SC RELEASES REVISED OUTSOURCING GUIDELINES

KUALA LUMPUR, Aug 9 (Bernama) -- The Securities Commission Malaysia (SC) has
released its revised Guidelines on Outsourcing for Capital Market
Intermediaries.

The new guidelines will 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.

In a statement Tuesday, the SC said 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.

"Intermediaries must also demonstrate the controls used to continuously
monitor and assess the service provider’s quality of service and conduct," the
SC said, adding, such assessment should be verified periodically by an internal
or external auditor.

The outsourcing of functions deemed as material, such as the
internal audit, risk management, compliance, fund accounting and maintenance of
unit holders’ register will still be subject to the SC or Bursa Malaysia’s
approval.

Other functions such as human resource and finance no longer require
approval from the SC or Bursa Malaysia (Malaysia Exchange).

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 made
available to it, upon request.