SC revises outsourcing guidelines

KUALA LUMPUR: The Securities Commission Malaysia (SC) yesterday released its revised Guidelines on Outsourcing for Capital Market Intermediaries.

According to a press release issued by the SC yesterday, the revised guidelines replace the Guidelines on Performance of Supervisory Functions at Group Level for Capital Market Intermediaries and Guiding Principles for Outsourcing of Back Office Functions for Capital Market Intermediaries.

The press release stated the revision was made to strengthen investor protection measures and enable intermediaries to focus on their core strengths of intermediation by outsourcing their back office functions to service providers.

In appointing a service provider, intermediaries are required to exercise due care and diligence in the selection process, premised on the service provider’s ability to undertake the functions efficiently without jeopardising clients’ interest.

Furthermore, intermediaries must demonstrate the controls used to continuously monitor and assess the service provider’s quality of service and conduct. Such assessments should be verified periodically by an internal or external auditor, it said.

“Outsourcing of functions deemed as material, that is, internal audit, risk management, compliance, fund accounting and maintenance of a unit holders’ register, will still be subject to the SC or Bursa Malaysia’s approval,” the SC said, adding that other functions such as human resources and finance no longer require approval from the SC or Bursa.

The SC said in creating a more business friendly and efficient environment for intermediation activities, the guidelines would also allow intermediaries to outsource to foreign service providers.

To ensure that such outsourcing arrangements do not impede the SC’s supervisory efforts, full access to books and records kept offshore must be given to the SC upon request, it said.