What is the CMC?
The Capital Market Compensation Fund Corporation, or CMC, was established under the Capital Markets and Services Act 2007 (CMSA).
It works closely with the Securities Commission Malaysia (SC). The SC's annual report notes that the SC may provide money to the CMC, and that the CMC must consult the SC when a licensed firm defaults.
The CMC's rules cover clients of firms in three regulated activities: dealing in securities (including unit trust sales), dealing in derivatives, and fund management (including private retirement schemes).
It is a safety net with limits. It is not insurance on investment returns.
When can investors claim?
The CMC's rules describe two routes to compensation.
First, the CMC can declare an "event of default". This happens when, because of a specified act by the firm or its representatives, such as defalcation (dishonest misuse of client money or assets) or mis-selling, the firm is unable, or likely to be unable, to meet clients' claims.
Second, compensation can follow a decision by SIDREC, the Securities Industry Dispute Resolution Center, where the investor's loss was caused by dishonest acts or defalcation.
Claims are open to individual investors and sole proprietors who were clients of the firm. A person who helped cause the breach cannot claim, and claims linked to money laundering or terrorism financing are excluded.
Compensation is tied to these specified acts. A share or fund that simply falls in value is not, by itself, a specified act.
How much, and how claims work
The rules set maximum amounts. For clients of a stockbroking firm (participating organisation), a derivatives trading participant or a PRS provider, the limit is RM100,000 per eligible claimant, counted across all accounts held with that firm.
For fund management companies and unit trust management companies, the rules set a limit of RM150,000. If the money available is not enough for all claims, the CMC may share it out as it decides.
When an event of default is declared, the CMC publishes a notice in at least one English and one Malay daily newspaper and on its website. The notice sets a cut-off date at least three months after publication.
Claims are made on Form 1 with supporting documents. Claims made after the cut-off date are normally barred. The CMC aims to decide within three months of a complete claim, which can be extended by another three months. Payment waits until the 30-day period to appeal to the SC has passed.
CMC vs PIDM
Perbadanan Insurans Deposit Malaysia (PIDM) protects bank deposits and insurance or takaful benefits. PIDM states that its protection does not cover non-deposit products such as unit trusts, stocks and shares.
For capital market products, the CMC is the compensation scheme to know about, and only for losses linked to the specified acts above.
Check the firm is licensed first
The CMC's rules apply to clients of firms licensed or registered under the SC's framework. A platform without a licence sits outside it.
Before dealing with any firm, search its name at sc.com.my/investment-checker or on the SC's list of licensed intermediaries, and look it up on the SC Investor Alert List and BNM's Financial Consumer Alert List. SmartChecker also shows register records and reviews for the companies it lists.
Common questions
Does the CMC cover losses from a falling market? No. The rules link compensation to specified acts, such as defalcation or mis-selling by a licensed firm or its representatives.
Is there a limit on compensation? Yes. For most firms the limit is RM100,000 per eligible claimant; for fund management and unit trust management companies it is RM150,000.
How will I know if I can claim? The CMC publishes a notice of the event of default in newspapers and on its website, with a cut-off date for claims.
Can companies claim? The rules define eligible investors as individuals and sole proprietors who are clients of the firm.