The Securities Commission Malaysia (SC) introduced on Tuesday the Guidelines on Product Governance (PGG), aimed at strengthening investor protection as well as encouraging responsible product development and distribution in the capital market.
This initiative is part of the SC’s market and regulatory reforms towards enhancing industry conduct and market integrity.
Among others, the PGG requires product issuers and distributors (firms) to prioritize investors’ interests when designing and distributing unlisted capital market products, reflecting this in its controls, policies and procedures (CPPs).
It also requires firms to put in place CPPs that improve product suitability for the intended target market and proactively identify and prevent potential harm to investors; places greater emphasis on board and management’s responsibilities by holding them accountable for product design and distribution; and requires collaborative relationship between the product issuers and distributors to share information in respect of the appropriateness of target market to ensure the product continues to serve its intended purpose.
The SC Chairman Mohammad Faiz Azmi said that the PGG reinforces the SC’s efforts in promoting responsible product innovation and distribution.
“The PGG adopts a principle-based approach, allowing firms to implement their product governance framework that best suits their business model while still achieving its desired regulatory outcomes,” he noted.
This, he added, is crucial in protecting investors’ interests and driving responsible innovation.
“By implementing an effective product governance framework, firms will also be able to demonstrate their commitment to ethical and responsible business practices, which is key to building trust in investors and regulators,” he said.
The PGG, which had taken into consideration benchmarked practices and industry feedback, will apply to unlisted capital market products except for ordinary shares, over-the-counter derivatives contracts, venture capital or private equity funds and products offered on platforms operated by a recognized market operator.
To facilitate a smooth transition, the PGG will come into effect on January 2, 2026, giving firms ample time to familiarize themselves with the requirements and prepare for compliance.