Interpretation
(1) In this Part, unless the context otherwise requires—
“business day” means a day during any part of which the facilities of an exchange established pursuant to this Part are available to its trading agents for trading purposes or would have been available but for a suspension of trading ordered by the Authority under section 143;
“committee” means the persons responsible for all matters relating to listing, licensing, trading and other matters related to the securities market;
“exchange” includes a body corporate established as a securities exchange under section 134 and the Labuan International Financial Exchange that was established by the Minister under section 30 of the Labuan Offshore Securities Industry Act 1998 [Act 579] that was approved and recognized immediately before the effective date;
“listing sponsor” means a person licensed by an exchange established pursuant to this Part, pursuant to its rules to carry on functions as a listing sponsor;
“secretary” means the secretary for the time being of an exchange established pursuant to this Part and includes an acting or assistant secretary;
“securities market” means a stock market or a place at which, or a facility by means of which—
(a) offers to sell, purchase or exchange securities are regularly made or accepted;
(b) offers or invitations that are intended, or may reasonably be expected, to result, whether directly or indirectly, in the making or acceptance of offers to sell, purchase or exchange securities, are regularly made; or
(c) information concerning the prices at which or the consideration for which particular persons or classes of persons propose to sell, purchase or exchange, or may reasonably be expected to sell, purchase or exchange, securities is regularly provided;
“trading agent” means a person licensed and authorised to engage in the business of dealing in securities pursuant to the rules of the exchange established pursuant to this Part.
Establishment of exchanges
The Authority may approve a Labuan company to be an exchange in Labuan upon such terms as it deems fit.
By-laws of exchanges
The Authority may prescribe such by-laws as may be expedient or necessary for the purpose of carrying out the provisions and matters connected with any exchange.
Rules of exchanges
An exchange established under section 134 may make rules which provide for—
(a) the conditions and administration of licences issued by such exchange and for the regulation generally of the conduct of trading agents and listing sponsors in connection with the business of such exchange;
(b) the financial, accounting, record-keeping, disclosure and capital adequacy requirements applicable to trading agents and listing sponsors;
(c) the conditions under which securities may be listed for trading in the securities market proposed to be operated by such exchange;
(d) the conditions governing dealings in securities by trading agents and listing sponsors;
(e) the class or classes of securities that may be dealt in by trading agents and listing sponsors or listed in such exchange;
(f) confidentiality with respect to information relating to the affairs of such exchange and of any trading agent or listing sponsor in connection with the business of such exchange;
(g) the arbitration of disputes arising out of or in connection with any securities market operated by such exchange;
(h) the suspension of trading in and the delisting of any security listed on such exchange;
(i) the carrying on of the business of such exchange with due regard to the interests of the public;
(j) a fair and independent market for the listing and trading of securities; and
(k) such other matters as the exchange deems necessary or desirable for the proper and efficient regulation, management and control of such exchange and the securities market operated by it.
Regulatory functions of exchanges
(1) In addition to its other functions, an exchange established under section 134 shall have regulatory functions and shall—
(a) ensure that it adequately supervises the market operations and the conduct of market participants;
(b) ensure the adequacy and efficiency of internal controls;
(c) ensure market participants follow capital adequacy rules;
(d) investigate misconduct or apparent misconduct by market participants and their representatives that could seriously affect investors or other participating organisations and promptly report to the Authority on these instances of misconduct;
(e) investigate possible market abuses, including insider dealing and fraudulent behaviour; and
(f) take disciplinary measures or agree to a settlement after a public hearing.
(2) Where an investigation is carried out by such exchange, it shall, in writing, forthwith—
(a) inform the Authority of the nature of such investigation and persons involved in the investigation; and
(b) advise the Authority on the status of such investigation at such intervals as the Authority may request.
(3) On the completion of an investigation, such exchange shall—
(a) transmit to the Authority all information in its possession relating to any such investigation; and
(b) inform the Authority of the outcome of such investigation and of any disciplinary measure or other course of action taken as a result of an investigation.
(4) An exchange established under section 134 shall ensure that an adequate budget allocation is made to properly carry out the regulatory functions mentioned in subsection (1).
(5) In this section “internal controls” means the system of controls put in place to asses and ensure the effectiveness of an exchange in the exercise of its regulatory functions and “market participants” means any investment dealer or any other person which has been given direct access to trading on the exchange.
Powers of the committee
(1) The affairs of an exchange established under section 134 shall be managed by a committee consisting of not less than three persons who possess relevant experience in financial, commercial or legal matters of whom the chairman and one other person shall be appointed by the Minister and the rest appointed by the Authority.
(2) Subject to this Division, such committee shall have full power in all matters relating to listing, licensing, securities or dealings on such exchange and other matters related thereto.
(3) Subject to section 184, the provisions of the Labuan Companies Act 1990 shall, unless the context otherwise requires, apply in all respects to the persons who make up the committee as if such persons were directors for the purposes of that Act.
Dealing in securities
(1) No person other than a trading agent shall engage in or hold himself out as engaging in the business of dealing in securities on any exchange.
(2) Any person who contravenes subsection (1) commits an offence and shall, on conviction, be liable to a fine not exceeding one million ringgit or to imprisonment for a term not exceeding three years or to both.
Register of trading agents and listing sponsors
(1) An exchange established under section 134 shall keep a register of the trading agents and listing sponsors and shall enter therein the names and addresses of the trading agents and listing sponsors and the date upon which each was admitted and ceased to be a trading agent or listing sponsor.
(2) The register of trading agents and listing sponsors shall be made available for inspection at the registered office of such exchange during business hours.
(3) Any person may require, and if required, the relevant exchange shall forthwith provide, a copy of the register or any part thereof on payment of such fee as may be specified in writing by such exchange.
(4) Any payment under subsection (3) shall be made to such exchange.
Financial statements of an exchange
Within six months of the end of each financial year, an exchange established under section 134 shall file with the Authority a copy, certified by the secretary as a true copy, of the financial statements of such exchange for that year prepared and audited in accordance with the provisions of Part VI of the Labuan Companies Act 1990.
Persons not deemed to be carrying on business in Malaysia
No person shall be deemed to be engaging in or carrying on a trade or business in Malaysia or with residents of Malaysia for the purpose of any written law by reason only of the fact that—
(a) securities of such person are listed on a securities market operated by an exchange established under section 134;
(b) such person is a trading agent or listing sponsor and that transactions are effected by it or on its behalf through the facilities of such exchange; or
(c) such person undertakes activities in Labuan incidental to the proper conduct of the activities referred to in paragraphs (a) and (b).
Suspension of trading on exchanges
(1) The Authority may direct any exchange established under section 134 by written notice to suspend trading, or any committee established under section 138 may, after notifying the Authority, suspend trading, on such exchange either wholly for a period not exceeding five consecutive business days or in respect of specified securities for such period as the Authority deems fit if the Authority after consultation with the committee determines that the orderly conduct of such trading is being or is likely to be prevented by reason of force majeure, natural disaster, strike or lock-out, revolution or other political upheaval or economic or financial crisis, wherever occurring.
(2) Pursuant to subsection (1), suspension of trading shall be carried out in accordance with the rules of the relevant exchange.
(3) The Authority may, after consultation with the committee, direct an exchange to extend the period of suspension of trading under subsection (1) either wholly for additional periods not exceeding five consecutive business days or in relation to specified securities for such additional periods as it deems fit.
(4) The Authority shall within two business days give written notice of such extension to an exchange indicating therein the reason therefor and duration thereof and such notices shall take effect upon its delivery to such exchange.
(5) The Authority shall on the business day next following delivery to an exchange of the notice under this section and if so requested by such exchange provide an opportunity for such exchange to be heard on the need for any suspension of trading or any extension thereof.
(6) The Authority may revoke, withdraw or modify any direction made under subsections (1) and (3) at any time prior to expiry of the period of suspension or extension thereof.
Minister’s power to suspend trading
(1) Without prejudice to section 143, where the Minister is satisfied that it is in the public interest to do so, or that it is expedient for the protection of investors or for the proper regulation
of an exchange to do so, he may, on the recommendation of the Authority, make a suspension order relating to all or any of the following:
(a) the functions of an exchange or its committee;
(b) the functions of any subcommittee established by the committee referred to in paragraph (a); or
(c) the functions of the principal officer, by whatever name called, who is responsible for the conduct of the business and operations of an exchange or any committee, as the case may be.
(2) For so long as the suspension order is in force, the following provisions shall apply:
(a) none of the functions to which the order relates shall be performed by such exchange or committee or any subcommittee established by the committee or by any officer of such exchange or the committee or any such subcommittee;
(b) any function to which paragraph (a) applies may be performed by such person as shall be specified in the order in relation to that function; and
(c) a person or body referred to in paragraph (a) shall not, by act or omission, either directly or indirectly, affect the manner in which the functions referred to in the order are performed unless the person referred to in paragraph (b) requests for his or its assistance.
(3) Subject to subsection (6), a suspension order shall continue to be in force for such period, being a period not exceeding six months, as shall be specified in the order.
(4) A suspension order or any extension thereof under subsection (6) shall take effect when a copy of the order or notice of the extension is served under paragraph (7)(a) to such exchange, committee or the subcommittee established by the committee to which the order relates.
(5) Without prejudice to subsection (4), where a suspension order is made or such an order is extended under subsection (6), the Authority shall, as soon as it may be practicable, give a copy of the order or, as the case may be, the notice of its extension, to the principal officer of such exchange, the committee or a subcommittee established by the committee as the Authority may consider appropriate in the circumstances.
(6) The Minister may, on the recommendation of the Authority, extend the period during which a suspension order is to remain in force for any further periods each not exceeding three months.
(7) Where a suspension order is made or extended under this section, the Authority shall—
(a) forthwith serve a copy of the order or notice in writing of the extension on such exchange, committee or the subcommittee to which the order relates; and
(b) cause a suspension order or the notice of the extension as the case may be, to be published in the Gazette.
(8) Any person who contravenes a suspension order issued under subsection (1) commits an offence and shall, on conviction, be liable to a fine not exceeding five million ringgit or to imprisonment for a term not exceeding five years or to both.
(9) For the purposes of this section, “principal officer” includes a person, by whatever name called, who either individually or jointly with one or more other persons, is responsible for matters relating to listing, licensing, securities or dealings on such exchange or the committee.
Powers of the Authority
(1) For the purposes of this Act and the proper conduct of the business of any exchange established under section 134 and in addition to any other powers accorded to it under this Act, the Authority may—
(a) at any time investigate or enquire into any transaction involving the purchase or sale of securities entered into by any person whether directly or indirectly to ascertain if that person has used dishonest, unfair or unethical
devices or trading practices whether such devices or trading practices constitute an offence under this Act or any other written law or an infringement of any of the rules or otherwise;
(b) require any such person to submit detailed information of any transaction involving the purchase or sale of securities;
(c) require the production of, inspect and make copies or printouts of or take extracts from any document record or thing relating to—
(i) the business or affairs of an exchange;
(ii) any dealing in securities;
(iii) any advice, report or analysis concerning securities; or
(iv) the accounts or records of any person concerned in any capacity with the matters referred to in subparagraph (i), (ii) or (iii) and any audit of, or report of an auditor concerning, the same; or
(d) whenever the Authority considers it necessary, examine by way of on-site inspections, the affairs or business of any market participants, which shall include listing sponsors and trading agents, for the purpose of—
(i) assessing whether the market participant is carrying out its permitted activities in accordance with this Act, any regulations made under this Act and or any other applicable law;
(ii) confirming that the provisions of the Anti-Money Laundering and Anti-Terrorism Financing Act 2001 are being complied with; and
(iii) carrying out the functions of the Authority;
(e) with the authority of a search warrant issued by the court to that effect and with or without the assistance of such persons as the Authority may require unless the Authority has reasonable grounds for believing that, by reason of
the delay in obtaining the search warrant, the object of any entry is likely to be frustrated, and in such instance without a warrant—
(i) break into and search any premises, place or item therein on or in which the Authority has reason to suspect there may be any document, record or thing the production of which was required by virtue of this section but not produced in compliance with such requirement; or
(ii) take possession of or secure against interference any document, record or thing the production of which was required.
(2) The Authority may in writing authorise any other person to assist it to perform functions under this Act.
(3) A person who—
(a) fails to comply with a requirement made under subsection (1);
(b) in purported compliance with a requirement made under subsection (1) furnishes information or makes a statement that is false or misleading in a material particular; or
(c) obstructs or hinders the Authority or another person in the exercise of any power under subsection (1),
commits an offence and shall, on conviction, be liable to a fine not exceeding ten million ringgit or to imprisonment for a term not exceeding five years or to both.
(4) The powers conferred under this section are in addition to, and not in derogation of, any other powers conferred by law.
DIVISION 3 — FALSE OR MISLEADING MARKET AND INSIDER DEALING
Creation of false or misleading market
Whoever creates or does anything which is calculated to create a false or misleading appearance of active trading in any securities or a false or misleading appearance with respect to the market for, or the price of, any such securities commits an offence and shall, on conviction, be liable to a fine not exceeding three million ringgit.
Insider dealing
Subject to the defences available under this Division, any individual who has information as an insider and—
(a) he deals in securities that are price-affected securities in relation to the information;
(b) he encourages another person to deal in securities that, whether or not that other person knows it, are priceaffected securities in relation to the information; or
(c) he discloses the information otherwise than in the proper performance of the functions of his employment, office or profession, to another person,
commits an offence and shall, on conviction, be liable to a fine not exceeding five million ringgit.
Defences
(1) An individual is not guilty of insider dealing by virtue of dealing in securities or encouraging another person to do so if he shows—
(a) that he did not at the time expect the dealing to result in a profit attributable to the fact that the information in question was price-sensitive information in relation to securities;
(b) that at the time he believed on reasonable grounds that the information had been disclosed widely enough to ensure that none of those taking part in the dealing in the securities would be prejudiced by not having that information; or
(c) that he would have done what he did even if he had not had the information.
(2) An individual is not guilty of insider dealing by virtue of a disclosure of information if he shows—
(a) that he did not at the time expect any person, because of the disclosure, to deal in securities; or
(b) that, although he had such an expectation at the time, he did not expect the dealing to result in profit attributable to the fact that the information was price-sensitive information in relation to securities.
(3) For the avoidance of doubt, any references to a profit in this Division includes the avoidance of a loss.
Dealing in securities
For the purposes of this Division, a person deals in securities if—
(a) he acquires or disposes of securities, whether as principal or agent; or
(b) he procures, directly or indirectly, an acquisition or disposal of listed securities by another person.
Procuring the acquisition or disposal of securities
(1) A person procures the acquisition or disposal of securities if securities are acquired or disposed of by a person who is, in relation to the acquisition or disposal—
(a) his agent;
(b) his nominee; or
(c) a person who is acting at his direction.
(2) Subsection (1) is not exhaustive as to the circumstances in which a person may be regarded as procuring an acquisition or disposal of securities by another.
(3) “Acquisition” or “disposal” in relation to securities includes agreeing to acquire or dispose of securities or entering into or terminating a contract which creates the securities, as the case may be.
Inside information
“Inside information” means information which—
(a) relates to particular securities or to a particular issuer of securities or to particular issuers of securities and not to securities generally or to issuers of securities generally;
(b) is specific or precise;
(c) has not been made public; and
(d) is price sensitive.
“Price-affected securities” and “price-sensitive information”
Securities are “price-affected” securities in relation to inside information, and inside information is “price-sensitive” in relation to securities, if and only if the information would, if made public, be likely to have a significant effect on the price or value of the securities.
Information as an insider
An individual has information as an insider if and only if—
(a) it is, and he knows it is, inside information; and
(b) he has it, and knows that he has it, from an inside source, that is to say—
(i) by virtue of being a director, employee or shareholder of an issuer of securities;
(ii) by virtue of having access to the information through his employment, office or profession; or
(iii) by virtue of the direct or indirect source of his information being a person who has it in either of the ways set out in subparagraph (i) or (ii).
Definition of “made public”
(1) “Made public” shall be construed in accordance with subsections (2) and (3), but these provisions are not exhaustive as to the meaning of that expression.
(2) Information is made public if—
(a) it is published in accordance with the rules of the exchange for the purpose of informing investors and their professional advisors;
(b) it is contained in records which by virtue of law are open to inspection by the public;
(c) it can be readily acquired by those likely to deal in any securities, or with any issuer of securities, to which the information relates; or
(d) it is derived from information which has been made public.
(3) Information may be treated as made public even though—
(a) it can be acquired only by persons exercising diligence or expertise;
(b) it is communicated to a section of the public and not the public at large;
(c) it can be acquired only by observation;
(d) it is communicated only on payment of a fee; or
(e) it is published only outside Labuan.
Exceptions
(1) For the avoidance of doubt, insider dealing is not committed in the following circumstances:
(a) an acquisition or disposal of securities or the communication of information that is carried out under any other written law relating to schemes of arrangement, reconstructions and take-overs relating to corporations;
(b) a clearing house which acquires or disposes of securities for the purpose of settlement of a market contract or in relation to any proceedings or other action relating to the settlement of a market contract where the acquisition or disposal of securities is effected in accordance with the rules of the clearing house;
(c) a stock exchange in relation to a sale or purchase of securities where the stock exchange acts on an instruction from a clearing house;
(d) the redemption of units of a collective investment scheme by a trustee or manager under a trust deed relating to that collective investment scheme in accordance with a buy-back covenant contained or deemed to be contained in the trust deed at a price that is required by the trust deed to be calculated, so far as is reasonably practicable, by reference to the underlying value of the assets less—
(i) any liabilities of that collective investment scheme to which the units relates; and
(ii) any reasonable charge for purchasing the units;
(e) subscribing for, or purchasing, securities under an underwriting agreement or a sub-underwriting agreement and includes entering in to such an agreement or selling securities subscribed for, or purchased, under such an agreement;
(f) the sale or purchase of securities pursuant to a requirement imposed by the Government, a statutory body or any regulatory authority, or any requirement imposed under any written law or order of court; and
(g) communication of information pursuant to a requirement imposed by the Government, a statutory body or any regulatory body or any requirement imposed under any written law or order of court.
Source: Laws of Malaysia, Attorney General's Chambers of Malaysia (lom.agc.gov.my). Not a copy of the Gazette printed by the Government Printer (Interpretation Acts 1948 and 1967, s 61).
