A group of Malaysian stockbrokers is examining the Securities Commission’s proposed revamp of its fee structure and the potential introduction of a levy on revenue generated from their regulated activities. The move comes as the industry weighs fair funding for oversight against the cost of doing business for brokers and, ultimately, for investors. The Association of Stockbroking Companies Malaysia, which represents 29 stockbrokers nationwide, says the review is necessary to assess the impact on the market, transparency, and fairness, with the aim of sustaining a healthier and more vibrant capital market.
Overview of the Securities Commission’s proposed fee revamp and levy
The Securities Commission (SC) is reportedly proposing a comprehensive reconfiguration of its fee structure and the possible imposition of a levy on revenue derived from regulated activities. The association noted that the review is currently focused on assessing the potential effects on the broader industry as well as on investors who rely on well-regulated financial markets. The objective cited by the association is to ensure that any changes are fair, transparent, and conducive to a more robust market ecosystem, rather than punitive or destabilizing measures that could dampen participant confidence or investment activity.
Industry observers have highlighted that the proposed changes would touch on the SC’s funding model, which historically has relied on a framework that has remained largely unchanged for more than three decades. The scope of the potential levy, as reported in media coverage prior to the review, is said to include a levy of up to 1.5% on revenue directly or indirectly derived from holding a licence for activities such as dealing in bonds, brokerage income (including platform fees), underwriting fees, and other related fees and commissions. This broad category would capture the core revenue streams generated by licensed market activities and could have a meaningful effect on brokerages’ cost structures and pricing strategies.
The review also references the SC’s broader fiscal context. In recent years, the SC has faced its largest net operating deficit in at least a decade, with a reported shortfall of RM54.64 million in 2023. This deficit underscores the funding pressures facing the regulator and the rationale cited by some in favor of a revised funding framework to sustain essential oversight and regulatory functions. In this context, the SC is described as being self-funded, with no changes to the levy and fee framework in more than 30 years. The proposed changes thus aim to address both a funding gap and the ongoing need to support effective supervision of Malaysia’s capital markets.
Beyond licensing fees, the SC’s revenue mix includes penalties for non-compliance with provisions or conditions and the recovery of investigation and proceedings costs recognized when incurred. These other income sources have historically contributed to the regulator’s financing, and any modification to how fees, levies, and penalties are structured could influence the regulator’s revenue mix going forward. Media commentary on the topic has suggested that the SC’s plan is to solidify funding for oversight while ensuring that the funding mechanism is aligned with current market realities, though details and final parameters have yet to be confirmed through formal consultations.
In the broader context of market structure and regulation, the proposed revamp raises questions about administrative efficiency, the burden on market participants, and the potential benefits of stronger regulatory capacity. Supporters of a clearer and more adequate funding mechanism argue that it is essential for maintaining market integrity, reducing systemic risk, and enhancing investor protection. Critics, however, may emphasize the need to avoid cost escalation that could be passed through to investors or discounted in ways that dampen liquidity and trading activity. The implications for market competitiveness, cross-border integration, and long-term capital formation are also part of the ongoing discussion sparked by the proposed framework.
Industry response and positions from the stockbroking community
The association representing Malaysia’s stockbroking firms states that it is conducting a thorough review of the SC’s proposed changes. The focus remains on the potential impact of the fee restructuring and the possible levy on revenue from regulated activities, particularly regarding how these changes affect brokerages and their clients. The membership, consisting of 29 stockbrokers nationwide, emphasises that any modifications must be fair and transparent while contributing to a healthier and more vibrant market environment. The association underscores the critical role of the SC in maintaining a robust and dynamic capital market and recognizes the necessity of adequate funding to support the regulator’s oversight and regulatory responsibilities.
Key themes emerging from the industry response include:
- Commitment to the SC’s essential regulatory role and the need for an appropriately funded regulator to ensure market integrity and investor protection.
- Emphasis on fairness and transparency in how fees and levies are determined, implemented, and communicated to market participants.
- Concern about how any new levy would affect the cost of capital, the pricing of investment services, and the affordability of trading for retail and institutional investors alike.
- A desire for the reform process to incorporate clear metrics, stakeholder input, and an evidence-based approach to assess the financial sustainability of the SC’s oversight function.
- The expectation that changes should avoid unintended consequences, such as reduced liquidity or diminished competitiveness in Malaysia’s capital market.
Within this framing, the association also highlights the importance of balancing the regulator’s funding needs with the practical realities faced by brokers, who must allocate resources to compliance, reporting, risk management, and technology platforms that support trading, settlement, and investor services. The discussion includes consideration of whether the levy would be uniform across all regulated activities or tailored to specific segments, as well as how any new charges would be levied and collected. Stakeholders recognise that clarity in the proposed model and the governance around how funds are earmarked and reviewed will be critical to gaining industry buy-in and ensuring predictable cost structures.
Additionally, industry observers note the potential for the review to renew conversations about the efficiency of SC processes, the speed and quality of enforcement actions, and the transparency of regulatory budgeting. The discussion suggests that stakeholders will be listening closely to how the regulator demonstrates stewardship of public funds and demonstrates measurable improvements in market health and investor confidence as a result of the proposed funding changes.
Financial context: regulatory funding history and the regulator’s funding model
The current financial backdrop for the Securities Commission includes its status as a self-funded regulator. For more than three decades, there has been no substantive alteration to the framework governing levies and fees charged by the SC. This longstanding arrangement has helped maintain predictability for market participants, but the recent reporting of a substantial net operating deficit—RM54.64 million in 2023—has intensified debate about whether the existing funding model remains fit for purpose in a modern, dynamic capital market.
Several components define the SC’s income streams beyond licensing fees. Penalties assessed for non-compliance play a role in revenue, as do the recovery of investigation and proceedings costs that are recognised at specific points in time. While penalties and recoveries are not the primary funding source, they contribute to the regulator’s ability to fund enforcement and oversight activities. The combination of these elements shapes the SC’s overall financial health and its capacity to sustain regulatory functions without compromising market integrity.
Given the deficit and the evolving demands of a technology-driven trading environment, the SC faces questions about how to close funding gaps while preserving a level playing field for market participants. A revamp of the fee structure, alongside the potential levy, would be a strategic response intended to align funding with contemporary market activity and regulatory responsibilities. At the same time, the changes could introduce new cost considerations for brokerages and related service providers, underscoring the need for careful design to minimize negative spillovers into trading costs and market competitiveness.
Industry stakeholders have emphasised the importance of a transparent, evidence-based approach to determine the extent and structure of any levy. They point to the need for robust impact assessments, clear delineation of which activities would be taxed, and careful consideration of transitional arrangements. The goal is to ensure that the fiscal health of the regulator does not come at the expense of market participants’ ability to compete and innovate in a way that benefits investors.
Stakeholder engagement and the consultation process
As part of the information-gathering phase, the Malaysian investment banking community associations have been invited to provide comments on the SC’s proposals. In particular, the Malaysian Investment Banking Association and the Federation of Investment Managers Malaysia were approached for their perspectives. At the time of the reporting, those associations had not yet issued responses. The ongoing engagement process signals an intent to gather input from a broad spectrum of market participants, including banks, investment managers, brokerage houses, and other stakeholders with a stake in the regulatory environment and the cost of compliance.
Key considerations for stakeholders during this consultation phase include:
- Assessing how the proposed fee revisions and the possible levy would affect operating costs for brokerages, wealth managers, and other market participants.
- Evaluating potential effects on investor costs and market liquidity, as changes in pricing for services could influence trading activity and investor demand.
- Understanding the governance mechanisms by which SC funds are allocated, spent, and monitored, including whether there are performance-based justifications for regulatory expenditure.
- Clarifying the transitional arrangements if a levy or new fee structure is introduced, including phasing, exemptions, or relief measures for smaller firms or certain market segments.
- Ensuring that the consultation process itself is transparent, timely, and accessible so that stakeholders can meaningfully participate in the discussion and influence policy design.
The consultation period is a critical step toward finalizing any new funding framework. Stakeholders will be watching closely how the SC synthesizes feedback, weighs competing priorities, and communicates decisions. The objective is to reach a consensus that supports strong regulatory capacity while preserving the competitiveness and inclusivity of Malaysia’s capital markets.
Impacts on brokers, investors, and market dynamics
If implemented, the proposed levy and the revised fee structure could influence several aspects of the market:
- Cost structures for brokerages: A levy on revenue from regulated activities could raise operating costs, potentially affecting commissions, platform fees, or other revenue lines that brokerages rely on to sustain services and technology platforms.
- Pricing for clients: Changes in the cost of regulatory compliance could be passed through to investors in various forms, potentially impacting retail and institutional trading costs and net returns.
- Market liquidity and activity: The overall effect on trading activity would depend on how the changes translate into total cost, the perceived fairness of the levy, and the comportment of the regulatory environment. If costs rise for brokers, there could be downstream effects on liquidity and trading volumes.
- Investor protection and confidence: Proactive and well-communicated regulatory funding reforms could bolster investor confidence by signaling a strong, well-funded regulator committed to oversight and enforcement.
- Competitiveness of Malaysia’s markets: The design of the levy, including any transitional relief or exemptions, could influence the relative attractiveness of Malaysia’s capital markets compared with regional peers.
Proponents argue that a transparent funding model is essential to sustaining robust regulatory oversight, which in turn protects investors and supports long-term market integrity. Opponents or concerned parties emphasise the need to guard against excessive cost burdens that could impede market participation or increase the cost of capital for businesses seeking funding through regulated channels. The balance between regulatory capacity and market efficiency remains at the heart of the debate.
Process, timeline, and governance considerations
The path forward for the SC’s fee and levy proposals will hinge on a structured consultation process, feedback assimilation, and formal policy determination. Industry participants expect a clear timeline outlining when formal proposals will be released, when stakeholder comments will be incorporated, and when any legislative or regulatory amendments would become effective. Sound governance practices—such as performance metrics for regulatory spending, regular reviews of the funding framework, and transparent budgeting—will be essential to maintain credibility and trust among market participants.
Several governance questions will need to be addressed:
- How will the levy be calculated, collected, and audited? Will it be uniform across all licensed activities, or will it differentiate by instrument class, trading venue, or licensing tier?
- What transitional arrangements will apply to existing brokers and new entrants? Will there be exemptions, grace periods, or tiered rates for smaller market participants?
- How will the SC demonstrate accountability for collected funds, including reporting on how the revenue is deployed to enhance regulatory oversight, enforcement, and market integrity?
- What benchmarks or performance indicators will be used to evaluate the impact of funding changes on market quality, investor protection, and regulatory efficiency?
- How will ongoing stakeholder engagement be structured to ensure continuous feedback and timely updates about the regulatory funding framework?
As the proposals move through formal channels, market participants will be attentive to any shifts in policy language, the scope of the levy, and the overall design philosophy guiding the SC’s funding model. The process will likely involve consultations, data collection, and iterative policy development aimed at achieving a balance between sustainable regulatory funding and maintaining a competitive, accessible market for Malaysian investors.
Broader implications for Malaysia’s capital market
The discussion surrounding the SC’s funding framework occurs within a wider context of capital market development and regulatory modernization. A well-funded regulator is widely viewed as a cornerstone of market stability, which supports investor trust, corporate financing, and long-term growth. At the same time, the cost of doing business within the financial sector—especially for smaller brokerage firms and startups—must be manageable to preserve competition and innovation.
The potential shift in funding structure could serve as a catalyst for broader conversations about market structure, technology investment, and the regulatory landscape. If the proposed changes succeed in delivering more predictable and stable funding without compromising market efficiency, they could set a precedent for how other regulatory bodies in the region design sustainable funding mechanisms. Conversely, if the changes are perceived as burdensome or insufficiently transparent, they could provoke concerns about competitiveness, compliance costs, and investor access to affordable financial services.
Market observers emphasise the importance of aligning regulatory budgets with measurable outcomes. Clear reporting on how SC funding translates into tangible improvements in supervision, faster enforcement where needed, and stronger protections for investors will be critical to maintaining confidence in the market’s governance framework. The ultimate objective remains to create an environment where capital can flow efficiently, risk is managed effectively, and investors can participate with confidence in a fair and transparent market.
Conclusion
Malaysian stockbrokers are engaging in a detailed review of the Securities Commission’s proposed fee restructuring and the potential levy on revenue from regulated activities. Representing 29 stockbrokers nationwide, the industry association stresses the importance of fair, transparent changes that bolster a healthy and vibrant market while ensuring robust funding for essential regulatory oversight. The backdrop to these discussions is the SC’s status as a self-funded regulator facing a significant net operating deficit in 2023 and a framework that has remained largely unchanged for over three decades. While the exact design and scope of the levy remain under consideration, stakeholder input from industry groups and regulatory bodies alike will be crucial to shaping a funding model that sustains oversight without unduly burdening market participants or dampening investor participation. The process will continue through formal consultations, with emphasis on governance, transparency, and measurable improvements in market integrity.
