In 2023, the Securities Commission Malaysia (SC) faced its largest net operating deficit in more than a decade, underscoring the strain between funding needs and revenue generation for market oversight. Despite generating income from a mix of levies, fees, licence and registration charges, as well as investments and other income streams, the regulator could not fully offset its costs. The year highlighted a complex funding puzzle: high fixed costs in a changing market environment, increasing scope of regulatory duties, and questions about how best to finance robust oversight in a fair and sustainable manner. This write-up revisits the financials, the staffing dynamics, the revenue structure, and the ongoing funding discussions that are shaping SC’s ability to supervise Malaysia’s capital market effectively. It also examines the broader implications for market participants, policy considerations, and the regulatory future.
Section 1: 2023 Financial Performance and Key Drivers
In 2023, the SC posted a net operating deficit of RM54.64 million, marking the largest shortfall in at least a decade. This result is notable because it occurred despite a diversified revenue base and a strong year for certain asset classes, yet it underscored structural cost pressures within the commission. The regulator’s revenue for the year totaled RM167.28 million, derived primarily from levies, fees and charges, licence fees, and registration fees. These core inflows formed the backbone of the SC’s funding, but they were insufficient to cover the overall expenditure. In addition to the main revenue stream, the SC reported other income of RM5.89 million, which came from penalties, recovery of investigation and proceedings costs, residual sums, and net fair value gains or losses on financial assets held at fair value through profit or loss.
When combined with investment income, the total income for 2023 reached RM209.91 million. This figure incorporated RM36.74 million earned from fixed deposits, bonds, and unit trusts, illustrating the SC’s reliance on investment performance to augment operating revenue. However, expenditure rose to RM266.36 million in 2023, up from RM237.8 million in 2022. The increase in spending reflected several factors, including higher human resource costs and the broadening of regulatory activities. The gap between income and outlays in 2023 thus manifested as a meaningful deficit, highlighting the challenge of maintaining rigorous oversight with a funding mix that does not always align with the evolving demands of the market.
Within the expenditure envelope, staff costs emerged as the single largest component, accounting for RM209.66 million. This represented a 9.6% increase from RM191.22 million in 2022, underscoring rapid wage growth pressures and the costs associated with attracting and retaining skilled professionals in a competitive financial-services landscape. The year’s staffing costs encompassed salaries, bonuses, medical benefits, training, overtime, defined contribution plans, and other employee benefits, as well as post-employment benefits. The rising wage bill reflected not only market competitiveness but also a broader strategy to strengthen the SC’s capacity to supervise a dynamic and complex capital market. The 2023 staff cost figure was part of a multi-year trend: over three years, staff costs climbed almost 35%, rising from RM155.74 million in 2019 to the RM209.66 million level reported for 2023. This trajectory highlighted ongoing challenges in balancing competitive compensation with public-budget realities while maintaining a robust regulatory function.
The overall financial dynamics show a regulator grappling with a cost base that was not fully matched by revenue streams in 2023. The SC’s leadership has acknowledged that, despite increases in certain income lines, the reliance on a substantial fixed-cost structure creates vulnerability when net income fluctuates or when revenue realization patterns shift. The result is a structural challenge: while a significant portion of the SC’s revenue is variable, a larger portion of its costs remains fixed, creating sensitivity to revenue fluctuations and necessitating deliberate policy responses to ensure sustainability.
In addition to the headline numbers, the SC’s leadership pointed to several year-over-year variances in the mix of revenue. The 80% share of revenue that is variable, relative to a fixed cost base, was identified as a fundamental issue in the funding equation. The organization noted that, when revenues are volatile or when market conditions dampen activity in certain segments, fixed costs do not scale down correspondingly, thereby widening the deficit gap. In this context, the levies that form a central pillar of SC funding were scrutinized for their ability to support a fair and effective regulatory framework without imposing undue burdens on market participants.
The SC’s leadership also highlighted an unusual year in 2023: it recorded a RM100 million loss in that year alone, a figure they used to illustrate the depth of the funding challenge. Although the subsequent year showed some improvement, the commission still logged a loss of RM2 million in the following year, underscoring the persistent mismatch between a high-cost regulatory function and constrained revenue streams. The financial narrative from 2023 through 2024 thus reinforces the central concern: the current funding model may not be sufficient to sustain comprehensive oversight, invest in long-term capabilities, and keep pace with the size and complexity of Malaysia’s capital markets.
Another important dimension of 2023’s financial performance is the composition of the equity levy. The SC noted that approximately 80% of its revenue came from the equity levy, amounting to RM144 million in 2023 and RM200 million in 2024. While the levy was essential to funding core enforcement and regulatory activities, the SC pointed out that the levy’s coverage extends beyond equity enforcement. It also finances oversight activities related to bonds, auditors, Islamic and structured products, and the broader spectrum of market integrity tasks, including countering scams. This broad coverage underscores the regulatory mandate’s breadth but also raises questions about the adequacy of the levy in proportion to the total cost base and the diverse enforcement responsibilities the SC bears.
As a consequence of the imperfect alignment between income and expenditure, the SC has acknowledged the imperative to re-evaluate its funding structure. The leadership has indicated a willingness to explore reforms that would better align fee structures with the costs of supervising a modern, dynamic market. In conjunction with this, the SC has engaged with market participants to explore enhancements to funding arrangements that could improve efficiency, accountability, and the capacity to sustain high-quality oversight. The overarching goal is to secure a funding framework that is fair, predictable, and capable of supporting robust enforcement and supervision across asset classes, including equities, fixed income, and alternative offerings such as unit trusts and Islamic finance products.
In summary, 2023 was a defining year for SC’s financial performance. The regulator faced a substantial deficit despite a diversified income mix and a notable contribution from investments. The outturn underscored the structural tension between high fixed costs, an expanding regulatory remit, and a funding model that is heavily dependent on variable revenue streams. The ensuing sections unpack the drivers behind these outcomes, the workforce dynamics involved, and the ongoing dialogues with industry and policy stakeholders aimed at achieving a more sustainable funding path for Malaysia’s capital-market oversight.
Section 2: Staffing Costs, Workforce Dynamics and Retention Pressures
A central element of the SC’s cost structure is its workforce, with staff costs representing the largest single item in the regulator’s expenditure. In 2023, staff costs totaled RM209.66 million, marking a continued rise from prior years and signaling the workforce-related challenge faced by the commission. The increase of 9.6% from 2022 to 2023 reflects ongoing investments in human capital to support regulatory functions, enforcement activities, and supervisory oversight across growing areas of responsibility. The figure includes all elements of compensation and benefits: salaries, bonuses, medical coverage, training programs, overtime payments, defined contribution plans, and other employee benefits, including post-employment provisions.
Over a longer horizon, SC’s staff costs have risen by approximately 35% over three years, climbing from RM155.74 million in 2019 to RM209.66 million in 2023. This trajectory aligns with an expansion of the commission’s mandate and an intensification of supervisory and enforcement activities in a more complex market environment. The staffing trend has prompted management to examine workload distributions, productivity, and efficiency gains, all while trying to maintain competitive compensation to attract and retain a skilled regulatory workforce in a competitive market. The salary and compensation framework was notably adjusted in 2022, under the leadership of executive chairman Datuk Mohammad Faiz Azmi’s predecessor, Datuk Seri Awang Adek Hussin. This adjustment, while addressing talent retention, also had lasting implications for the cost base, contributing to the elevated level of staff costs observed in the following years.
The elevated wage bill is juxtaposed with concerns that SC cannot fully match the salaries offered by financial institutions and other employers in comparable regulatory or financial sectors. This mismatch contributes to attrition pressures, as skilled professionals may be lured away by higher remuneration elsewhere, including banks, asset managers, and other financial services entities. The regulator acknowledged the attrition challenge openly, indicating that the turnover rate reached about 12% in 2024, with a similar range of 9% to 10% observed over the preceding nine years. Such attrition has implications for institutional knowledge, continuity of regulatory programs, and the costs associated with onboarding and training new staff.
Attrition and workforce dynamics thus form a critical consideration in the SC’s broader cost management and strategic planning. The regulator’s capacity to maintain a high-quality enforcement and oversight function relies on retaining experienced staff who understand the nuances of capital markets, risk management, and compliance frameworks. The combination of a high fixed cost base and a challenging salary market creates a persistent tension: how to balance the need for stable, experienced teams with the imperative to manage expenditures in a manner consistent with revenue inflows. The SC has recognized this tension and has engaged with industry associations to explore funding arrangements that could support sustainable staffing levels and reduce turnover costs.
Beyond compensation, the SC’s staffing strategy has encompassed broader investments in human capital. This includes expansion of training programs through the Securities Industry Development Centre and related capacity-building initiatives, aimed at keeping the regulator’s workforce up to date with evolving market practices, regulatory requirements, and technological advancements. The organization has sought to align its human-resource development with its strategic objectives such as strengthening market integrity, improving enforcement capabilities, and supporting the rapid growth in complex financial instruments. In light of attrition and cost pressures, the SC’s leadership has signaled the importance of relooking at the overall compensation framework, performance-based incentives, and the balance between fixed and variable pay elements. The aim is to align incentives with long-term regulatory outcomes while ensuring that the pricing of regulatory services remains fair and proportionate to the value delivered to the market.
The workforce dynamics discussed above occur in a context where the SC has been expanding its office footprint and capacity to accommodate staff growth and training activities. In the next section, we will examine the broader implications of this expansion on the organization’s cost structure, capital expenditure, and long-term funding requirements. The balance between maintaining a robust, capable regulator and managing a sustainable cost base remains a central theme in the ongoing policy discussions surrounding regulatory finance for Malaysia’s capital market.
Section 3: Revenue Structure, Levy Policy and the Cost of Oversight
A pivotal element of the SC’s funding model is the levy regime that underpins a significant portion of its revenue. The regulator’s leadership has indicated ongoing discussions with market participants about the possibility of imposing a levy, potentially up to 1.5% of revenue, on various segments within the financial markets. These segments include bond market participants, brokerage income (including platform fees), underwriting fees, placement fees, commissions (including success fees and completion fees), advisory fees, and commissions arising from the distribution of unit trust products. The objective of such a levy would be to broaden the funding base for SC’s regulatory activities and to align the cost of oversight with the beneficiaries of that oversight.
Mohammad Faiz has explained that the current fee structure has remained largely unchanged since the regulator’s establishment in 1993, with several fees potentially placing SC at a disadvantage relative to the evolving market landscape. In his view, the funding framework needs modernization to reflect contemporary market dynamics and the expanded scope of SC’s regulatory responsibilities. He emphasizes that the current mix of revenue is heavily skewed toward fixed and variable components that do not always align with the organization’s actual costs. The levy discussion is part of a broader effort to ensure that those who benefit from market integrity contribute proportionately to its maintenance.
A key part of the narrative around the levy is the relationship between revenue volatility and cost structure. SC officials have stressed that roughly 80% of SC revenue is variable, while the majority of costs are fixed. This combination creates a scenario where profits or losses can be highly sensitive to fluctuations in market activity and the performance of fee-heavy segments. The negotiation framework began with an initial target or proposal, followed by efforts to reach a figure that reflects fairness and practicality for both the regulator and market participants. The process includes stress-testing scenarios to understand how different levy rates would affect various players in the market, including banks, asset managers, brokers, and other service providers.
Within the discussions, several practical considerations have emerged. For instance, the number of stockbrokers and the breadth of their activities may not accurately reflect the underlying business truth, particularly in light of transfer pricing practices and cross-subsidization among affiliated entities within a banking group. Such issues imply that a simple levy pegged to reported revenue could under- or over-charge some entities, depending on how revenue is structured within a corporate group. Mohammad Faiz notes that, in stress-test scenarios, the proposed levy rate would often fall below 1% of revenue for most entities, though profit margins vary significantly across participants. This observation reinforces the view that the levy would be a tool not only to raise funds but also to promote fair cost-sharing across market participants with varying profit profiles and revenue structures.
Engagement with industry associations forms a critical component of the levy policy dialogue. The SC has been in discussions with the Association of Stockbroking Companies Malaysia (ASCM), the Malaysian Investment Banking Association (MIBA), and the Federation of Investment Managers Malaysia (FIMM). The status of these talks indicates progress, with ASCM confirming that a thorough review is underway. The ASCM represents 29 stockbrokers nationwide, and its involvement underscores the importance of industry input in shaping a levy that can be implemented effectively without distorting market competition. The SC has signaled openness to integrating industry perspectives into the final design of any levy arrangement, seeking to balance revenue needs with the competitive dynamics of the market.
A critical context for these policy discussions is the SC’s operational base and capacity. The regulator’s Bukit Kiara office, which houses the commission and its training arm—the Securities Industry Development Centre—was built in February 1999 to accommodate 500 employees. By 2023, the SC employed around 800 people, highlighting both growth in regulatory activities and the space requirements necessary to support a modern, capable oversight function. The expansion in headcount outside the original plan has contributed to rising costs, reinforcing the argument for a more sustainable funding mechanism that can support a larger, more complex organization without compromising financial stability. The levy policy discussions sit at the intersection of operational feasibility, market fairness, and long-term strategic planning for Malaysian capital markets.
In assessing the leverage of a potential levy, the SC’s leadership has underscored that the revenue model must be fit for purpose across current and future market conditions. The aim is to secure a stable, predictable funding stream that can finance risk-based supervision, investigations, enforcement, and market education initiatives, while ensuring that the fees charged to participants reflect the benefits they receive from a well-regulated market. The conversations thus far indicate an understanding that a levy could complement existing fee streams and penalties to create a more resilient financing framework for oversight. At the same time, the authorities acknowledge the need for fairness and proportionality, ensuring that the burden of funding does not disproportionately affect smaller players or new entrants who benefit from a transparent, well-regulated market.
In sum, the revenue structure and levy policy discussions represent a central axis in the pursuit of sustainable regulatory funding. The SC’s leadership has argued that achieving fairness requires careful calibration of levy rates, recognition of revenue diversity across market activities, and a thoughtful approach to how different segments contribute to the costs of policing, supervising, and safeguarding the integrity of the capital market. The ongoing negotiation with industry associations signals a collaborative path forward, one that could yield a funding framework capable of supporting comprehensive oversight while maintaining market competitiveness and investor protection.
Section 4: Industry Engagement, Stakeholder Dialogues and Funding Implications
Engagement with industry stakeholders has become a defining feature of the SC’s funding discourse, reflecting a recognition that sustainable oversight requires input from the market itself. The SC has been actively engaging associations and bodies that represent key segments of the financial ecosystem, including the Association of Stockbroking Companies Malaysia (ASCM), the Malaysian Investment Banking Association, and the Federation of Investment Managers Malaysia. These dialogues aim to align funding mechanisms with market realities and to ensure that regulatory objectives are achievable within the cost constraints faced by participants.
ASCM, which represents 29 stockbrokers nationwide, has publicly indicated that discussions with the SC are progressing well. In a response to questions from The Edge, ASCM highlighted that the association is carrying out a thorough review of the regulatory funding framework, consistent with its mandate to support the stability and resilience of Malaysia’s stockbroking landscape. The association’s stance underscores a recognition that regulatory funding is not merely a government concern but a shared responsibility among market participants who benefit from a fair, orderly, and transparent market. The ongoing engagement emphasizes that any changes to funding must be thoughtfully designed to minimize disruption to day-to-day market operations while enabling the SC to fulfill its oversight responsibilities effectively.
Beyond stockbrokers, the SC has engaged with other essential market participants, including those involved in bonds, brokerage income (including platform fees), underwriting, placement, commissions, and the distribution of unit trust products. The discussions cover a broad spectrum of activities that generate revenue in the financial ecosystem and explore how a levy or revised fee structure could be implemented without distorting incentives, impacting competition, or reducing access to capital for market participants. The scope of these talks reflects the SC’s recognition that oversight responsibilities extend across the full gamut of financial services, from primary market activities to trading and market infrastructure services.
In parallel with industry dialogues, the SC has been assessing internal capacity and the relationship between funding and service delivery. The commission’s leadership emphasizes the need to ensure that the revenue streams are aligned with the costs of enforcement, investor protection, and market development. This alignment involves not only current cost structures but also the potential investments required to keep pace with rapid technological change, data analytics, and evolving risk management practices. The conversations with industry associations are thus part of a broader effort to craft a sustainable funding model that can support modern regulatory infrastructure, including enhanced enforcement capabilities, risk-based supervision, and efficient case handling.
ASCM’s input suggests a strong industry commitment to the SC’s mandate and a willingness to participate in reform discussions that balance regulatory needs with market competitiveness. The association’s comments reflect a shared understanding that an adequately funded regulator is essential for maintaining a robust, dynamic, and trustworthy capital market. The ASCM’s stance also hints at possible acceptance of new funding mechanisms, provided they are designed with fairness, transparency, and predictability in mind. The ongoing reviews and consultations signal a pragmatic approach to regulatory finance, one that seeks to protect investor interests, uphold market integrity, and sustain the growth of Malaysia’s financial sector.
The SC’s stakeholder engagement strategy also considers potential implications for market participants and their cost structures. Any change in funding—whether through levies, revised fees, or other mechanisms—could have downstream effects on the cost of capital, trading activity, and the competitiveness of Malaysian markets. Therefore, the SC aims to deliver a funding framework that minimizes adverse effects while ensuring robust public protection, governance, and transparency. The dialogue with ASCM and other bodies confirms a collaborative approach to resolving the complexities of regulatory finance, one that emphasizes fairness, practicality, and shared responsibility for a thriving financial system.
In sum, industry engagement is not merely a process to obtain buy-in for a new funding model; it is a mechanism to align incentives, share risk, and ensure that the regulatory framework remains fit for purpose in a rapidly evolving market environment. The SC’s willingness to incorporate industry feedback, assess stress scenarios, and adapt fee or levy structures reflects a pragmatic approach to balancing efficiency, accountability, and the overarching mission to protect and advance Malaysia’s capital markets. The picture that emerges is one of a regulator seeking to modernize funding through collaborative reform, with a clear emphasis on fairness, sustainability, and long-term market resilience.
Section 5: Infrastructure, Capacity Expansion, and Implications for Cost Management
The SC’s physical footprint and organizational capacity have grown beyond the original assumptions that guided its early years. The SC’s office in Bukit Kiara, which was designed to accommodate 500 employees, now houses a workforce that exceeds that figure, with approximately 800 employees on the payroll. This expansion reflects the regulator’s response to an increasingly complex market, broader regulatory ambit, and a more demanding oversight function that requires greater human and technical resources. While the expansion supports the SC’s mission to deliver robust supervision and enforcement, it also contributes materially to the cost base, reinforcing the need for a funding model that can sustain an enlarged organization over the long term.
The discrepancy between the original space allocation and current staffing levels has palpable implications for cost management. A larger workforce entails higher occupancy costs, more substantial support services, increased training and development expenditures, and greater administrative overhead. The SC’s leadership has acknowledged this mismatch and the consequences for the organization’s overall efficiency and budget discipline. The expansion underscores the necessity of ensuring that the funding model reflects the reality of the regulator’s size and scope, rather than relying on outdated projections that fail to capture the demands of modern supervision.
From a strategic perspective, the increased staffing and facility footprint enhance the SC’s capacity to supervise a broader range of activities, implement more sophisticated risk-based supervision methods, and execute complex investigations more efficiently. It also provides the physical space to support ongoing education and capacity-building programs through the Securities Industry Development Centre. However, this growth must be matched by a sustainable, predictable funding approach to prevent chronic underfunding that could compromise regulatory efficacy. The cost implications of additional staff and facilities are central considerations in the ongoing debate about how to finance the SC’s expanded mandate.
This infrastructure expansion also intersects with the regulator’s longer-term strategy for technology, data analytics, and digital supervision capabilities. A larger workforce can be complemented by investments in information systems, data platforms, and analytic tools that enable more proactive supervision and faster responses to market events. The cost of these technology initiatives, while essential for modern oversight, adds another layer to the financial equation that policy-makers must address in determining an equitable and practical funding framework. The SC’s ability to sustain a technologically advanced supervisory regime depends on securing stable funding that aligns with the enhanced capacity it has built.
In summary, the SC’s infrastructure expansion signals a commitment to strengthening Malaysia’s financial oversight. Yet, it also highlights the need for a funding structure that recognizes the scale of operations and the ongoing investments required to maintain high-quality supervision. The relationship between capacity, costs, and funding remains a central theme in the policy discourse around regulatory finance. The governance and sustainability of oversight rely on ensuring that capacity growth translates into meaningful outcomes for market integrity, investor protection, and the stability of financial markets.
Section 6: Cost Base, Profitability, and Risk Factors in Regulatory Finance
A recurring theme in the SC’s financial narrative is the interplay between a large fixed cost base and revenues that are, to a significant extent, variable. The regulator’s cost base was described as being heavily influenced by fixed costs, with many expenses that do not scale down quickly as revenue fluctuates. The 2023 experience underscored the risk of relying on a funding mix that cannot readily adapt to market cycles or to changes in enforcement scope. The elevated fixed-cost structure makes the SC sensitive to any decline in income, which, in turn, can magnify the impact of a deficit on the regulator’s ability to safeguard market integrity.
The combination of high fixed costs and a significant, variable revenue component creates a nuanced dynamic that complicates budgeting and long-term planning. In the 2023 results, the mismatch between the fixed cost base and the variable revenue streams manifested in a substantial net operating deficit despite substantial income in other lines. The leadership’s candid assessment that, in practice, “80% of my revenue is variable, but all my costs are fixed” captures the essence of the challenge: with many costs not reducing proportionally to revenue shocks, the regulator’s margin for error is limited.
Another dimension of risk relates to the revenue mix and the sustainability of fee-based income. The SC’s reliance on the equity levy—accounting for a sizable portion of revenue—means that any changes in market structure or fee design could alter the regulator’s funding trajectory. If levy income were to grow more slowly than anticipated or if market participants altered their cost structures in response to regulatory changes, the SC could confront a funding shortfall that would affect its capacity to enforce and supervise effectively. The stress-test analyses referenced by SC leadership indicate a need for contingency planning and diversification of revenue sources to reduce reliance on any single mechanism.
In terms of profitability, 2023’s RM100 million loss and 2024’s RM2 million loss (before optimism about 2025) illustrate that the regulator is operating under challenging financial conditions. While investment income provided a cushion in some periods, it is not a reliable long-term substitute for core income from levies, fees, and charges. The profitability challenge is not merely an accounting concern; it translates into the regulator’s ability to maintain staffing levels, training programs, and enforcement capacity. The SC’s leadership has emphasized that, without a more resilient funding framework, there is a risk that market oversight could be compromised in adverse conditions, with implications for investor confidence and market integrity.
Looking ahead, the cost-risk calculus will continue to shape strategic planning for SC. The regulator’s attempt to balance the need for robust supervision with affordability for market participants will require careful calibration of fee structures and potential levies. The cost base must be sustainable, and the funding model must be adaptable to changing market conditions, regulatory priorities, and technological investments. The ongoing consultations with industry associations and other stakeholders are central to achieving this balance, allowing the SC to design a financing approach that supports long-term regulatory resilience while maintaining a fair and competitive market environment.
Section 7: Fairness, Policy Balance and the Ethics of Regulatory Financing
The funding debate around the SC is not merely a matter of numbers; it also engages questions of fairness, accountability, and the equitable distribution of regulatory burdens. The regulator’s leadership contends that those who benefit from a fair and orderly market should contribute to its cost. The concept of a levy—potentially up to 1.5% of revenue—reflects a policy stance that seeks to align costs with beneficiaries, including participants across equities, bonds, unit trusts, and the broader suite of financial services that rely on robust oversight.
A core equity concern centers on how different participants’ revenue structures interact with the levy framework. For example, entities within a banking group may engage in various segments of financial activity, and transfer pricing practices may obscure the true scale of their regulated activities. In such cases, the levy design must ensure that charges reflect the regulated activities’ net value to the market rather than the top-line revenue that may not map to direct regulatory exposure. The problem of accurately attributing costs across diverse corporate structures has been a focal point of stress-testing and policy design.
From a fairness perspective, the SC’s approach seeks to avoid overburdening smaller participants while ensuring that larger, more complex organizations contribute commensurately to the costs of market integrity. The evolving design of the levy is intended to maintain this balance, leveraging industry feedback and empirical analyses to calibrate rates that are both practical and principled. The policy aspiration is to reinforce a sense of shared responsibility for preserving a fair, transparent, and efficient marketplace where investors can participate with confidence.
The ethical dimension extends to the allocation of cost responsibility across different market segments and products. The SC has underscored that the levy framework would cover multiple enforcement and regulatory activities, including equity enforcement, bond market supervision, auditors, Shariah-compliant and structured products, and broad counterparty risk controls. The aim is to avoid underfunding critical operations that protect investors and uphold market integrity, while also avoiding punitive charges that may stifle market activity or innovation. The ethical imperative of this approach is to secure funding in a way that is transparent, accountable, and anchored in the public interest.
The policy discussion on funding also intersects with governance and accountability mechanisms. A fair funding model would ideally be subject to regular reviews, performance metrics, and independent oversight that ensure funds are used effectively to achieve the regulator’s stated objectives. The SC’s leadership has signaled a commitment to transparency in how funds are used, how decisions on regulatory priorities are made, and how results are reported to stakeholders. This governance posture is essential to maintaining the legitimacy of any new funding mechanism and to building trust among market participants, investors, and the public.
In sum, the fairness and policy balance considerations are central to shaping a sustainable funding framework for SC. The objective is to design a system that reflects beneficiaries’ contributions, preserves competitive dynamics, and ensures continuity in essential regulatory functions. The ongoing engagement with industry associations and the public interest narrative signals a collaborative approach to designing financing arrangements that can withstand market volatility, support robust supervision, and uphold the integrity of Malaysia’s financial markets for years to come.
Section 8: Market Impact, Oversight, and Strategic Outlook
A well-funded regulator is instrumental to maintaining the stability and integrity of Malaysia’s capital markets. The SC’s financial performance and funding discussions have direct implications for market participants, investors, and the broader economy. A sustainable funding mechanism supports timely, effective supervision and enforcement, which in turn fosters investor confidence, reduces systemic risk, and helps ensure that market infrastructure functions efficiently. The current discussions around levy-based funding, fee modernization, and broader funding reforms reflect a shared aspiration among policymakers, the regulator, and industry participants to align regulatory finance with market realities.
From a market participant perspective, clearer and more predictable funding models can reduce the uncertainty associated with regulatory costs. If participants understand how regulatory costs are determined and passed through, they can better factor those costs into their business planning and pricing strategies. At the same time, the regulator must be mindful of the competitive dynamics within the financial sector and avoid creating disincentives to participate in Malaysia’s markets. The challenge is to achieve a funding regime that supports robust oversight without distorting competition, stifling innovation, or limiting access to capital for smaller market participants.
The strategic outlook for the SC thus centers on achieving a balanced, transparent, and sustainable funding framework that can underpin high-quality market oversight in the long term. This includes maintaining a stable base of levies and fees while ensuring that new funding mechanisms, such as potential levies on revenue, are implemented with fairness, clarity, and accountability. The SC’s engagement with industry associations and its emphasis on stress-testing and scenario analysis reflect a proactive stance aimed at risk-aware policy development. The objective is to create a funding landscape that aligns costs with benefits, supports the regulator’s mandate to protect investors and maintain market integrity, and positions Malaysia’s capital markets for resilient growth in the coming years.
As the financial environment evolves—with new products, increasingly sophisticated trading platforms, and greater cross-border activity—the SC’s funding framework will need to adapt accordingly. The regulator’s capacity to maintain a robust supervisory regime hinges on having predictable, sustainable resources that can support ongoing staff development, infrastructure improvements, and the deployment of advanced regulatory technologies. The ongoing conversations with ASCM and other industry bodies will shape the design of an equitable funding approach that fosters collaboration, accountability, and shared responsibility for an orderly, dynamic, and fair market ecosystem.
Conclusion
The Securities Commission Malaysia’s 2023 financial results reveal a complex funding challenge: robust oversight requires substantial, sometimes inflexible costs, while revenue streams—though diverse—face pressures that can widen deficits if not well aligned. The year’s RM54.64 million net operating deficit, despite RM209.91 million in total income, underscores the persistent gap between a high fixed-cost regulatory apparatus and the structure of fees, levies, and other revenues. The upshot is not only about numbers; it is about the implications for market integrity, investor protection, and the overall health of Malaysia’s capital markets. Staff costs, rising attrition, and the expanded footprint of the SC contribute to a cost base that demands a more sustainable funding mechanism.
Through 2023 and into 2024, the SC has been actively exploring policy options to rebalance the funding equation. The proposed levy up to 1.5% of revenue, the modernization of an aging fee framework established in 1993, and broader stakeholder engagement with associations representing stockbrokers, investment banks, and asset managers reflect a holistic approach to financing oversight. These conversations are grounded in a belief that those who benefit from a well-functioning, fair market should contribute to its upkeep. The discussions with ASCM and other bodies indicate a constructive path forward, with an emphasis on fairness, practicality, and transparency.
At the heart of the reform effort is the recognition that an effective regulator requires sufficient, predictable, and sustainable resources. The SC’s leadership has highlighted that 2023 was a difficult year, and 2024 showed improvements but still illustrated the fragility of relying on a heavily variable revenue base with a large fixed cost structure. The path toward a more resilient funding framework involves reconciling the needs of a growing regulatory scope with the realities of market participants’ cost structures. The ultimate objective is to ensure that the SC can continue to uphold market integrity, protect investors, and support Malaysia’s capital markets’ long-term growth.
As Malaysia’s capital markets evolve, the SC’s funding strategy will remain a central pillar of its mission. The regulator’s ability to maintain high standards of oversight—without compromising market competitiveness—depends on transparent, accountable, and well-structured financing. The ongoing reforms, stakeholder dialogues, and policy adjustments will shape the regulatory landscape for years to come, with the hope of delivering a sustainable, fair, and robust framework for oversight that supports innovation, protects investors, and sustains confidence in Malaysia’s financial markets.
