By the MIA Capital Market Advisory Committee
The Capital Market Advisory Committee or CMAC was created as a non-statutory committee by the Malaysian Institute of Accountants (MIA) in April 2013 with the following main objectives:
- To serve as liaison between MIA, regulators and key stakeholders on capital market related matters.
- To consider practical problems faced by members relating to the application and compliance with the regulations of the capital market and make recommendations to the relevant authorities.
- To consider and recommend principles of good practice on issues not covered by Auditing and Assurance Standards Board (AASB) and the Ethics Standards Board (ESB) pertaining to capital market practice.
- To formulate and provide guidance notes for the MIA Council to be issued to members on various aspects of capital market practice from time to time.
The latest information on the Committee can be accessed here.
CMAC members currently consists of practitioners who are reporting accountants (RA), a tax practitioner and two observers from the Securities Commission (SC) and Bursa Malaysia respectively. Under its terms of reference, CMAC meets at least twice a year.
Malaysian Investment Reporting Standards (MIRS)
In 2018, CMAC initiated the development of appropriate reporting standards for capital market transactions in Malaysia so that reporting accountants and preparers and/or listed issuers are well-guided and consistent in dealing with capital market transactions and reporting. The development of these standards entailed extensive jurisdictional research, consultations and discussions which are partly funded by a grant from the Capital Market Development Fund (CMDF), a trust fund under the purview of the SC, whose purpose is to support the development of the Malaysian capital market. The MIA has since re-applied for and successfully obtained a new grant in the current year, enabling CMAC to continue its work on the MIRS.
Prior to issuance of the first MIRS standard in 2021, there was no formal framework governing the principles and essential procedures with which a reporting accountant (RA) in Malaysia was required to comply in the conduct of an engagement connected with an offer or invitation to subscribe for or purchase any securities of a corporation, a business trust or a real estate investment trust, including any excluded offer or excluded invitation, as defined under the Capital Markets and Services Act 2007 and post-listing transactions. Likewise, guidance materials for preparers and/or listed issuers were limited (such as MIA’s Guidance Notes). Hence, the MIRS were conceived with the purpose of addressing and resolving divergent practices in the Malaysian capital market especially among the RA community as well as driving consistency in the treatment of capital market transactions and reporting.
While the RAs have always worked closely with the Malaysian Investment Bankers Association (MIBA) to arrive at consensuses on best practices and mutually agreed terms, the results of such collaborations were not widely published, contributing to a lack of knowledge in the public domain. This is not desirable for the Malaysian capital market in the long run.
Against this backdrop, MIA approached the SC and Bursa Malaysia in 2018 to produce a unified approach to capital market reporting as seen in more developed markets of the United Kingdom and Hong Kong. Preparers and listed issuers as well as the RAs would be guided to know their work scope and responsibilities better. This would eventually lead to more knowledgeable and competent preparers, RAs and Principal Advisors. Ultimately, this unified approach aims to meet the greater objective of facilitating convergence in practices, improving compliance and thus, boosting investor confidence in the Malaysian capital market.
The first standard, the MIRS 1000, setting the framework for the rest of the impending standards was issued in May 2021 after a lengthy period of exposure and deliberations. This was followed by the issuance of MIRS 2030 in January 2022. The next MIRS is expected to be issued in 2023.
MIRS 1000 sets out the framework for the RA’s scope of work pertaining to investment circulars prepared for issuance in connection with a capital market transaction governed wholly or in part by capital market laws and regulations of Malaysia. It establishes basic principles and essential procedures that are common to all reporting engagements (both public and private) relating to investment circulars. MIRS 2030 provides guidance to the RAs on their responsibilities when engaged to report on the Statement of Capitalisation and Indebtedness included in an investment circular.
Other MIRS in the pipeline are:
CMAC recently worked with MIBA to finalise the latter’s Equity & Debt Capital Markets Due Diligence Guides that were issued in January 2021. These industry guides are a collaboration by various stakeholders of the Malaysian equity and debt capital markets to update, enhance and clarify the due diligence standards and practices in relation to the preparation and submission of corporate proposals and offering documents to the SC. These guides encompass the various aspects of due diligence including the scope and extent of due diligence in a corporate proposal as well as the roles of participants involved.
CMAC has also actively responded to various consultative documents issued by the SC and Bursa Malaysia over the years.
In addition, CMAC is the architect of the Capital Market Conference organised since 2017 by MIA and supported by the SC and Bursa Malaysia. The conference took a hiatus in 2020 due to the COVID-19 pandemic and reconvened in June 2021.
Impact to MIA members
It is important for members of MIA who are preparers of reports in connection with prospectuses and other investment circulars or RAs to be aware of all related initiatives and the applicable standards in investment reporting. The MIRS series is a set of reporting standards binding on all MIA members. Similar to other mandatory requirements, members found to have failed in complying with these standards without reasonable justification can be subjected to MIA’s investigation and disciplinary procedures if a complaint is received by these statutory committees. Members are reminded to be fully conversant of these standards when carrying out their professional duties, either as a preparer or the RA. This responsibility is also incumbent upon the MIA members’ staff who eventually report to him or her on a direct basis.
As part of CMAC’s commitment to sharing knowledge, webinars that are mostly complimentary are organised on a regular basis for the education of members and non-members. In 2020 and 2021, CMAC held complimentary outreach sessions on the “Guidance Note on Accountants Report by Reporting Accountant”, “Guidance Note for Issuers of Pro Forma Financial Information”, and “MIRS 2030”. Apart from these, CMAC also participated in outreaches held by other stakeholders. In February 2021, MIBA held a virtual outreach session to brief participants on the recently released Equity Due Diligence Guide. CMAC’s Chair, Mr Teoh Soo Hock, was a panel member and shared on topics such as the RA’s roles and responsibilities, scope of work and relevant best practices.
In addition, the MIA’s Professional Development department also frequently holds training programmes on capital market-related topics such as “Pre & Post IPO Rules and Key Updates to Listing Requirements” and “Pathway to Equity Capital via Initial Public Offering (IPO)”.
With a unified approach to investment reporting, CMAC will be in a strong position to upgrade the quality of work of preparers and RAs alike over time. This can only augur well for the capital market in Malaysia.