KLSE Deputy President 1 Encik Md Nor Ahmad said in a marketplace increasingly driven by technological advances, widely available information and more empowered investor base, strong corporate governance is no longer just a sensible business practice, but an indispensable by-product of market discipline.
"New imperatives demand a revitalised and modern perspective on the fundamental responsibilities and obligations of public listed companies to their investors, shareholders, and stakeholders alike," he said in his keynote opening address at a seminar on implications, enforcement and penalties of KLSE's new listing requirements in Kuala Lumpur today. The opening address was delivered by Ms Selvarany Rasiah, KLSE Legal Advisor to its Listing Group.
Md Nor Ahmad said it is a well known fact that capital markets, in the long run, place a premium on companies with strong corporate governance.
"A survey conducted by Mckinsey & Co. showed that, in respect of Malaysia, foreign investors would pay a premium of about 25% for good corporate governance while local investors are willing to pay a premium of about 22%.," he said.
He added that modern corporate governance practices demand and promote accountability through an independent board, an audit committee that is engaged and committed, and a corporate culture that demands and emphasises on steadfast commitment to the interest of the shareholders.
"In our present era of interconnected and global marketplaces, this is the approach to governance that will make possible more efficient, resilient and robust markets," he said.
On the move towards a disclosure based regime (DBR), Md Nor said DBR is a mode of regulation, which focuses on the quality of information disclosed by issuers when they issue or offer securities and the quality of information disclosed on a continuing basis to enable investors to make informed investment decisions.
"The mission of KLSE is to promote and facilitate capital formation in Malaysia by providing investors and issuers with a fair and orderly market for the securities that are traded on the KLSE.
"DBR recognises that the key purpose of market regulation is to promote confidence among investors in the integrity of the market. However, at the same time, our market must meet the need of issuers for low-cost access to funds in a flexible and responsive regulatory environment," he said.
Under DBR, a market environment with high standards of disclosure, due diligence and corporate governance is developed, coupled with vigilant surveillance and enforcement by regulators to upheld high standards for compliance.
Md Nor said the full implementation of DBR will very much depend on the outcome of the assessment on the readiness of the market to adopt DBR.
On the Malaysian Code on Corporate Governance, Md Nor said the code reviews and reforms the legal and regulatory framework for public listed companies, including to identify training and education need of directors and investors.
"While the Code is not mandatory, there are provisions in the new Listing Requirements, which requires disclosure of application of various principles and best practices set out in the Code in the annual report.
"The Code is also aimed at increasing the efficiency and accountability of boards to ensure that the decision-making processes are not only independent but seen to be independent," he said.
Md Nor said with the introduction and enhancements of certain standards and practices, Malaysia will be able to present to investors, both local and foreign, a capital market that is international not only in concept but also by practice.
"KLSE is constantly and continuously engaged in an endeavour to bring its standards in line with the best in the developed markets. When investors look at present Malaysian market, they will find a comparatively developed exchange - both in terms of regulatory environment as well as the infrastructure - within an emerging economy.
"What investors seek are markets with good returns and markets that they perceive to be conducted and regulated in a fair and orderly manner i.e. markets that deliver value to shareholders.
"Thus, the implementation of rules and regulations, and practices that conform to expectations of investors, will be vital in the identification or acceptance of a capital market that is of international standing and class," he said.
KLSE introduced its new listing requirements on 22 January 2001. Since then, several roadshows and public seminars have been conducted to enhance awareness on the new requirements for industry participants and investors
The KLSE new listing requirements are available at www.klse.com.my and the KLSE Shoppe at the Exchange Square, Kuala Lumpur and Balai Maklumat BSKL in Johor, Penang, Kuantan and Kuching. KLSE new listing requirements are also available at established bookshops nationwide.
