Tutorial 12: Nature & Operations of Bursa Malaysia

1. What is a stock market? (4 marks)

Stock market is the marketplace for the raising of equity funds by companies through the
issuance of new securities to investors. It is also a marketplace where listed securities can
be bought and sold by investors enabling liquidation of their investments for those who
need cash and those that have cash to invest.

According to S.2(1) CMSA 2007, stock market means a market or other place at which,
or a facility by means of which (a) offers to sell, purchases or exchanges of securities are
regularly made or accepted; (b) offers or invitations that are intended, or may reasonably
expected, to result, whether directly or indirectly, in the making or acceptance of offers to
sell, purchase or exchange securities, are regularly made; or (c) information concerning
the prices at which or the consideration of which, particular persons, or particular classes
or persons, propose or may reasonably be expected to sell, purchase or exchange
securities is regularly provided.
*Stock exchange: Bursa Malaysia Securities Bhd

2. Bursa Malaysia is made up of three separate markets. Explain those three markets.
The three separate markets are Main Market, Ace Market and Leap Market.
Main Market:
Main Market is the merger of the Main Board and Second Board into a single board
known as the Main Market. It is comprising established listed companies with good track
records with clear listing requirements.

Ace Market:
ACE Market stands for “Access, Certainty, Efficiency”. It is formerly known as
MESDAQ, Malaysian Exchange of Securities and Dealings and Automated Quotation
Berhad. It is mooted as an alternative market that is sponsor driven open to all economic
sectors and sizes consisting of emerging companies with growth potential (Company
does not fulfill main market listing requirement).
Leap Market:
 Leap Market is stand for the “Leading Entrepreneur Accelerator Platform Market”. It is a
platform for Small and Medium Enterprises (“SMEs”) to raise funds and visibility in the
capital market, despite not being able to meet the criteria for listing on the Main Market
and the ACE market. It is accessible only to Sophisticated Investors because it is high
risk.
Sophisticated investors – are referring to entities (company) with total net assets
exceeding RM10 million, or individuals whose investment portfolio or total net joint
investment portfolio with a spouse exceed RM 1 million; or whose gross annual income
exceeds RM300,000.00. In the preceding 12 months/ join with spouse exceed
RM400,000, in the preceding 12 months.

3. Briefly explain the effect if PN17 issuer has failed to regularize any obligations in
the regularization plan within the time stipulated by the Exchange.
PN17 Company is the listed company that has insignificant business or operation. It
generates 5% or less of the share capital in its latest annual financial statements or has
lost its major business or operations business that contributes 70% or more of the revenue
in its latest financial statements, it must make an announcement and inform Bursa
Malaysia. Required to regularize its position within the time prescribed by Bursa
Malaysia. The first effect is trading suspension. The second effect is de-listing - removing
this company out of the market cannot buy and sell via Bursa Malaysia exchange.
First effect – trading suspension
Second effect – de-listing, stocks cannot be traded

4. What are the disciplinary actions available for Bursa Malaysia against brokers
(participating organization/registered person) who breached the Rules of Bursa
Malaysia Securities Bhd.?
Under the Rule 15.02, Bursa Malaysia may exercise its disciplinary powers if the broker
is found to have breached any of the rules and directives. The disciplinary powers
include:
(a) Reprimand publicly or privately
(b) Impose a fine not exceeding RM1 million
 (c) Suspend a Participant in accordance with the terms prescribed by the Exchange
(d) Strike off the Register where it ceases to enjoy the privileges of Participant ship
(e) Impose any restrictions or conditions on activities that a Participant involved in
(f) Impose conditions for compliance including issuing a directive to remedy or mitigate
the breach
(g) Direct a participant to take appropriate action against any of its employees or agents
(h) Mandate education, training or programme determined by the Exchange to be
undertaken by the Exchange
(i) Any other action the Exchange considers appropriate subject to consultation with the
Security Commission (SC)

5. GG Bhd. received a letter from Bursa Malaysia on 23 Jun 2020. The content of the
letter is reproduced as below:
We draw your attention to the sharp rise in price and volume of your Company’s shares
recently (“trading activity”).
In light of the above and in order for investors to be able to make informed investment
decisions, you are requested to respond, after making due enquiry with your directors,
major shareholders and such other relevant persons, to the following queries
immediately for public release in accordance with paragraph 9.11 of Listing
Requirements :
1. Whether there is any corporate development relating to your Group’s business and
affairs that has not been previously announced that may account for the trading activity
including those in the stage of negotiation/discussion. If yes, kindly provide the details
including status of the corporate development to enable investors to make informed
investment decisions
2. Whether there is any rumour or report concerning the business and affairs of the
Group that may account for the trading activity and in this respect, you are required to
comply with Paragraphs 9.09 and 9.10 of Bursa Securities LR;
3. Whether you are aware of any other possible explanation to account for the trading
activity; and
4. Whether you are in compliance with the Bursa Securities LR, in particular Paragraph
9.03 of the Bursa securities LR on immediate disclosure obligations.
Please note that the contents of the announcement must be endorsed by the Board of
Directors of the Company and the announcement must reach Bursa Securities
immediately via Bursa LINK.
Yours faithfully,
Bursa Malaysia Securities Berhad

a) Discuss which regulatory measures was enforced by Bursa Malaysia to monitor

the market surveillance on the example above?
Regulatory measures that Bursa Malaysia had initiated and enforced is Unusual
Market Activities (UMA) query that initiates upon detection of any irregular price or
volume movements or fluctuations. UMA query is initiated, such company that are
affected must immediately make an announcement and clarification to clarify and
make known the cause of unusual market activities and behavior in the trading of its
securities.

b) What is the purpose of market surveillance?

 To ensure a fair and orderly manner in terms of market operation and to promote
efficient price discovery and investor protection, market surveillance system was
introduced and implemented by Bursa Malaysia (BM).

 Market surveillance includes activities such as monitoring the trading activities both
real-time and post-trade, analyzing both equities and derivatives trading activities.

 If there were to have any form of detection of market misconduct, regulatory actions
are to be taken by BM to ensure market integrity at all times which includes soft
enforcement, market alerts and designation.

c) Apart from the market surveillance discuss in (a) above, what are the other
regulatory measures that may be adopted by Bursa Malaysia?
Soft enforcement
Soft enforcement is an approach used to address irregular trading concerns through
engagement with Participating Organisations (POs). Bursa Malaysia’s expectation on
POs post soft enforcement include POs to immediately carry out investigation into
possible irregularities and cease trading misconduct.

Market Alert
Market alert is an alert initiated to caution the investing public on the possible
irregular trading activities of a particular security. The Market Alert is published via
media release and Listing Circular. The functions of Market Alert are to alert
investors take note of the recent developments of the listed company, to exercise
caution and due diligence on the trading of the affected securities, and to guide their
investment decisions based on fundamentals of the listed company.

Designation
The Exchange may declare any listed securities to be Designated Securities for such
period as the Exchange thinks fit if there has been manipulation or excessive
speculation on such listed securities, or it is so directed by the Commission. The
decision to designate securities has to take into account the interest of ensuring a fair
and orderly market for the trading of the affected securities. With the designation,
trading in the securities continues but will require payment upfront before buying and
a free balance of securities before selling.