New Malaysian listing rules to require compliance with code

Proposed amendments to the Kuala Lumpur Stock Exchange (KLSE) listing rules will require all listed companies to comply with the Malaysian Code of Corporate Governance as the code is voluntary at present, said Nordin Baharuddin, executive chairman of Ernst & Young.

Speaking at Ernst & Young's Breakfast Forum on "Corporate Governance: Annual Report Disclosure Requirements -- Is Your Company Ready?", Nordin said the expected amendments meant that all listed companies need to state in their annual reports both compliance and non-compliance with the code.

Nordin said the KLSE and the Securities Commission (SC) had the first roll-out session in May for companies with June 30 year-ends, with the expectation that the requirement would be effective from year-end 20 June 2001 onwards.

Therefore, he said companies must prepare early as the requirements would be significant and may require expending efforts and other resources to a large extent.

He said the introduction of the code, partly an initiative of the private sector, was very significant and brought to the forefront the duties, responsibilities and accountabilities of directors.

"The code, issued in March this year, was inspired in part by a desire for the private sector to initiate and lead a review and to establish reforms of standards of corporate governance at a micro level," he said.

More importantly, he said its introduction was based on the belief that in some aspects, self-regulation was preferable and the standards developed by those involve may be acceptable and thus more enduring.

"The code aims to set out principles and best practices on structures and processes that companies may use their operations towards achieving the optimal governance framework," he said.

Nordin said the issuance of the code, contrary to popular belief was not solely in response to the recent financial crisis but a part of a well structured plan to enhance the governance framework in Malaysia.

According to him, efforts to improve corporate governance in Malaysia started well before the 1997 crisis but it was the crisis that expedited the awareness and transformation.

"Efforts started as far back as 1993 when the KLSE Listing Requirements made Audit Committees mandatory for all PLCs.

"In 1995, the SC started a programme to move the regulation of Malaysia's primary market from a merit-based regulatory regime (MBR) to a disclosure-based regulatory regime (DBR),' he said.

He said a key component for shifting from MBR to DBR was for the capital markets to progress to an environment largely governed by self-regulation, high standards of disclosure and due diligence as well as corporate governance practices.

Nordin said under the DBR, the responsibilities of assessing the merit of any securities rest with the investors whose money was being put at risk.

With the DBR, he said that the investors would assess and determine the investment merits of the offering while the SC regulated the disclosure of material information.


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