A year is unfolding as Malaysia’s Securities Commission (SC) moves to lay a bold, far-reaching framework designed to propel the regulator to new heights over the next two decades. Eight months into his tenure as executive chairman, Datuk Mohammad Faiz Azmi is shaping a strategic plan that will extend well beyond the current cycle, integrating a suite of initiatives that are set to define the regulatory landscape for years to come. The groundwork for these reforms is being laid in tandem with the forthcoming Capital Market Master Plan 4 (CMP4), which will be unveiled later this year, while its predecessor, CMP3, reaches its sunset this year. This strategic cadence signals a deliberate move from episodic policy changes to a structured, long-term evolution of Malaysia’s capital markets governance and supervisory architecture.
Strategic vision for a two-decade regulatory framework
Mohammad Faiz Azmi’s leadership centers on constructing a robust, forward-looking framework that can guide the Securities Commission through the next two decades. The ambition is not merely to refine current rules but to architect a regulatory environment capable of absorbing future shocks, leveraging new financial instruments, and sustaining orderly market growth. The emphasis on a two-decade horizon reflects a mature, proactive stance toward regulation, aiming to align policy with the longer-term development trajectory of Malaysia’s capital markets. This approach envisions scalable governance mechanisms, adaptable supervisory tools, and a framework that accommodates evolving market structures, digital innovations, and broader socio-economic objectives.
Central to this planning is the integration of CMP4 into the regulatory architecture. CMP4 is positioned as the capstone of ongoing reform work, intended to update strategic priorities, governance models, and supervisory guidelines in ways that harmonize with technology-driven market dynamics, investor protection imperatives, and systemic risk management. The impending CMP4 release underscores a calibrated sequencing: CMP3 has delivered foundational reforms since its 2021 launch and is nearing completion, while CMP4 promises to elevate standards, expand coverage, and intensify the regulator’s capability to oversee a more complex market ecosystem. This sequencing implies a disciplined, phased approach to reform, enabling stakeholders to anticipate changes, prepare for compliance, and participate in the evolution of market building blocks in a transparent manner.
From a governance perspective, the plan emphasizes clarity of mandate, enhanced accountability, and alignment with international best practices, all while preserving the unique contours of Malaysia’s financial landscape. It also reflects an understanding that effective regulation must be responsive to macroeconomic shifts, technological disruption, and evolving investor expectations. In practical terms, that means more precise risk surveillance, stronger oversight of new financial products, and more rigorous disclosure and governance standards for market participants. The overarching aim is to ensure that Malaysia’s capital markets can sustain higher levels of investor confidence, attract deep and diverse capital pools, and support the financing needs of a broad spectrum of economic activities across the country.
Market growth milestones and the path to higher capacity
Over the last two decades, Malaysia’s capital markets have expanded substantially, reaching a total size of about RM4.1 trillion. This figure comprises roughly RM2 trillion in equity and RM2 trillion in debt instruments, underscoring a diversification of funding sources beyond traditional bank lending. Notably, this growth has occurred in the context of a banking sector asset base that sits at approximately RM3.6 trillion, illustrating that the capital markets have become a dominant channel for corporate financing and investor wealth creation. Against this backdrop, Mohammad Faiz Azmi contends that a total market size of RM8 trillion is achievable, suggesting a doubling of current capacity if policy directions, market confidence, and structural reforms align effectively.
To reach such a scale, the SC’s strategy involves leveraging several levers. First, expanding access to diverse financing instruments – including equities, corporate debt, structured products, and social finance mechanisms – can broaden the spectrum of funding options for businesses of varying sizes and stages. Second, unlocking deeper liquidity and reducing frictions in trading, settlement, and post-trade processes can enhance market efficiency and attract a wider array of domestic and international investors. Third, embracing financial inclusion and broad-based participation can widen the investor base, enabling more households and smaller entities to engage with capital markets. Fourth, strengthening governance and disclosure standards supports investor protection and confidence, which are critical for sustaining long-term growth and capital formation.
Moreover, the market’s growth narrative is increasingly linked to broader socio-economic objectives. The SC has signaled a willingness to pivot beyond the traditional pursuit of initial public offerings (IPOs) as the sole engines of capital formation. In recent years, the regulator has explored initiatives that align corporate financing with social and philanthropic aims, reflecting a broader understanding of the market’s potential to contribute to societal development. This shift implies that the regulatory framework will not only facilitate capital formation but also guide the manner in which funding affects stakeholders, including employees, communities, and social enterprises. Such a holistic approach to market development is designed to foster sustainable growth and resilience in Malaysia’s financial system.
In parallel, the regulatory leadership recognizes that achieving RM8 trillion in market size will require sustained collaboration with market participants, exchanges, policymakers, and the public. It calls for a proactive ecosystem that supports innovation while maintaining robust risk controls and investor protections. The ultimate objective is to create a market structure that can withstand volatility, adapt to disruptive technologies, and deliver long-term value to both issuers and investors. These aims reflect a deep-seated commitment to building a capital market that is not only large in size but also high in quality, transparency, and resilience.
Diversifying funding sources: beyond IPOs to social and charitable avenues
A notable strategic pivot under Mohammad Faiz Azmi’s leadership is the SC’s move away from an exclusive focus on IPOs as the primary source of funds for companies. The regulator has begun exploring a broader spectrum of financing models, including the potential roles of charitable foundations, social enterprises, and other impact-driven funding constructs. This diversification aims to unlock capital for social good, while simultaneously expanding the market’s depth and breadth. By enabling and legitimizing such funding avenues, the SC seeks to channel resources toward initiatives that generate social impact, stimulate innovation, and support inclusive growth.
The push toward social and charitable fundraising structures aligns with the broader objective of using the capital market as a tool for national development. A social finance ecosystem can mobilize private capital for public-interest projects, including initiatives that address social inequality, environmental sustainability, and community development. The concept of a social exchange, which has been advanced in Malaysia, illustrates a potential platform for matching investors with socially meaningful projects. The anticipated live launch of a social exchange next year, following an earlier pilot program, signals a concrete step in operationalizing this vision. The social exchange would provide a formalized avenue for funding social impact projects, complementing traditional capital market activities and broadening the market’s purpose beyond corporate profitability alone.
From a regulatory perspective, enabling social finance requires clear governance standards, transparent disclosure practices, and well-defined risk management frameworks. It also necessitates clarity around investor protection, fiduciary duties, and the appropriate alignment of incentives for all participants. The SC’s role would be to establish the rules of engagement, ensure compliance, and monitor outcomes to maintain market integrity while fostering innovation. This approach holds the promise of connecting capital with need, thereby expanding the instrument mix available to fund social, environmental, and community-oriented initiatives. It also provides a pathway to mobilize a broader segment of the population into investment activities, contributing to financial literacy and inclusive growth.
Integrating social finance with the mainstream capital market can yield several benefits. It can mobilize additional pools of patient capital for long-horizon projects, create new opportunities for social enterprises to scale, and enhance public awareness of the impact of investments. At the same time, it requires careful calibration to ensure that social objectives do not compromise financial prudence or market discipline. The SC’s governance framework would need to strike a balance between enabling social funding and maintaining rigorous risk controls, reporting standards, and accountability mechanisms. As the social exchange concept matures, stakeholders can anticipate a structured pathway from pilot programs to a fully functional platform that aligns with Malaysia’s development ambitions, while ensuring investor confidence and market stability remains intact.
In practical terms, this diversification expects to stimulate collaboration among a wider array of actors, including philanthropic bodies, private sector participants, social enterprises, and public institutions. It also implies a potential reconfiguration of corporate strategy among listed companies and fund managers, who may increasingly consider social impact metrics as part of their investment theses and capital allocation decisions. The regulatory environment will need to accommodate these evolving dynamics by codifying clear guidelines on eligibility, governance, reporting, and accountability for social-finance activities. The end result could be a more vibrant, inclusive, and innovative capital market ecosystem that supports sustainable development goals alongside traditional financial performance.
Dividend discipline and the corporate health dialogue
A central corporate governance issue highlighted by Mohammad Faiz Azmi concerns the consistency and reliability of dividend payouts by Bursa Malaysia-listed companies. The emphasis on dividends reflects an ongoing effort to align corporate behavior with shareholder expectations, enhance capital allocation discipline, and promote investor confidence. Ensuring that profitable and cash-generative companies maintain predictable dividend streams can contribute to a healthier investment climate, attract yield-focused investors, and reinforce the market’s long-term sustainability.
The push to secure consistent dividends may have particular implications for companies that have experienced financial stress or structural weaknesses. In recent years, certain firms designated under Practice Note 17 (PN17) and Guidance Note 3 (GN3) have faced challenges related to sustainability and financial viability. The regulator’s focus on dividend payout practices signals a broader governance objective: to incentivize prudent financial management, strengthen balance sheets, and promote a culture of value creation that benefits shareholders across cycles. While this approach can enhance investor returns and market credibility, it also requires a careful balance to avoid forcing unsustainable payouts that could jeopardize corporate solvency and long-term growth prospects.
From a policy standpoint, the SC will need to calibrate its expectations with market realities. This includes considering sectoral differences, cash-flow constraints, and investment needs that may temporarily limit dividend capacity for certain issuers. The regulatory framework would therefore benefit from flexible yet transparent rules that guide dividend policy while preserving the ability of signaling firms to reinvest in capital expenditure, research, and strategic acquisitions where appropriate. Effective implementation would involve robust disclosure on dividend policy, payout history, and the underlying earnings quality, enabling investors to assess the sustainability and reliability of distributions. The result would be a more predictable dividend environment that supports steady income for investors while encouraging prudent corporate stewardship.
In practice, this dividend discipline could interact with broader market reforms aimed at improving corporate governance, investor protections, and market efficiency. Companies with stronger governance, transparent earnings reporting, and sound cash-management practices are better positioned to maintain stable dividend streams that align with investor expectations. Conversely, firms under stress or with weaker governance may need to adjust payout strategies while the regulator provides oversight to prevent abrupt, unsustainable shifts. The net effect is expected to be a market where dividend signals reliably reflect true cash-generating capacity, rather than being subject to opportunistic management behavior during periods of volatility.
Regulatory finances: fees, deficits, and the pricing of supervision
An important facet of Mohammad Faiz Azmi’s commentary concerns the SC’s fee structure, which he notes has remained unchanged since the regulator’s establishment in 1993. He argues that the static fee regime may place SC at a disadvantage relative to other financial-market intermediaries and supervisory bodies, implying that recalibration of fee schedules could be necessary to ensure sustainable funding for regulatory functions. This point intersects with the regulator’s broader mandate to modernize supervision without compromising access to capital markets or undermining competitiveness. Fee reforms would need to balance the need for adequate resources to supervise a growing and increasingly complex market with the imperative to maintain an attractive and fair business environment for issuers, financial institutions, and investors.
Candidly, the SC’s financial performance has faced pressures in recent years. In 2023, it posted its largest net operating deficit of RM54.64 million in at least a decade. This financial backdrop provides additional context for discussions around fee adjustments and the resource allocations required to execute CMP4 and related market-improvement initiatives. A sustainable funding model is critical to delivering robust supervision, timely policy updates, and high-quality market infrastructure. It also underscores the importance of aligning regulatory funding with evolving market complexity, technology-driven supervision, and heightened risk management demands.
The implications of fee reform extend beyond the SC’s internal sustainability. They bear on market participants who rely on predictable, transparent regulatory costs. An updated fee framework could be designed to reflect the scale and complexity of activities supervised, the risk profile of certain participants, and the benefits derived from enhanced market integrity. In implementing any adjustments, policy makers would need to ensure a clear and predictable fee regime, emphasize transparency in how fees are calculated, and communicate the rationale for changes well in advance to minimize disruption. A well-structured fees strategy can reinforce trust in the regulator and in the market as a whole, contributing to a more stable investment climate and the continuity of long-term reform programs.
The social exchange initiative: live next year and the roadmap ahead
An integral part of the SC’s forward-looking agenda is the establishment of a social exchange, which is anticipated to go live next year following the launch of a Social Exchange Pilot Programme earlier this year. This platform is designed to spearhead Malaysia’s journey toward creating a dedicated fundraising channel for socially impactful projects. The social exchange represents a concrete step toward translating the ideals of social finance into a tangible market mechanism that can connect capital with social outcomes. The timing of the rollout signals a readiness to scale pilot learnings into a fully operational platform that complements the existing capital markets while expanding the scope of market-based financing.
From a regulatory and operational perspective, the social exchange will require a robust framework for governance, measurement of social impact, and transparent reporting. Investors must be able to assess the legitimacy of projects, the expected social benefits, and the financial implications of their investments. Projects seeking funding through the social exchange will benefit from standardized criteria, credible due diligence, and credible risk disclosures. These elements are essential to maintaining investor confidence and ensuring that the platform fulfills its social and financial objectives. The integration of social impact metrics into the broader investment decision process will also encourage innovative financing models and encourage market participants to consider non-traditional metrics alongside conventional financial returns.
The social exchange concept further signals an alignment between regulatory policy and national development priorities. By enabling social funding mechanisms, the SC acknowledges the potential for capital markets to contribute to public-interest outcomes, such as reducing social inequalities, promoting environmental sustainability, and supporting community development. The practical success of this initiative will depend on effective coordination with other government agencies, clear standards for governance and reporting, and ongoing stakeholder engagement to refine the platform’s design and operation. If executed effectively, the social exchange could become a flagship example of how capital markets can support inclusive growth, mobilize patient capital for social outcomes, and broaden participation in investment activities.
Broader implications for Malaysia’s capital market ecosystem
The cumulative effect of these strategic directions is to position the SC at the center of a broader transformation of Malaysia’s financial system. The move to a two-decade regulatory framework, the expansion of funding channels, the emphasis on dividend discipline, the attention to regulatory funding, and the advent of a social exchange together form a cohesive blueprint for a more resilient, inclusive, and innovative market. This framework recognizes that a modern capital market must balance the dual objectives of efficient capital formation and robust investor protection, while also serving social and developmental aims that align with the country’s growth agenda.
For market participants, these reforms will translate into clearer expectations, more comprehensive disclosure requirements, and new opportunities to engage with capital markets beyond conventional equity and debt offerings. Issuers may explore alternative financing avenues that align with social impact goals, while investors will gain access to broader investment options and more diverse risk-return profiles. Fund managers, financial institutions, and intermediaries will need to adapt to new rules, enhanced oversight, and emerging platforms—particularly the social exchange—that collectively shape the market’s future shape and behavior. The goal is to create an ecosystem where innovation can thrive within a robust regulatory framework that guards against risk, ensures transparency, and maintains the integrity of the Malaysian financial system.
The CMP4 pathway, once unveiled, will provide a more concrete articulation of these ambitions. It will delineate policy priorities, governance reforms, and supervisory enhancements designed to sustain high standards of conduct, market efficiency, and systemic resilience. The 20-year horizon embedded in Mohammad Faiz Azmi’s leadership reflects a confidence that the regulator can bring about meaningful, lasting change—an objective that requires extensive collaboration among regulators, exchanges, market participants, and the public. The outcome sought is a capital market that is not only large in scale but also credible, dynamic, and aligned with the nation’s broader development objectives. Achieving this will demand ongoing dialogue, rigorous implementation, and continuous refinement of policies and practices in response to evolving market realities.
Conclusion
Datuk Mohammad Faiz Azmi’s early tenure as executive chairman of the Securities Commission Malaysia signals a decisive shift toward a comprehensive, long-term regulatory framework designed to elevate the regulator to new heights over the next two decades. The forthcoming CMP4, building on CMP3’s momentum, aims to redefine Malaysia’s capital market architecture by expanding the instrument mix, broadening funding channels beyond IPOs to include social and charitable financing, and reinforcing governance, disclosure, and investor protection. The market’s growth trajectory—from RM4.1 trillion in size to an ambitious RM8 trillion target—reflects a constructive confidence in Malaysia’s capacity to scale its financial markets while maintaining stability and integrity.
Key issues highlighted by the leadership include ensuring consistent dividend policies among listed companies, addressing the complexities of PN17 and GN3 firms, and reevaluating the SC’s own funding model in light of a long-standing, unchanged fee structure and a significant net operating deficit in 2023. The discussions around regulatory fees underscore the need for a sustainable financing approach that supports robust supervision without compromising competitiveness. The social exchange initiative represents a tangible bridge between market finance and social impact, offering a platform to channel capital toward projects with measurable societal benefits while expanding the market’s participatory base.
In sum, the SC’s strategic direction reflects a holistic vision: to build a more capable, inclusive, and socially conscious capital market that can deliver sustained growth, investor confidence, and meaningful contributions to national development. The roadmap ahead—anchored by CMP4, the social exchange, and a reimagined approach to funding—will require continued collaboration among policymakers, market participants, and the investing public. As the regulator navigates these reforms, the emphasis remains on delivering a credible, resilient, and modernized financial ecosystem that serves Malaysia’s economy today and far into the future.
