Legal Updates December 2022

• Published date: 23 December 2022
• Subject Matter: Finance and Banking, Corporate/Commercial Law, Immigration, Capital Adequacy/BASEL, Financial Services, Venture Capital, Corporate and Company Law, Securities, General Immigration
• Law Firm: Shearn Delamore & Co.
• Author: Ms Suganthi Singam, Chin Wei Song and Chui Siew Xuan

Financial Services

Principles-Based Sustainable And Responsible Investment ("SRI") Taxonomy For Malaysian Capital Market

The Securities Commission Malaysia ("SC") has released a Principles-based SRI Taxonomy for Malaysian Capital Market ("SRI Taxonomy") on 12 December 2022. The SRI Taxonomy sets out the universal guiding principles for the classification of economic activities that qualify for sustainable investment.

The SRI Taxonomy also seeks to address concerns on the need to mitigate and manage the risks of greenwashing and to define sustainable investments.

In addition to the SRI Taxonomy, the SC also issued a public response paper in response to the feedback it received pursuant to the Public Consultation No. 1/2021 on Principlesbased SRI Taxonomy for Malaysian Capital Market that was issued on 17 December 2021.

9th Meeting of Joint Committee on Climate Change (JC3) Meeting

Following the 9th meeting of JC3 on 2 December 2022:

• JC3 will publish a Data Catalogue and Accompanying Report, that is intended to serve as a source of reference on the avaiability and accessiblity of of climate and environmental data based on a priority list of financial sector use cases as well as recommendations to bridge data gaps.
• there were discussions on plans to launch several pilot programmes in 2023 to scale up green and sustainable finance.
• there were discussions on plans to launch several pilot programmes in 2023 to scale up green and sustainable finance.
• there were discussions on plans to launch several pilot programmes in 2023 to scale up green and sustainable finance.
• it will align the TCF Application Guide for Malaysian Financial Institutions with the International Sustainability Standards Board's disclosure requirements upon its finalisation.
• JC3 will support the development of an ESG Disclosure Guide tailored to small and medium enterprises in Malaysia.
• JC3 will develop climate change curriculum for financial institutions which is intended to faciliate the development of structured training pathways for financial institutions to build technical capabilities across all levels in climaterelated topics and developments.

Revision to Guidelines on the Registration of Venture Capital and Private Equity Corporations and Management Corporations

The Securities Commission Malaysia revised its Guidelines on the Registration of Venture Capital and Private Equity Corporations and Management Corporations (the Guidelines) on 28 November 2022.

The revisions made to the Guidelines include:

• expansion on the type of investors eligible to participate in venture capital and private equity funds.
• a venture capital corporation (VCC), private equity corporation (PEC), venture capital management corporation (VCMC) or private equity corporation (PEMC) is now required to be registered with the Securities Commission Malaysia only where it is acting or offering to act as an investment manager or co-investment manager of a venture capital or private equity fund.
• provides guidance on the types of incidental activities which such registered entities may conduct.
• streamlining the financial requirements whereby a registered corporation must now maintain at all times a minimum net asset of RM100,000.

Bank Negara Malaysia issues exposure draft on Capital Adequacy Framework (Basel III ' Risk Weighted Assets) ' Operational Risk

BNM has on 30 November 2022 issued an exposure draft on capital adequacy framework (Basel III ' risk-weighted assets) for public feedback by 31 March 2023. This exposure draft sets out the proposed requirements and guidance on the calculation of the capital charge for operational risk under the Basel III capital adequacy framework, which is expected to come into effect in 2025.

Once in effect, these requirements will supersede Part C of the Capital Adequacy Framework (Basel II ' Risk-Weighted Assets) and the Capital Adequacy Framework for Islamic Banks (Risk-Weighted Assets), both issued on 3 May 2019.

Bank Negara Malaysia issues policy document on climate risk management and scenario analysis

On 2 December 2022, Bank Negara Malaysia announced the issuance of its policy document on Climate Risk Management and Scenario Analysis (the "PD").

The PD:

• came into effect on 30 November 2022, subject to the following transitional specifications
  • paragraphs 7 to 11 on governance, strategy, risk appetite and risk...