Friday, 16 December 2011

Investor Protection in Malaysia 4th best in the world .....?

The Securities Commission published a new Capital Market Brochure:

Publications of this kind are really self-serving. The time spent on writing them is better used in much needed enforcement, which is often so disappointing.

On page 19, the usual boasting:

Yes, the regulatory framework is comprehensive but without proper enforcement, protection for investors is (very) weak. Malaysia still has a long way to go.

On page 24:

I don't agree, I think that the fact that the index held up quite well had more to do with [1] the limited amount of foreigners who invested in Malaysia and [2] support by the local Government Linked Funds like PNB and EPF.

On page 26 I almost fell out of my chair:

I located the report about Malaysia, and indeed, it has a score of 8.7, higher than the US, UK, Canada, Australia etc.

This is about the weirdest research I have ever seen in my life. It gets even stranger, the three countries above Malaysia are New Zeeland (normal), Singapore (strange) and Hong Kong (strange). Both Singapore and Hong Kong are not exactly known for their excellent investor protection either, despite their high GDP per capita.

The criteria that are used are listed here:

It turns out that investor protection is measured in only three, very limited categories:

Disclosure: I have to admit, this is pretty good in Malaysia, unfortunately, with poor enforcement it is of limited use.

Director liability: the high score of Malaysia in this category is simply unbelievable. The question is if issues are enforced on a regular basis, within a reasonable time. And the answer is simply: No.

Ease of shareholders suits: how can Malaysia score well in this category?

The SC knows that a lot more is needed for investor protection: active enforcement, a regulatory body that ensures that brochures are balanced, that independent advisers are truly independent, that perpetrators (Directors, Auditors, Advisers, etc) are caught without fear and favour, that complaints are handled in a fair and efficient way, a properly operating SSM, etc, etc, etc. All area's where Malaysia is clearly lacking. And yet they still use this hugely biased report that gives the completely wrong impression.

And finally page 61:

I am a foreign investor and completely disagree with the above.


  1. Erm can I said that I feel that the writer or the research team had an under table deal with SC/BM? Because as a Malaysian I feel that it is way safer to invest in the countries mention above (exclude Malaysia). I don't think that the number of robbers like Ananda Christnan, Vincent Tan, Syed Mokthar, Lim Kok Thay in those countries will be higher than Malaysia. This research is suck!

  2. Yes, the research was hopeless, and SC knew it and still used it. They should have toned down on how good things are, they should have been a lot more humble.