PART ONE Introduction 1.

0 Overview The International Organization of Securities Commissions (IOSCO) is recognized as the world's most important international cooperative forum for securities regulatory agencies. The organizations wide membership regulates more than 90% of the world's securities markets. As the leading international policy forum for securities regulators, IOSCO plays a key role in setting international standards for securities regulation, identifying issues affecting global markets, and making recommendations in meeting those challenges. IOSCO sets out 30 principles of securities1 regulation, which are based upon three objectives of securities regulation. These are: The protection of investors; Ensuring that markets are fair, efficient and transparent; The reduction of systemic risk.

Among the 30 principles of securities regulation lay down by IOSCO is disclosure information as stated in Part III (Issuers, Market Intermediaries, and Secondary Markets) of IOSCO principles. This principle explains that: Full disclosure of information material to investors decisions is the most important means for ensuring investor protection. Investors are, thereby, better able to assess the potential risks and rewards of their investments and, thus, to protect their own interests. As key components of disclosure requirements, accounting and auditing standards should be in place and they should be of a high and internationally acceptable quality.

1.1

Disclosure

Timely disclosure of material information is critical towards building and maintaining corporate credibility and investor confidence. The failures of high profile Corporate like Enron scandal have yet again focused worldwide attention on the importance of disclosure and corporate accountability. These failures have emphasized that the disclosure of information must not only

be timely but also complete, clear and accurate. Generally, the corporate disclosure should follow five pillars of disclosure as follows: 1. Truthfulness 2. Completeness information disclosed must provide accurate description of circumstances. information disclosed must be sufficient to enable investors to make

informed decisions. The information must include financial as well as non-financial matters. 3. Materiality of information information disclosed must be material i.e. information which can influence investment decisions. 4. Timeliness information disclosed must be timely to enable investors to react as quickly as possible. 5. Accessibility information disclosed must be easily accessible, and available to the investors at low cost. The disclosure of information is required at least when: the conditions applicable to an offering of securities for public sale; the content and distribution of prospectuses or other offering documents (and, where relevant, short form profile or introductory documents); supplementary documents prepared in the offering; advertising in connection with the offering of securities; information about those who have a significant interest in a listed company; information about those who seek control of a company information material to the price or value of a listed security; periodic reports; shareholder voting decisions

Bursa has 6 specific disclosure policies as follows: i) Immediate disclosure of material information (Chap 9 Part C); For example the entry into a joint venture agreement or merger; the acquisition or loss of a contract, franchise or distributorship rights

ii)

Thorough public dissemination (Chap 9 Part D); For example, a listed issuer must release material information to the public in a manner designed to obtain its fullest possible public dissemination. Clarification, confirmation or denial of rumours or reports (Chap 9 Part E); For example, whenever a listed issuer becomes aware of any rumour or report, true or false, that contains material information, the listed issuer must make due enquiry and immediately publicly clarify, confirm or deny the rumour or report. Response to unusual market activity (Chap 9 Part F); For example, where unusual price movement, trading activity, or both (unusual market activity) occurs, the listed issuer must immediately undertake a due enquiry to seek the cause of the unusual market activity in its securities Unwarranted promotional disclosure activity (Chap 9 Part G); For example, a listed issuer must refrain from promotional disclosure activity in any form whatsoever or howsoever which may mislead investors or cause unwarranted price movement and activity in a listed issuers securities. Insider trading (Chap 9 Part H). For example, all listed issuers and parties who may be regarded as insiders must be fully aware of the provisions of the CMSA and the Companies Act 1965.

iii)

iv)

v)

vi)

1.2

Disclosure Based Regulation

The main development in terms of disclosure and transparency is naturally the shift in Malaysia from Merit Based Regulation (MBR) to Disclosure Based Regulation (DBR). In the Securities Commissions initiative, DBR is seen as having three basic views, namely: 1. Disclosure - Disclosure of information benefits investors by facilitating them to make investment decisions. Companies intending to offer securities to the public are required to fully disclose information about the affairs of the companies and the securities which are being offered, in the offering documents or prospectuses. 2. Due Diligence - Due diligence is a process by which inquiries are conducted to ensure that information to be disclosed is true, sufficient and timely. Due care must also be given to ensure that there is no omission of material information. Material information is

information which would reasonably be expected by rational investors to facilitate their investment decisions. 3. Corporate Governance - The timely, accurate and transparent disclosure of material information is an integral component of ensuring good corporate governance. Boards of directors of companies need to be open about the businesses they direct and this includes transparency in corporate activities and transactions. This is essential so that shareholders can exercise their rights constructively. However, they can only do so if they are provided the relevant information

Publications by the Securities Commission indicate that the rationale for the move is to ensure that: Access to the primary markets is accompanied by full, timely and accurate disclosure thus enabling investors to make informed and reasoned investment decisions. There is a continuous flow of timely and accurate information in secondary markets to ensure efficient market operation and fully informed investment decisions.

The shift to DBR aim to shoulder higher level of responsibilities to companies, directors and promoters. They should provide full, accurate and timely disclosure of information to investors, also adhere to good practices of corporate governance and have a deeper understanding of the Securities Commission's policies, rules and regulations.

Directors of public companies are expected to discharge their duties with greater integrity and due care, bearing in mind the criminal liabilities imposed on persons convicted of violating the securities laws. They are liable for any breach of the securities laws and regulations. Under Section 32B (4) of the SCA, a person who contravenes subsection (1) [submission of false or misleading information and omission of material information] or sub-section (3) [need to inform the Commission of misleading or incomplete material that has been submitted], shall be guilty of an offence and shall on conviction be liable to a fine not exceeding three million ringgit or to imprisonment for a term not exceeding ten years or to both.

In sum up, DBR premised on greater and higher quality of information disclosure by issuers, so as to bring about great transparency in the market, thus empowering investors to make informed investment decision. 1.3 Disclosure Regime

Disclosure in the context of Malaysian listed companies can be broken down into two broad areas, these are: i) Primary market disclosure Primary disclosure is very important in connection with initial public offerings (IPOs). The disclosure obligations are contained in the Companies Act 1965, Bursa Malaysia Listing Requirements and the Securities Commission Act 1993. Eventually, the aim of primary disclosure is to enable potential investors to evaluate for themselves the risks of investing in the IPO based on the risk profile of the offeror.

ii)

Continuous disclosure The SC and Bursa Malaysia Listing Requirements impose continuous disclosure and reporting obligations on Public Listed Companies. Among the requirements are publishing of quarterly financial statements; furnishing of annual audited accounts, auditors and directors reports; Stating the extent of compliance with the Malaysian Code on Corporate Governance; and making immediate public disclosure of all material information concerning its affairs,

PART TWO Listing Requirements and Continuous Obligations 2.0 Overview When a company went public, it provides itself with access to an efficient and cost- effective source of finance to meet its capital needs. In order to be listed, the company should have higher profile and this will lead to investor confidence and in turns increasing its prospect for raising additional fund as well as expanding its activities nationally and internationally. Listing requirements are administered and reviewed by Bursa Malaysia. These requirements are both additional and complementary to common law and statutory obligations of publicly listed companies. The two main functions of these requirements are: 1. To lay down the initial listing requirements which have to be complied with by companies looking for a listing of their securities on either the main market or ACE market of the Bursa Malaysia. 2. To impose strict continuing obligations on companies which supplement the disclosure requirements under the companies Act 1965.Failure to comply with these obligations may cause the companies to be removed from the official list. 2.1 Initial Listing Requirements The listing requirements are the strongest elements in the regulation of listed companies in Malaysia and have received judicial and legislative recognition. Paragraph 16.02(1)f of the Main market listing requirements and paragraph 16.02(1)e of ACE market listing requirements impose a contractual obligation upon the issuer of the securities to comply with the same as well as with the policies of the Bursa Malaysia and any provision of the CMSA, the Securities Industry (Central Depositories) Act 1991, the Securities Commission Act 1993 or any guidelines issued by the SC. A comprehensive Listing Requirements will benefit investors and shareholder as it could (a) enhance shareholders value in the long term,

(b) provide better protection of shareholders interest, (c) reducing the risk faced by shareholders and investors, (d) enable investors to make better informed investment decisions. The Listing Requirements is complemented by Practice Notes to aid interpretation and to clarify the operational procedures of the Listing Requirements. 2.1.1 Requirement under Securities Commission Act 1993 and Bursa Malaysia When companies decide to offer their securities to public, board of director must proceed to approves IPO and appointments of adviser. The advisers will take a central role with SC. After that prospectus will prepared which known also as preliminary prospectus (refer to defined above) and submit to SC for approval. In this stage prospectus will expose to public for 15 market days. SC will clear the process of prospectus application within 60 working days. In the same time company will submit initial listing application to Bursa Malaysia. All of this prospectus to SC must disclose their information which noted in Section 236 (1) (3), SCA 1993, that the general duty to disclosure information in prospectus eg the nature of securities, the business of the issuer of the securities, the unit trust scheme or prescribed investment scheme; the assets and liabilities, financial position, profits and losses, prospects of the issuer and, in the case of a unit trust scheme or prescribed investment scheme, of the scheme; the rights attaching to the securities; and the merits of investing in the securities and the extent of the risk involved and the name of person that need for investor and their adviser as noted in subsection (2) must disclose to Commission and Bursa Malaysia for their approval.

Bursa Malaysia has set out the requirements that need to be complied by the companies that want to be listed in the Bursa Exchange. The purpose of these Requirements is to set out the requirements that must be complied with by all applicants, listed issuers, management companies, trustees, their directors, officers, advisers or other persons to whom these Requirements are directed. Failure to comply with any of these Requirements will amount to a breach in respect of which actions may be taken and/or penalties may be imposed. These

requirements stated in Listing Procedures for Initial Admission in Practice Note 21 Bursa Malaysia (Main Market). The general principal of these requirements are mainly based on: (1) all applicants shall be of a certain minimum size, quality and have a record of operations of adequate duration; (2) investors and the public shall be kept fully informed by the listed issuers of all facts or information that might affect their interests and in particular, full, accurate and timely disclosure shall be made of any information which may reasonably be expected to have a material effect on the price, value or market activity in the securities of listed issuers; (3) (4) all holders of securities shall be treated fairly and equitably; directors, officers and advisers of listed issuers shall maintain the highest standards of integrity, accountability, corporate governance and responsibility; and (5) directors of listed issuers shall act in the interests of the company as a whole, particularly where the public represents only a minority of the shareholders or where directors or major shareholders have material interests in transactions entered into by listed issuers 2.1.2 Initial Listing Requirements under companies Act 1965 In addition to other requirements, section 18 of CA 1965 requires the company to print the dated memorandum of association which states the name of the company, the objectives of the company, the amount of share capital (for limited liability company, that the liability of the members is limited (for a company limited by shares), extent of members liabilities (for a company limited by guarantee). Section 37 of CA requires a person not to issue, circulate or distribute any form of application for shares in or debentures of a corporation unless the form is issued, circulated or distributed together with a prospectus, a copy of which has been registered by the Registrar. As per Section 323 of CA, An investment company shall not issue a prospectus or permit a prospectus to be issued on its behalf unless the prospectus specifies -the type of security in which it is among the objects of the company to invest; and whether it is among the objects of the company to invest within Malaysia or outside Malaysia or both.

2.2 Continuing Obligations The obligation of the company and its promoters do not cease upon the listing of the same. There are also the post-listing requirements obliged by the company throughout the duration which it remains as listed entity. These are mentioned in listing requirements of Bursa Malaysia, SC guidelines as well as Company Act 1965. 2.2.1 Continuous Disclosure Requirements under Bursa Malaysia In Bursa Malaysia under Listing Requirement at Main Market, Chapter 9 noted that this Continuous Disclosure which explains below: Part A General Paragraph 9.01(1) requires the continuing disclosure requirements that must be complied with, amongst others, by a listed issuer, its directors or advisers. Sub paragraph (2) set out the disclosure requirements needed. These are as follows: (a) Corporate disclosure policy of the Exchange (Parts B to H); (b) Preparation of announcements (Part I); (c) Immediate disclosure requirements (Part J); (d) Periodic disclosure requirements (Part K); (f) Circulars and other requirements (Part L); and (e) Disclosure requirements for specific listed issuers (Part M)

Paragraph 9.01(3) states that, continuing disclosure is the timely and accurate disclosure of all material information by a listed issuer to the public. According to sub paragraph (4) Continuing disclosure ensures a credible and responsible market in which participants conduct themselves with the highest standards of due diligence and investors have access to timely and accurate information to facilitate the evaluation of securities. Part B Corporate Disclosure Information Under paragraph 9.02(1), a listed issuer must disclose to the public all material information necessary for informed investing and take reasonable steps to ensure that all who invest in its securities enjoy equal access to such information.

Periodic and continuous disclosure obligations reduce the problem of asymmetric information, maintain corporate credibility and help promote fair and efficient markets. Part C Immediate Disclosure of Material Information Paragraph 9.03 of the Bursa Securities Listing Requirements imposes upon listed companies the mandatory obligation to make immediate disclosure of material information to the market, being such information which is reasonably expected to have material effect on the price, value of market activity of the listed company securities or on the decision of a securities holder or investor in determining his choice of action. It also states that any announcement made by a listed company must be, amongst others, factual, clear, unambiguous, accurate, succinct, contain sufficient information and not false, misleading or deceptive. Paragraph 9.07 noted that Bursa Malaysia must be inform immediately by listed issuer when information is withheld likes unusual market activity in the listed issuers securities which signifies that a leak of the information may have occurred, rumours or reports concerning the information have appeared and signs that insider trading may be taking place.

2.2.2 Continuous Disclosure Requirements under Securities Commission Section 152, SCA 1993 noted that Commission may require Company to Disclosure of information due administration of the securities laws. The person to whom the notice is directed shall not(a) disclose or cause to be disclosed any information that is false or misleading; (b) disclose or cause to be disclosed any information from which there is a material omission; or (c) engage in, or aid, or abet, conduct that is misleading or deceptive or is likely to mislead or deceive the Commission. A person referred above becomes aware that(a) any information disclosed to the Commission is false or misleading, a material omission; or person's conduct is misleading or deceptive or is likely to mislead or deceive the Commission,

the person shall advise the Commission of the facts and shall take such action as the Commission may require. A person who contravenes subsection (2) or (3) shall be guilty of an offence and shall on conviction be punished with a fine not exceeding one million ringgit or imprisonment for a term not exceeding ten years or both.

Under Section 352(1) (4), SCA 1993 which said that every company dealing with securities and futures contracts must submit and disclosure their information relating to any acquisition, disposal and any information related to the company to Commission. A person who contravenes a requirement under this section commits an offence and shall on conviction, be liable to fine not exceeding RM1 million or imprisonment for a term not exceeding 10 years or both. The requirement also noted in section 353 which the disclosure of information relating to dealing in securities or trading in futures contracts need to show to Commission. Its shows that the disclosure information is must in every changes in the company position. 2.2.3 Continuous Disclosure Requirements under Companies Act 1965 Section167 requires the company, directors and managers to cause to be kept accounting and other records as will sufficiently explain the transactions and financial position of the company and enable true and fair profit and loss accounts and balance sheets and any documents required to be attached thereto to be prepared from time to time, and also cause those records to be kept in such manner as to enable them to be conveniently and properly audited.

PART THREE Observations and Conclusion 3.0 Observations

Bursa Malaysia, Securities Commission of Malaysia and Companies Act 1965 has given the guidelines for listing procedure and also continuous obligation in order to help investors to assess the potential risks and rewards of their investments to protect their interest. In order to conclude on the extent of efficiency of the listing requirements and continuous obligations of public listed companies in Malaysia can fulfil the need that there should be full, timely and accurate disclosure of financial results and other information that is material to investors decisions, we come up with the following observations: 3.1 Observation from Malaysian Accounting Standard Board (MASB)

 Since October 2005, MASB has published new and revised MASB-approved accounting standards for application in relation to financial statements with a view to providing a true and fair view of the companys financial position and results. These accounting standards prescribe methods for identification of changes to accounting policies and disclosures, alignment of internal management reporting systems with the new rules, and how financial information is to be presented. For example, in 19 November 2011, MASB on its websites announced that it has issued internationally compliant accounting framework and new FRSs. The MFRS Framework comprises Standards as issued by the International Accounting Standards Board (IASB) that are effective on 1 January 2012. It also comprises new/revised Standards recently issued by the IASB that will be effective after 1 January 2012 such as Standards on financial instruments, consolidation, joint arrangements, and fair value measurement and employee benefits, amongst others. There is continuous effort to review the Statement on Internal Control Guidance for Directors of Public Listed Companies. The objective of the review is to improve corporate disclosures on risk management systems and internal controls including addressing specific issues such as internal processes to highlight emergent risks to boards. A taskforce co-chaired by the Institute of Internal Auditors Malaysia (IIAM) and the Malaysian Institute of Accountants (MIA), comprising representatives from the SC, Bursa Malaysia, Companies Commission of Malaysia (CCM), professional bodies, industry organizations and audit firms, is undertaking this review. On the accounting and audit front, early 2003 Organisation for Economic Co-operation and Development (OECD) White Paper on Corporate Governance acknowledged that Asian countries including Malaysia have made significant progresses in the area of financial reporting as well as convergence with international standards and practices. Generally Malaysias accounting and audit practices are identical to global practices and Malaysia will fully converge with the International Financial Reporting Standards (IFRS) from 1 January 2012. The move towards a universal accounting language allows measurement and reporting on corporate business performance to be fully comparable on a global basis. 3.1 The observation from Bursa Malaysia, Securities Commission of Malaysia and

Companies Commission on Malaysia The three bodies plays an important role to make sure that the listing procedures and continuous disclosure requirements can protect the investors interest. Amendment of rules and regulations

As part of its on going efforts to promote high standards of corporate disclosure, Bursa Malaysia has made various amendments to its act in order to maintain market integrity and investor protection. In 22 September 2011, the Bursa Malaysia announced that they had done some amendments to its Listing Requirements (LR) and introduced a Corporate Disclosure Guide (CD Guide) that aimed at assisting listed issuers elevate their standards of disclosure. High standards of disclosure is a value proposition that can enhance a listed issuers investability. The amendments to the LR for the Main and ACE markets and the issuance of the CD Guide were made following consultations with the public, industry groups and stakeholders. The amendments are in the following key areas: i) ii) improving the quality of information for financial reporting; improving disclosure by listed issuers in areas of related party transactions, poll voting, corporate proposals, boardroom/senior management/external audit

announcements; iii) according greater flexibility to listed issuers in structuring share scheme for employees; iv) promoting greater transparency in respect of share schemes for employees which do not involve issuance of new shares; v) facilitating listed issuers to pay dividends in shares to their shareholders through a Dividend Reinvestment Scheme; and vi) promoting greater efficiency in the market by allowing listed issuers to buy back odd lot shares through direct business transactions.

The amendments to the LR will take effect from 3 January 2012. In respect of the enhanced disclosure requirements in the quarterly financial reports and annual reports, all listed issuers must comply with the enhanced disclosures in the LR for the financial

periods/years ending on or after 31 December 2011. Therefore, the new listing rules and Corporate Disclosure will require companies having to
raise their standards of disclosure.

Enforcement

Having the rules without enforcement is nonsense. In Malaysia, besides making the rules and regulation, the Bursa Malaysia, SC and SSM also play important roles in enforcing the law. The three bodies have power to take action to those who contravene the laws. For example, they can take action to those who disclose misleading information. One of the recent cases in Malaysia is former Transmile directors sentenced to jail and fined for misleading disclosures. The case is about two former independent directors of Transmile Group Berhad guilty under section 122B(b)(bb) of the Securities Industry Act 1983, for having authorized the furnishing of a misleading statement to Bursa Malaysia in Transmile's 'Quarterly Report on Unaudited Consolidated Results for the Financial Year Ended 31 December 2006'. The misleading statement was with respect to the unaudited revenue figures which were reported to the stock exchange for both the 4th quarter of 2006 as well as the cumulative period for 2006.

In addition to regulations, various non-regulatory initiatives have also been undertaken to promote the quality of disclosures by companies. In 2007, Bursa Malaysia issued an investor relations guide that clarified what constitutes material information and identified potential areas

1.1 Conclusion High quality disclosure, through its influence on investors and lenders who must assess risks and returns and decide where best to place their money, strengthen the efficiency of capital allocation as well as offer the benefit of reducing the costs of capital. Furthermore high quality corporate disclosure provides clarity on the extent to which companies meet legal and ethical requirements. Based on the observations above, we come to the conclusion that listing requirements and continuous disclosure obligations of public listing companies in Malaysia are effectively and efficiently fulfill the need of investors protection. However, having regulations without good enforcement is nonsense. Without proper enforcement the companies may not comply with the rules. Therefore, the regulator must be able to ensure compliance without fear and favour.
There is also no selective enforcement.