MALAYSIAN CODE FOR INSTITUTIONAL INVESTORS
On 27 June 2014, the Malaysian Code for Institutional Investors (Code) was launched jointly by the Securities Commission Malaysia and Minority Shareholders Watchdog Group (MSWG).
This initiative was one of the recommendations of the Corporate Governance (CG) Blueprint 2011 for the formulation of an industry-driven code that is expected to strengthen the accountability of institutional investors to their own members and investors. In addition, Institutional investors being major players in the global economy have significant influence over their investee companies due to the substantial stake they hold. This clout can provide them the ability to encourage good governance and appropriate behavior by their investee companies to ensure delivery of sustainable long term value for their beneficiaries or clients.
The formulation of the Code was led by MSWG. This was done through the Steering and the Working Groups. The members of the Steering Committee comprised CEOs and key representatives from the institutional investors fraternity in Malaysia namely Kumpulan Wang Simpanan Pekerja (Employees Provident Fund), Lembaga Tabung Angkatan Tentera (Armed Forces Fund Board), Lembaga Tabung Haji (Pilgrims Fund Board), Pertubuhan Keselamatan Sosial (Social Security Organisation), Persatuan Pengurus Aset Malaysia (Malaysian Association of Asset Managers), Persatuan Takaful Malaysia (Malaysia Takaful Association), Pentadbir Pencen Swasta (Private Pension Administrator) and Badan Pengawas Pemegang Saham Minority Berhad (MSWG).
To provide input and expert opinion, the Expert and Observer Groups were formed comprising Pricewaterhouse Coopers Malaysia (PWC), Financial Reporting Council (FRC), International Corporate Governance Network (ICGN), Governance for Owners, Securities Commission Malaysia (SC), Bursa Malaysia Berhad and Organisation for Economic Co-operation and Development (OECD).
Prior to the launch of the Code, a Joint Consultation Paper with Securities Commission on the Malaysian Code for Institutional Investors was issued in early 2014 to seek public feedback on the Code. Various focus groups were also engaged such as from the fund managers, unit trusts and insurance companies to obtain feedback on the Code.
The Code was a significant milestone not just for MSWG but for the country as well, being the first of such code in the ASEAN region.
The Code which is voluntary sets out six broad principles of effective stewardship by institutional investors, followed by guidance to help institutional investors understand and implement the principles.
In addition to economic considerations, the Code advocates institutional investors to ensure that they invest in a responsible manner by having regard to corporate governance and sustainability of the company.
Institutional investors are encouraged to be signatories of the Code.