The new Capital Market reforms agenda of the Securities and Exchange Commission (SEC) for 2023-2025 will cater to the present and future needs of the capital market, the annual report of the SEC stated.
The twelve key reforms that are envisaged to be implemented are:
• Separate real-time surveillance system
This is considered as a critically important component to enhance the effectiveness of the capital market regulatory role of the SEC. Robust surveillance systems with new features that cater to prevent increasing trading volumes would strengthen the effective and efficient market monitoring and timely interventions of the SEC.
• Digital transformation
Some of the key initiatives under the reform include digitalising the e-filing system for regulatory reporting. Market intermediaries would be able to submit their reports online via a standardised system.
• Demutualisation of the CSE
Demutualisation will provide the governance and management structures required for the operation of an efficient and effective stock exchange.
• Capacity building at the regulator level and market intermediary level
Capacity building at the regulatory level and the market intermediary level has become critically important with the enactment of the new SEC Act.
Some of the initiatives that come under this reform include: building internal capacity to enhance the effectiveness and efficiency of the SEC’s regulatory function and responsibilities, increasing the minimum capital requirements of market intermediaries to enhance the overall operating standards of the market and revising licensing fees to defray enhanced regulatory supervision cost to ensure that only market operators with a certain stature and financial soundness will be eligible for the license.
• Enabling the listing of State-Owned Enterprises
Entry by SOEs into the capital market will benefit SOEs in numerous ways. As such, the SEC has already approved the rules applicable for SOE listings and the CSE launched a separate transitionary Board called the “Catalyst Board” to accommodate such SOEs.
• Setting up a multi-currency exchange for foreign investors
A novel reform is the setting up of a multi-currency exchange. It is expected that such an exchange will facilitate trading of multi-currency denominated securities while increasing the foreign portfolio investments to the country.
• Setting up of a Carbon Credit Trading Exchange
Carbon markets can help to accelerate the transformation needed in addressing the climate crisis. Effective, transparent and efficient carbon markets put a price on pollution and create an economic incentive for reducing emissions. The SEC believes that setting up a Carbon Credit Trading Exchange would further strengthen Government’s mandate in achieving net zero status by 2050.
• Real Estate Investment Trusts
Under this reform, the SEC is looking at alternative avenues to make Real Estate Investment Trusts (REITs) an attractive investment avenue for the issuer and for the investor.
• Infrastructure Bonds
Infrastructure Bonds listed on the Exchange would attract the private sector participation in infrastructure projects. Such bonds may be issued by Government agencies, municipal councils, local government councils, etc.
• Facilitating listings at the Empower Board
This special listing board was solely created to attract and facilitate the entry of SMEs into the capital market. However, it has not been actively marketed yet. SMEs are a critical component of the country’s growth.
• Product development
The products and market infrastructure include the introduction of Green Bonds/Blue Bonds (commonly known as Sustainable Bonds), Regulated Short Selling, Islamic Capital Market products such as Sukuks, Equity Crowd Funding platforms etc.
• Building Capital Market awareness at school level
The SEC continues to enhance the financial literacy level among the public. In that regard, the SEC together with the National Institute of Education (NIE) is in the process of introducing the securities market as a subject to the student education curriculum from next year.
