SC broadens sophisticated investor categories for greater market accessibility

KUCHING: The Securities Commission Malaysia (SC) announced that it has widened sophisticated investor categories in a move to increase capital market accessibility.

The new “Guidelines on Categories of Sophisticated Investors”, which takes effect immediately, reinforces the SC’s commitment to maintain capital market competitiveness and vibrancy, while promoting greater investor participation.

The SC Chairman Datuk Seri Dr Awang Adek Hussin said that the growing sophistication of the Malaysian capital market has resulted in varied financing needs and investment risk appetites.

“The criteria for sophisticated investors have been broadened to include a wider range of individuals who can contribute to the market’s growth and stability,” he said.

“In 2023, the domestic capital market grew to RM3.8 trillion from RM3.6 trillion in the previous year.

“This presents significant opportunities for the market to attract a more diverse investor base regionally and encourage greater capital flow into sophisticated product and market segments,” he added.

Key features of the expansion include a new category that takes into account the knowledge and experience of sophisticated investors.

In addition, enhancements to current categories are made, allowing flexibilities of existing financial thresholds for high net worth individuals.

The new ‘Knowledge and Experience’ category will benefit individuals who do not meet financial tests but are able to demonstrate financial knowledge sophistication to participate in relevant market offerings.

This category assesses potential investors based on their education, recognised financial association membership, and practical experience in relevant sectors such as banking, capital markets or insurance.

Another key change is the inclusion of an investor’s primary residence value, up to a cap of RM1 million, in assessing their qualification as a sophisticated investor.

The definition of a joint account is also expanded to incorporate accounts with a spouse or child, including total net joint annual income and investment portfolios.

This expansion will better depict a family’s collective financial status and investment potential.

The “Guidelines on Categories of Sophisticated Investors” are now available on the SC website.

Consequently, all relevant guidelines have also been updated in relation to reference to sophisticated investors.