Do brokers have to be licensed?

In order to protect potential investors from unscrupulous individuals and to maintain appropriate standards, persons engaged in the securities industry must be duly licensed. Under the Securities Industry Act 1983 (SIA), all stockbroking companies must hold a valid dealer’s licence in order to conduct business or hold themselves out as a dealer. (A list of licensed intermediaries is provided in the SC website under Resources www.sc.com.my). Similarly, futures brokers and their representatives trading futures and options must be licensed under the Futures Industry Act 1993 (FIA).

Licensing ensures that certain criteria and standards are met. It also ensures an adequate level of investor protection by instilling confidence among the investing public that the individuals and the organisation they are dealing with have been deemed fit and proper by the appropriate regulatory authorities and is legally bound to treat them fairly. The SC through its authority to issue, renew and revoke such licences regulates the behaviour of stockbroking companies.

Among the various obligations of a licence holder under the SIA are:

• the requirement to make their register of securities available for inspection by the SC,
• the obligation to comply with any additional requirements of the SC,
• the obligation to notify the SC of event(s) under which the SC can revoke their licence,
• and the obligation to furnish to the SC such returns and information as and when requested by the SC.