Market conduct, client treatment and AML/CFT

Three SC guidelines sit behind this topic, and the exam treats them as rule books: the Guidelines on Market Conduct and Business Practices for stockbroking companies and their representatives, the Guidelines on Conduct for Capital Market Intermediaries (the CMI Conduct Guidelines), and the AML/CFT/CPF and Targeted Financial Sanctions Guidelines for reporting institutions in the capital market. Expect short scenarios: a client asks a dealer's representative to log in for her, a company has nominee shareholders, a sanctions match appears. You score by knowing which party must act, what it must do and the exact figure: quarterly, monthly, 10 working days, seven years, more than 25%.

10 min read6 sections

SC Guidelines on Market Conduct and Business Practices for Stockbroking Companies and Licensed Representatives (SC-GL/SBC-2008 (R6-2023), revised 7 September 2023) and summary of amendments, cross-checked against the R5-2022 and R4-2021 versions; Guidelines on Conduct for Capital Market Intermediaries (SC-GL/3-2021 (R2-2024), revised and effective 1 October 2024), its summary of amendments and FAQ, cross-checked against the March 2024 revision; Guidelines on Prevention of Money Laundering, Countering Financing of Terrorism, Countering Proliferation Financing and Targeted Financial Sanctions for Reporting Institutions in the Capital Market (SC-GL/AML-2014 (R3-2024), revised 13 June 2024), cross-checked against the April 2021 version and the 2024 summary of amendments. All read on sc.com.my on 12 October 2026. AMLA 2001 amendments in force 1 March 2026 noted from Bank Negara Malaysia's legislation page and AML/CFT/CPF Newsletter 01/2026. As at October 2026. Independent prep, not endorsed by SIDC or the SC.

Must-know for the exam

Discretionary trading needs prior senior management approval, a record of the trades and quarterly reporting to the client (Market Conduct Guidelines para 7.01).
No one may access or use a client's online trading account in any circumstances; sale proceeds go to the client directly and never by cash cheque (paras 8.02-8.04).
The compliance function reports directly to the Board and/or board committee, monthly; the Board and senior management are primarily accountable (paras 4.02, 4.04).
A dealer's representative may advise only on listed securities, with senior management approval, kept records and no fees, even for materials (section 9A).
CMI Conduct Guidelines: personal advice documents are kept at least seven years; accredited investors and opted-out high-net worth entities can be exempted (paras 9.04, 9.17).
A vulnerable client must not be denied a product just for being vulnerable; respond with extra time, other formats or a companion (Chapter 7 guidance).
Beneficial owner cascade: shareholders with more than 25%, then control by other means, then the senior manager (AML/CFT/CPF Guidelines para 8.1.11).
Delayed verification is capped at 10 working days; if missed, end the relationship and consider an STR (paras 8.1.26-8.1.28).
Keep CDD records at least seven years from account closure, and transaction records seven years from completion; longer if linked to an STR or case (paras 10.2-10.3).
STRs go to the FIED at Bank Negara Malaysia, including attempted transactions of any amount; revealing a suspicion or STR is tipping off (paras 11.8, 11.17, 12.1).

On this page · 6 sections

Traps that cost marks

Candidates treat client consent as curing the problem; paragraph 8.02 bars anyone else from using an online account in any circumstances.
Reading 'more than 25%' as '25% or more' wrongly pulls in shareholders sitting exactly on 25%.
Candidates assume the regulator must approve discretionary trading, or confuse quarterly reporting with monthly.
Thinking an STR needs a completed transaction or a minimum amount.
Confusing marking the close with painting the tape; the tape is painted by false trade reports, not closing orders.
Applying the domestic-PEP 'assess risk first' approach to the family of a foreign PEP.
Candidates either sell what the client asked for or switch products silently; the Guidelines require explanation and consent.
Using six years (a common AML benchmark) instead of the SC's seven, or counting from account opening.

Market Conduct Guidelines: principles and accountability

The SC issues the Guidelines on Market Conduct and Business Practices for Stockbroking Companies and Licensed Representatives under section 377 of the CMSA. They apply to stockbroking companies, their licensed representatives and, where relevant, employees, and must be read with the AML/CFT Guidelines. Supervision is principles-based: the SC looks at outcomes, not prescribed processes (para 4.01).

Core principle (para 3.01)	Example the SC gives
Integrity	Treat all customers fairly, equitably and equally
Skill, care and diligence	Suitably qualified staff, cover for absent key personnel
Supervision and control	Segregate key duties, review delegated authority
Financial requirements	Risk taken matches capital
Market conduct	Policies to detect and prevent fraud and rigging
Priority to customer's interests	No dealing for own account ahead of clients
Communication with customers	Clear, fair and not misleading

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Market conduct, client treatment and AML/CFT

10 min read6 sections

Must-know for the exam

Discretionary trading needs prior senior management approval, a record of the trades and quarterly reporting to the client (Market Conduct Guidelines para 7.01).
No one may access or use a client's online trading account in any circumstances; sale proceeds go to the client directly and never by cash cheque (paras 8.02-8.04).
The compliance function reports directly to the Board and/or board committee, monthly; the Board and senior management are primarily accountable (paras 4.02, 4.04).
A dealer's representative may advise only on listed securities, with senior management approval, kept records and no fees, even for materials (section 9A).
CMI Conduct Guidelines: personal advice documents are kept at least seven years; accredited investors and opted-out high-net worth entities can be exempted (paras 9.04, 9.17).
A vulnerable client must not be denied a product just for being vulnerable; respond with extra time, other formats or a companion (Chapter 7 guidance).
Beneficial owner cascade: shareholders with more than 25%, then control by other means, then the senior manager (AML/CFT/CPF Guidelines para 8.1.11).
Delayed verification is capped at 10 working days; if missed, end the relationship and consider an STR (paras 8.1.26-8.1.28).
Keep CDD records at least seven years from account closure, and transaction records seven years from completion; longer if linked to an STR or case (paras 10.2-10.3).
STRs go to the FIED at Bank Negara Malaysia, including attempted transactions of any amount; revealing a suspicion or STR is tipping off (paras 11.8, 11.17, 12.1).

On this page · 6 sections

Traps that cost marks

Candidates treat client consent as curing the problem; paragraph 8.02 bars anyone else from using an online account in any circumstances.
Reading 'more than 25%' as '25% or more' wrongly pulls in shareholders sitting exactly on 25%.
Candidates assume the regulator must approve discretionary trading, or confuse quarterly reporting with monthly.
Thinking an STR needs a completed transaction or a minimum amount.
Confusing marking the close with painting the tape; the tape is painted by false trade reports, not closing orders.
Applying the domestic-PEP 'assess risk first' approach to the family of a foreign PEP.
Candidates either sell what the client asked for or switch products silently; the Guidelines require explanation and consent.
Using six years (a common AML benchmark) instead of the SC's seven, or counting from account opening.

Market Conduct Guidelines: principles and accountability

Core principle (para 3.01)	Example the SC gives
Integrity	Treat all customers fairly, equitably and equally
Skill, care and diligence	Suitably qualified staff, cover for absent key personnel
Supervision and control	Segregate key duties, review delegated authority
Financial requirements	Risk taken matches capital
Market conduct	Policies to detect and prevent fraud and rigging
Priority to customer's interests	No dealing for own account ahead of clients
Communication with customers	Clear, fair and not misleading

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Every note. Every question. One pass.

4 more sections of this note are part of Premium.

Every section of every study note
Every question in every live SIDC module
Full timed mock exams
A worked explanation on every question
Your full mistake bank and weak-area review

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Accounts, discretionary trades and advice by dealer's representatives

Parts 5 to 9B of the Market Conduct Guidelines govern day-to-day dealing with clients. CDD under the AML/CFT Guidelines must be done before any transaction (para 5.02(b)), and advice or trading limits must suit the client's finances and risk profile (para 6.01).

Situation	Rule	Paragraph
Discretionary trades	Prior senior management approval, records kept, quarterly report to client	7.01-7.02
Client's online account	No person may access or use it in any circumstances	8.02
Change of address or payment instructions	In writing, verified (e.g. letters to old and new addresses)	8.03(b)
Sale proceeds	Paid to the client directly; no cash cheques	8.03(c), 8.04
Several accounts settled from one source	Monitor and aggregate for risk profiling	8.03(d)
Error account	Only for bona fide errors; justification and written senior executive approval	9.01-9.03
Investment advice by a dealer's representative	Listed securities only; prior approval; records; no fees, including for materials	9A.01-9A.05
Fractional share trading	Notify SC 14 days before; no internal matching; prevailing market price; ComRep monthly within 14 days	9B.02-9B.04

Managing conflicts (para 10.01) means disclosing potential conflicts and never passing on rumours, baseless information or speculative statements about securities.

Trap: Thinking a client's consent lets a dealer's representative log in to her online account, or that a free talk with paid slides escapes the fee ban.

Takeaway: Discretionary: approval, records, quarterly report. Online accounts: client only. Advice: listed securities, approved, recorded, free of charge.