Stress testing should be conducted more regularly to assess the impact on fund liquidity and redemptions, and to pre-empt liquidity shortages before they occur.
Malaysia’s SC (Securities Commission) has issued a reminder to fund and unit trust managers of their duty to act in the best interests of and investors, in light of recent market volatility.
In a circular, the SC emphasised good governance, proper conduct and continuous compliance with capital market regulations as imperative to the functioning of capital market intermediaries.
“Capital market intermediaries need to closely monitor the dealing and trading of funds under management, and ensure that their clients are informed of the potential risks in funds that they intend to invest in,” the SC said.
The SC also highlighted that market participants must properly manage fund liquidity, especially to mitigate potential mismatches between liquidity underlying assets and the redemption terms.
“Additionally, liquidity stress testing should be conducted more regularly to assess the impact of market disruptions / conditions on the liquidity and redemption levels of the fund; as well as to pre-empt an emerging…
