.

Among the roundtable recommendations to attract, develop and retain the best talent to support capital market growth include co-funding and co-opetition of talent training costs among market competitors, facilitating cross-border talent mobility, exploring tax incentives and enhancing talent development collaborations between education institutions and employers.

As the leading capital market learning and development solutions provider in Malaysia and the growth and emerging markets, SIDC aims to continue our efforts in engaging and collaborating with the industry to understand their talent needs. Through these initiatives we will be able to collectively develop a network to achieve overall advancements in human capital development.


The Capital Market Director Programme (CMDP) serves as an exclusive platform for directors of licensed intermediaries to be equipped with the relevant knowledge, skills and abilities, from basic to intermediate level, to meet the expected competencies required of a board. The programme is also designed to allow directors and other participants to explore and deliberate on pertinent issues affecting the industry from multi-stakeholder perspectives.

Currently, the CMDP is compulsory for all directors of Capital Markets Services Licence (CMSL) holders for dealing in securities, dealing in derivatives and fund management in relation to portfolio management.

It is a modular programme comprising four modules:

Module 1: Directors as gatekeepers of market participants

Module 2*: Business challenges and regulatory expectations – What directors need to know?

* This Module is offered as Module 2A (for directors of CMSL holders undertaking dealing in securities and dealing in derivatives) and Module 2B (for directors of CMSL holders undertaking fund management)

Module 3: Risk oversight and compliance – Action plan for board of directors

Module 4: Current and emerging regulatory issues in the capital market

The first CMDP was offered in May 2015. All directors appointed prior to 1 May 2015 are given 18 months from 1 May 2015 to complete the programme while new directors (i.e. those appointed after 1 May 2015) are given six months from the date of their appointment to complete the programme.

As at end September 2015, eight batches of the programme have been completed. These sessions were attended by 241 participants, out of whom 126 have completed the requisite CMDP modules. Feedback obtained indicates the programme is well-received by the participants, and the information gained is useful to their work.

Continuous engagement with industry leaders provides SIDC with an in-depth understanding of the capital market’s talent development needs. Hence, the CMDP alumni is a key initiative that SIDC has implemented to maintain an ongoing connection with participants who have completed the programme, because their valuable views and feedback from the top level perspective is very important to SIDC in developing and delivering the right learning propositions to directors and their organisations. It is also hoped that these alumni events will become a good avenue for directors to connect and exchange ideas on leadership experience. On 27 November 2015, a workshop entitled “Doing Business in a Responsible Way” facilitated by global advisory and investment firm KordaMentha was held at the Hilton Kuala Lumpur for more than 30 alumni members.

Detailed programme information and the CMDP schedule are available at www.sidc.com.my

Capital Market Director Programme

NSIDC News


Corporate Governance and Investment Decision-Making – What Directors Need to Know

NSIDC News

Two sessions of the corporate governance programme for directors, “The Interplay between Corporate Governance, Non-financial Information and Investment Decision - What Boards of Listed Companies Need to Know”, were held at Bursa Malaysia in August and September 2015.

The programme’s aim was to raise the level of awareness among directors of listed companies of the nature, role and prospect of impact investing and the key role of a more effective and meaningful corporate disclosure including that of policies and practices on corporate governance (CG) in the investment decision making framework. The half-day programme also offered an insight on how company-specific governance factors that relate to the quality of a company’s governance and its challenge to remain sustainable have become benchmarks for investors in making informed impact investment decisions.

Wan Kamaruzaman Wan Ahmad, the CEO of Retirement Fund Incorporated (KWAP) facilitated the opening segment of the programme entitled “Corporate Governance and Non-financial Information – Its Significance for Investment Decisions”, which looked at how non-financial information (NFI), including that pertaining to corporate governance as disclosed in the CG statement, sustainability report, statement of risk management and internal control and other non-financial narratives, influences investment decisions of investors and why there is a need for companies to integrate CG and NFI into their business model and strategy.

The second part of the programme on “The Landscape of CG and NFI Reporting – What Lessons Can Be Learnt” was presented by Salleh Hassan, Director, Examinations & CPE and Corporate Governance at SIDC. This segment dealt with the current state of reporting of CG and NFI by listed companies where examples good reporting practices and gaps in CG and NFI reporting were identified. The learning was enhanced through case study comparisons of excerpts of non-financial narratives against the expectations of extant guides and those of stakeholders.

The two sessions were attended by 121 members of board of directors of listed

companies. Based on the feedback gathered, the programme has helped to bring home the message on the importance of NFI to a company, how it can be incorporated into a company’s business model and strategy, and how non-financial disclosures including CG statement, sustainability report, statement of risk management and internal control, and reports of board committees are being used by the investing community in their investment decision-making process.

For more information on CG programmes, visit www.sidc.com.my or contact us at +603 - 6204 8664/8857.


In timely response to an observed higher demand from industry for ASEAN capital market courses due to the move towards capital markets integration in the region, SIDC launched the ASEAN Markets Programme Series earlier this year to highlight the growth and opportunities in ASEAN and the economic trends in the region.

The programme was created on the back of the findings of a training needs analysis of 95 industry respondents and a subsequent survey to further understand the industry’s needs on ASEAN and facilitate programme design, comprising 71 respondents from associations, investment banks, stockbroking companies, commercial banks and others. Based on the comprehensive feedback received, SIDC developed a programme series comprising the following five topics:

• Series1:InvestingintheASEANMarkets

• Series2:InvestASEAN:TheASEANExchanges

• Series3:ASEANStockMarketsandTrends

• Series4:ASEANMarketsStock-PickGuide:WhatInvestors Should Look Out For

• Series5:InvestinginMultipleASEANAssetClasses

The programme series in its entirety aims to present participants with deep insights into the current developments in the ASEAN region including its economic outlook, capital markets prospects and the opportunities, challenges and risks it faces as a region in serving the various groups of regional and global investors in the current global economic environment. It also explores cross-border investment opportunities and discusses the future of ASEAN as a single integrated economic community.

Targeted at dealer’s representatives, analysts and fund managers, the innovative programme features interactive presentations, case studies and Question-and-Answer sessions as its mode of delivery. Roll-out of the subsequent series is in the works and updated information on the ASEAN Markets Programme Series is available on SIDC’s website, www.sidc.com.my.

The ASEAN Markets Programme Series: Highlighting the Growth and Opportunities in ASEAN

Building Talent for Islamic Finance

NSIDC News

Islamic finance has been experiencing strong double digit growth in the last decade, gaining worldwide acceptance and successful integration into mainstream markets globally. In tandem with this, Malaysia, as a success story in Islamic finance, has been recognised for its capability in Islamic finance human capital development to drive the industry’s continuous growth.

Supporting the creation of a comprehensive industry talent pool for the Islamic capital market, SIDC has developed fit-for-purpose programmes to cater to participants of different levels and job scopes. At the entry level, SIDC delivers the Securities Commission Malaysia (SC)’s eight-week Islamic Capital Market Graduate Training Scheme (ICMGTS) twice a year to train fresh entrants for the local Islamic capital market, where subject matter experts who comprise academicians and industry practitioners offer industry-relevant knowledge and quality instruction to help participants gain invaluable skills and fast-track their careers. The programme’s focus on experiential, hands-on learning based on the real-life experiences of the trainers themselves is particularly valued by the participants.

ICMGTS applicants are required to undergo a rigorous assessment process before being accepted into the programme. Recognising their talent and future contribution to the capital market, the programme offers each participant a monthly allowance of RM2,000 while in training.

Since its launch in July 2009, the ICMGTS has trained 480 graduates from various backgrounds, from both local and foreign universities. SIDC also assists ICMGTS graduates in sourcing for career opportunities through its established ties with the industry. To date, 85% of ICMGTS graduates have been employed by the capital market industry, signifying its strong track record in enriching the Islamic capital market talent pool.

For senior Islamic capital market professionals and regulators, SIDC offers the Islamic Markets Programme (IMP). The annual SC flagship programme, led by


NSIDC News

speakers comprising leading Islamic capital market experts from the SC and international industry practitioners, covers an extensive array of topics ranging from Shariah fundamentals and underlying concepts and mechanics of Islamic finance to regulatory and current issues in the global Islamic finance

On 29 July 2015, the graduation dinner for Batch 12 of the ICMGTS was held at the Kuala Lumpur Golf and Country Club, celebrating the achievement of 39 participants in successfully completing the programme. Training for the current Batch 13 commenced in October 2015 and is scheduled to end in December 2015.

A participant at the 2015 IMP from Brunei that engage@SIDC spoke to commended the programme for “bringing in fresh ideas and offering new perspectives towards the development and growth of Islamic finance” as well as for the diversity of speakers “coming from different backgrounds and areas of expertise”.

industry. It is an established personal development and networking platform for regulators, bankers, senior managers, staff of government bodies, fund managers and academicians. Themed “Revving Up Islamic Finance to the Next Phase of Growth and Development”, this year’s IMP – the

tenth in the series – was held from 7 to 10 September 2015. The discussions centred around emerging product innovation trends, appropriateness of facilitative governance frameworks and its supervisory oversight challenges. Participants had the opportunity to engage with subject matter experts on the shared value creation and socially responsible investing (SRI) initiatives that are reshaping the Islamic finance landscape, such as SRI sukuk, Waqf and crowdfunding. The challenges of building a sustainable Islamic financial services talent pool with the right competencies to take the industry to the next phase were also deliberated.

The IMP, which has received more than 400 participants since its launch in 2006, has been consistently rated highly by attendees for its quality and objective. “The IMP is a noble initiative by the regulator in ensuring continuous knowledge update and efforts by various stakeholders to upgrade Islamic finance product offerings in Malaysia,” said the institutional dealing head of a Malaysian stockbroking firm, who added that feedback from market players is essential for realistic target setting of action timelines by the regulator.


When a speaker opens his session with a personal account of his disruptive record at school and declares that “fear and embarrassment does not exist in my life”, all expectations for a conventional, textbook-style presentation go out the window.

This was the preamble by Alex Malley – visionary CEO of CPA Australia, best-selling author, award-winning educator, TV host and LinkedIn Influencer – at the “Life Lessons from The Naked CEO” breakfast talk on 21 September 2015, which set the tone for what turned out to be a gratifying, incisively honest and motivating talk on how disruptive thinking, dreaming big and living a full life that is “90% vision and 10% risk management” has led him to espouse a unique leadership style which saw the successful transformation of the CPA Australia into a forward-looking, innovative and relevant brand befitting a leading global accounting body. Throughout the talk, Alex wowed the 150-strong audience comprising capital market professionals, business leaders and regulators with his nuggets of leadership, people management and parenting wisdom. Considering himself as a teacher first and foremost, Alex is passionate about mentoring as part of his responsibility as a leader. In establishing thenakedceo.com, an online mentoring community for students, Alex succeeded in engaging two million young people by offering them career and “real world” advice as CEO of CPA Australia. His noteworthy media-savvy approach on leadership subsequently landed him an invite to become a LinkedIn Influencer, where he now shares his leadership insights with a network of more than 300 million professionals regularly. Such initiatives have played a major role in increasing CPA Australia’s brand profile and recognition among future business leaders of the world. “Life Lessons from The Naked CEO” was organised by the Securities Commission Malaysia (SC) and SIDC in collaboration with CPA Australia. It is part of SIDC’s industry insights series – an initiative to strengthen our engagement with the industry through talks, seminars and roundtables on leadership insights, industry-relevant research and reports that support or facilitate capital market development.

Inspirational Life Lessons from the Naked CEO

NSIDC News

At the book-signing event for Alex’s best seller, The Naked CEO, after the talk


NSIDC News

Alex with Datin Teh Ija Mohd Jalil, SC Executive Director, Corporate Resources Division, who delivered the welcome remarks at the breakfast talk.

Alex with SC and SIDC Chairman Dato’ Seri Ranjit Ajit Singh

Universiti Malaysia Sarawak (UNIMAS), in collaboration with SIDC and supported by the Malaysian Institute of Accountants (MIA), organised the International Conference on Contemporary Issues in Accounting and Finance (CoCIAF) from 8 to 10 October 2015 at the Hilton Kuching, Sarawak. The conference, themed “Theory meets Practice”, provided a lively and engaging platform for academicians, researchers, industry practitioners, and policy makers to interact and exchange ideas and thoughts on the issues affecting the Accounting and Finance industry today.

Offering participants informative industry plenary sessions and academicians parallel sessions to present their papers, the CoCIAF 2015 set the stage for interactive and enriching discussions. Believing that every theory can be implemented and applied, UNIMAS drove home the “Theory meets Practice” idea wherein the gaps between academic peers and industry practitioners are bridged. The conference also welcomed participants from Indonesia, Japan, and United Arab Emirates, who took the opportunity to network and share their country-specific insights.

SIDC Directors Jennifer Lopez (Director, Corporate Strategy, Brand and Business Partnerships) and Salleh Hassan (Director, Examinations & CPE and Corporate Governance) presented papers at two sessions on Capital Market Talent Development and Management, and Malaysia Corporate Transparency and Governance Issues during the conference.

UNIMAS-SIDC’s International Conference on Contemporary Issues in Accounting and Finance 2015


Today’s annual report should reflect the entire organisation and its thinking, and not be limited to just the financials. This “integrated thinking” was the focus of the CFO Dialogue 2015, themed “Integrated Thinking, Sustainable Business Success” which was jointly organised by the Malaysian Institute of Accountants (MIA) and Chartered Institute of Management Accountants (CIMA), and supported by SIDC. Datuk Zaiton Mohd Hassan, Vice President, MIA, urged delegates to do away with silos in their respective organisations, saying that institutional investors today were looking at different aspects of the companies they invested in, compared to what they scrutinised before. “Don’t just go for form,” she said, emphasising that the tone from the top was imperative. “Go for substance. Be honest.”

In his keynote address, Charles Tilley, Chief Executive, CIMA, pointed out the importance of having a continuous understanding about what is going on, internally and externally. “This requires a change in behaviour,” he said. “New skills will be important to cope with the new reporting system which is now developing, bearing in mind that intangible assets are becoming more valuable to companies than they ever were.”

Adding that there was a need to track “value creation” stories, not just financial outcomes, he said that although the idea of Integrated Reporting (IR) was gaining traction locally, overall take-up has been slow. He urged the abolishing of the “silo thinking” prevalent in many local firms, for more inclusive reporting that brings together all factors affecting a firm, its environment and stakeholders. Acknowledging that this was a tall order, he stressed that this will nevertheless impact positively on value. “If we can get IR right, we can drive business better – which will be a good thing,” he said.

Paul Druckman, CEO, IIRC, spoke at the beginning of the interactive dialogue segment which focused on “Breaking the Silos for Value Creation.” Delegates analysed their respective situations and discussed how to manage issues. The groups were facilitated by Kasturi Nathan, Partner KPMG Advisory; Venkkat Ramanan, Head, South East Asia CIMA; Richard Bedlow, Executive Director, Assurance, PwC; Chong Chen Kian, Director, Professional Standards and Practices, MIA; Chris Hill, CEO SEA, Black Sun Pte Ltd; and Douglas Brown, Executive Director, BDO Consulting. Group participants represented diverse industries, including manufacturing, oil & gas, telecommunications, banking, plantations and construction.

CFO Dialogue 2015: Focus on Integrated Reporting

Druckman also provided updates on IR and how it was being handled in various countries around the world. About 40% of the top 30 annual reports are currently presented in integrated format, and many companies are showing interest in transitioning into it. More integration has been requested as research has shown that companies which practise IR are doing better than companies which don’t. “Over 1,000 companies are now doing IR,” he revealed. “And more than 750 are participating in IR networks globally.”

The Securities & Exchange Board of India (SEBI) is pushing for IR and IR is already a requirement in South Africa. Japanese multinationals NEC, Fujitsu and Mitsubishi have taken up IR; 16 Korean companies – including Samsung and NKS Telecom – have done so too. In Hong Kong, the Swire Group is doing IR and in Singapore, the Marine Port Authority, DBS and the Singapore Stock Exchange are all doing it. Malaysian companies Sime Darby, Astro, Petronas and Kulim Plantations have taken it up.

A Skype Dialogue session was held with Dr Joydeep Chatterjee, General Manager, Corporate Quality Assurance, Kirloskar Bros Ltd of India. KBL has successfully implemented IR, despite many challenges. A panel discussion followed, moderated by Brown. Panel speakers – Charles Tilley, Chief Executive, CIMA, Thivanka Rangal, Group CFO, edotco Group, Rozaini M Sani, Senior VP, Finance & Corporate Services, Johor Corporation, and Nora Abd Manaf, Group Chief Human Capital Officer, Maybank – talked about how their respective firms managed talent. Relating the capacity of an organisation’s talent to its ability to cope with IR, she emphasised, “Everyone has a direct stake in ensuring the whole story is told; we all need to be part of the solution.”

MIA jointly promotes the IR initiative with various parties like the Securities Commission Malaysia and Bursa Malaysia. On 18 December 2014, MIA established the Integrated Reporting Steering Committee (IRSC) to help companies adopt IR, and in early August 2015, conducted an IR roundtable with investors and an engagement session with public-listed companies.

This article is contributed by the Malaysian Institute of Accountants (MIA).

NSIDC News


NSIDC News

Financial Services Industry Aidilfitri CelebrationOn 12 August 2015, SIDC, together with our Affiliate Institutes comprising Asian Institute of Finance, Asian Institute of Chartered Bankers, The Malaysian Insurance Institute and IBFIM, played host at the Financial Services Industry Aidilfitri Celebration at Lanai Kijang, Bank Negara Malaysia. Guests comprising financial services industry players and participants, representatives of industry associations and academicians were in high spirits at the open house as one and all enjoyed the sumptuous spread, the opportunity to network and the festive cheer.


Employing psychometric assessment technologies is one of the many avenues that SIDC is keen to explore to design, evaluate and improve examinations as well as identify training and development needs of participants of the capital market, among other things. For this purpose, SIDC is looking into potential collaborations with the Psychometrics Cluster of MIMOS.

Notably, collaborations with MIMOS on psychometric assessment methodologies focusing on the quality assurance aspects of validity, reliability and fairness will be relevant to the SC Licensing Examinations (SCLE) framework, which is currently being reviewed to be aligned with industry requirements and developments in assessment methodologies.

In line with this, the Examinations and CPE team of SIDC had paid an educational visit to MIMOS at its office in Technology Park, Bukit Jalil. The SIDC delegation, headed by Salleh Hassan, Director, Examinations & CPE and Corporate Governance, was received by Dr. Haniza Yon, the Director of MIMOS’ Psychometrics Cluster and her team. Presentations on the background and core activities of both SIDC and MIMOS were delivered, followed by a short discussion on the possible areas of collaboration such as consultancy and transfer of technology.

It is hoped that such collaborations will harness the latest tools and technologies to assist SIDC in developing a competent, world-class talent pool for the Malaysian capital market.

Forging Collaborations for the Enhancement of Assessment Methodologies

Psychometric’ is derived from the Greek words ‘psyche’ (mind) and ‘metron’ (measure). It can be described as the science of measuring mental attributes encompassing the theory and technique of educational and psychological measurement, including the measurement of knowledge, abilities, attitudes and personal traits. It is one of the most powerful and rigorous tools that can be employed in fields such as educational assessment, human resource allocation, economics, behavioural genetics, epidemiology, artificial intelligence, security and forensic science.

MIMOS is an agency under the Ministry of Science, Technology and Innovation (MOSTI) and is Malaysia’s forefront technology provider in Information and Communications Technology, Industrial Electronics Technology and Nano-Semiconductor Technology. MIMOS contributed its core technological competencies towards raising Malaysia’s local, regional and international market competitiveness. It has 10 Research and Development areas, one of which is on ‘Psychometrics’

NSIDC News


Starting Smart by Starting Right: 5 Investment TipsIf you are frustrated with the returns earned from your savings accounts, perhaps it is time you consider taking your first step into the world of investing.

Tip #1: PlanningBefore you start investing, consider your:

Financial goalsSet a clear goal of what you want to

achieve by investing. Are you looking to grow your money or generate

income? Are you investing for your retirement (growth), or are you looking

for a source of passive income (long-term)?

Risk appetiteUnderstanding the risks, as well as

your ability to stomach them (i.e. if you lost your capital) will have an impact

on your financial strategy. If you want your money to grow significantly over a shorter period of time, be prepared

to invest in riskier assets to achieve that growth. However, if the potential downsides are greater, you may have

to consider realigning your goals.

AffordabilityBe realistic about how much you can afford to invest. Assess all your liabilities, such as debts, insurance premiums and living costs, to see how much cash you actually can afford to invest.

Time frameAfter you have determined your goals, set a time frame for when you would want to achieve them. From there, you can figure out the rate of return required in order to achieve your investment goals within the set timeline.

a b

c d

LULearning Updates



Tip #2: Always start with the basics

It is impossible to pick the perfect moment to invest in or to beat the market. We recommend you improve your chances of maximising returns by drip-feeding your money into a fund on a regular basis (once a month), rather than investing a lump sum. This is also known as Ringgit cost averaging.

For example, suppose you invest RM200 monthly in your UTFs or ETFs. When the market is up, your investment will give you less shares. When the market is down, your investment will give you more shares (due to the cheaper price). Over time, you would have averaged the cost of those shares and accumulated more shares. When the market goes up again, you will make more money.

To make real money in the market, you don’t have to invest in individual stocks. There have been many investors who have made their fortunes using unit trust funds (UTFs) and exchange-traded funds (ETFs).

UTFs and ETFS tell you exactly which stocks you own and in what proportions, which gives you predictable exposure to the stocks of your choice. Although avoiding individual stocks can be a smart move for novices, there is an alternative way for beginners to invest. If you focus on stocks that tend to be less volatile than the overall market, you can get specialised exposure to stocks that have promising long-term prospects.

Tip #3: Invest regularly to minimise losses

Types of stocks that you should look for are blue-chip stocks, those which are offered by large, prominent, stable companies with strong competitive advantages trading at reasonable valuations. The key to this predictability is to identify companies with strong competitive advantages trading at reasonable valuations.*

For example, consumer staple related stocks such as food, cloth and medical supplies are generally perceived safer than the overall market. This is because even in tough economic times, people will still need these products.

* In general, blue chip means stocks offered by a company with a national reputation for quality, reliability, and the ability to operate profitably in both positive and negative economical climates. These companies are usually very well-established and have little volatility. They also usually pay consistent dividends. Investing in these companies can be expensive but the risks are relatively low.

$

LULearning Updates



Tip #4: Diversify

Source: http://www.defaqto.com/advisers/zones/dfm-zone/features/what-can-financial-advisers-expect-to-see-in-a-portfolio/

The best method of protecting capital is to diversify, which involves dividing up your lump sum across a portfolio and investing those portions into a variety of companies, asset classes or global markets. As some markets fall, others will rise and cancel out the losses. How you spread your money will be determined by your attitude to risk.

UTFs and ETFs provide automatic diversification for individuals who don’t have enough assets or experience to manually create a diversified portfolio. Every Ringgit you invest gets split across different stocks, protecting your portfolio against potential catastrophic events that can hit an individual stock.

LULearning Updates



Speak to an investment advisor or do your research online to find out what your available options are based on your financial goals, risk profile and timeline. Once you understand all the different types of investments (and their pros and cons) you will be able to make an informed investment decision and take more calculated risks.

Time is a key ingredient in becoming a successful investor and maximising the benefits of compounding interest. You are never too young to start putting away a small amount of money on a monthly basis for investing. The longer you invest, the more money you can potentially make.

So start smart, start right and start fast!

This article is sponsored by Securities Commission Malaysia, under its InvestSmart initiative.

© Securities Commission Malaysia (SC). Considerable care has been taken to ensure that the information contained here is accurate at the date of publication. However no representation or warranty, express or implied, is made to its accuracy or completeness. The SC therefore accepts no liability for any loss arising, whether direct or indirect, caused by the use of any part of the information provided. The information provided is for educational purposes only and should not be regarded as an offer or a solicitation of an offer for investment or used as a substitute for legal or other professional advice. For enquiries regarding sharing, republishing or redistributing this content please write to: [email protected].

Tip #5: Seek financial advice from the experienced

LULearning Updates



LULearning Updates

New phase of investor education programmes takes off From January to June 2015, SIDC conducted 48 investor education (IE) seminar sessions nationwide under the InvestSmart initiative, reaching out to 5,930 participants from all walks of life. A new phase of investor education programmes has since kicked off, promising more innovatively presented informative sessions for the public. Those interested to participate or those who wish to nominate their clients to attend may log on to www.investsmartsc.my for registration information or contact Mr Mohammad Izwan Sanusi at 03-62048471 for more details.

The InvestSmart Stock Market and Unit Trust Seminars for Retail Investors are Back!InvestSmart is an investor empowerment initiative by the Securities Commission Malaysia (SC) that seeks to create more informed investors who are self-reliant and able to make investment decisions that are right for them. And now back by popular demand are the InvestSmart Stock Market and Unit Trust Seminars for Retail Investors, a nationwide roadshow designed to guide investors to make smart stock market and unit trust investment decisions.

The Stock Market Seminar aims to arm investors with a sound understanding of investing in the stock market and to raise awareness of the risks associated with equity investment, while the Unit Trust Seminar will cover the basics of unit trust investing, reading the prospectus and annual report, dealing with qualified professionals, monitoring investments, risk and diversification as well as investor protection.

Seminar participants will learn useful tips on investing in the stock market or unit trusts, including how to select quality stocks and avoid pitfalls, investor’s rights and responsibilities, methods of investing wisely in the capital market and more.

Interested members of the public or those who wish to nominate their clients to attend may log on to www.investsmartsc.my for registration information or contact Mr Mohammad Izwan Sanusi at 03-62048471 for more details.



Since its launch in 2001, the Continuing Professional Education (CPE) programme has come a long way in fostering a learning culture among capital market professionals in Malaysia. However, how many market professionals are actually familiar with the programme? Where should you go if you need further information?

Back to Basics: Continuing Professional Education (CPE)

LULearning Updates


LULearning Updates

What is CPE?

CPE is a mandatory programme created to equip and update capital market professionals with the essential technical knowledge, skills and ethical standards to better serve market investors and the industry.

Capital market professionals are required under the law to collect 20 CPE points within a specified period in order to continue performing the activities prescribed under the Securities Commission Malaysia’s (SC) Licensing Handbook as well as the Guidelines on Investor Protection jointly issued by SC and Bank Negara Malaysia.

To comply, these professionals, namely the licensed individuals and employees of registered persons, may choose to participate in CPE-recognised activities which consist of:

• active learning – by attending CPE-approved courses; and

• development of others - by sharing their knowledge and expertise with their peers and the industry at large through the following avenues:-

o serving in CPE-approved industry associations or committees;

o speaking on topics or subjects relating to the capital market;

o writing materials or works in a recognised business publication; and

o serving the Securities Commission Malaysia as an expert witness.

Where do I get further information?

If you need more information on CPE requirements, simply visit the Securities Commission Malaysia’s website at http://www.sc.com.my/licensing/continuing-professional-education-cpe/.

Alternatively, drop an email to the CPE Secretariat at [email protected].


A competent financial sector workforce is essential to ensure the reputation of Malaysia as an international financial centre of good standing. Competence forms part of the fit and proper requirements and is assessed with regard to the person’s education and qualifications together with relevant experience. The SC Licensing Examinations are designed to set a minimum standard of competency required of individuals who wish to act as intermediaries in the Malaysian capital market as prescribed in the Licensing Handbook or the Guidelines on Investor Protection respectively.

SIDC is responsible for the conduct of the SC Licensing Examinations and offers 13 examinations modules in the form of multiple choice questions. There are three levels of cognitive skills being tested, namely knowledge, comprehension, and application and analysis. The knowledge level requires studying, absorbing and recalling the memorised information. The level of comprehension requires an ability to grasp and understand the meaning of the principles or concepts for each subject. And finally, the application and analysis level – the highest level of cognitive skills for licensing examinations – tests the candidate’s ability to relate and apply the acquired information in market practices.

In general, to identify individuals who are competent for a particular industry, licensing examinations focuses on three aspects, namely validity, reliability, and fairness. Validity establishes the link between examination scores and competencies for a profession while reliability deals with accuracy and consistency of candidates’ score in responding to items in the question papers. Fairness involves consideration taken in setting standards which defines the decision to pass or fail a candidate.

A Closer Look at the SC Licensing Examinations

Question Development and Review

Each module has its own examination matrix (test specifications) to ensure the accuracy and consistency of candidates’ scores in responding to items in an examination set. The examination syllabus is divided into sections with the maximum composition of questions from each section and cognitive skills predetermined. All items (questions) are linked to a content area and cognitive skills in accordance with the examination matrix. Therefore, all question sets for a particular module are standardised, not only in terms of the number of questions, but also in terms of content and cognitive skill distribution.

Items developed internally or by external writers undergo a review process led by SIDC using techniques propagated by psychometricians. The goal of the review is to develop good examination questions in terms of format, stem, distractors, key and cognitive complexities.

The next stage of the review process involves the Licensing Examinations Review Committee (LERC) comprising at least four senior representatives knowledgeable in the capital market industry from the SC, capital market institutions and industry associations. This thorough process cultivates adequacy, quality, relevance and accuracy of the syllabus, questions and coverage of the SC licensing examinations in the Malaysian capital market.

Sample ItemWhich of the following dividend theories suggests that investors prefer higher dividend income to future capital gains?

•Bird-in-HandTheory•TaxPreferenceTheory•ResidualDividendPolicy•DividendIrrelevanceTheory

STEM

ANSWER

OP

TIO

NS

DIS

TR

AC

TIO

NS

LULearning Updates


LULearning Updates

A Continuous Process: Statistical Analysis

The development of questions is an on-going process as once an exam is active, item analysis is conducted to identify items that exhibit problematic statistics. In general, two indices are calculated – the Difficulty Index and the Discrimination Index. The Difficulty Index is really the “easiness” index as it shows the percentage of all students who answered the item correctly. Items that are extremely easy or extremely difficult are removed from the active examination set and flagged for LERC review since they contribute little to measurement precision.

The Discrimination Index is a measure of the effectiveness of an item in discriminating between high and low scores on a test, based on the assumption that high-achieving students will tend to choose the right answer and low-achieving students will tend to choose the wrong answer. Items that exhibit negative discrimination are removed from the active examination set flagged for LERC review.

What’s in the Pipeline?

In ensuring the standards and relevance of the SC Licensing Examinations (SCLE), SIDC has embarked on the review of the SCLE framework to align our best practices with industry requirements and recent developments in assessment methodologies, working closely with the relevant stakeholders through engagement sessions and consultation. The review takes a holistic approach and focuses on the quality assurance aspects of validity, reliability and fairness of the entire SCLE framework. The whole spectrum of the examination development process consisting of Test Specifications, Item Writing, Item Review, Test Development, Standard Setting and Statistical Analysis will be revisited and revised where necessary. The first phase involving the review of the modules related to the regulated activities of Advising on Corporate Finance and Investment Advice (i.e. Modules 12 and 19) has been completed. The revised Study Outlines for these two modules based on the findings of the review have been made available on the SIDC website since mid-November 2015. SIDC is now set to embark on the second phase of the review which involves the remaining examination modules related to the regulated activities of Dealing in Securities, Dealing in Derivatives and Fund Management as well as the module on Fundamentals of Compliance. BibliographyCastle R. A(2002), Developing a Certification or Licensure Exam


Securities Industry Development Corporation (765264-K)

No. 3, Persiaran Bukit Kiara, Bukit Kiara, 50490 Kuala Lumpur, MalaysiaTel: (6).03-6204 8667 Fax: (6).03-6201 5811Email: [email protected] Web: www.sidc.com.my

Find us on Facebook & LinkedIn at Securities Industry Development Corporation – SIDC

We welcome any enquiries and feedback you may have. Please do not hesitate to contact us at [email protected] or visit our website at www.sidc.com.my.

Copyright 2015 Securities Industry Development Corporation (SIDC)

an industry engagement initiative by sidc • december 2015 • vol.1

Documents