IPPC Exam Format | Course Contents | Outline | Syllabus | Objectives

AICB Investor Protection Professional Certification (IPPC)

1. The Malaysian Financial System

1.1 Structure of the Malaysian Financial Markets

Financial Market Fundamentals

• Purpose and functions of financial markets
• Role of financial markets in the economy
• Mobilisation of savings
• Allocation of capital
• Facilitation of investment
• Liquidity creation
• Price discovery
• Risk transfer

Major Financial Markets

• Money market
• Capital market
• Foreign exchange market
• Commodity market
• Derivatives market

Understanding Market Functions

• Functions of the money market
• Functions of the capital market
• Functions of the foreign exchange market
• Functions of commodity markets
• Functions of derivatives markets
• Differences among the major financial markets

Market Classifications

• Primary markets
• Secondary markets
• Exchange-traded markets
• Over-the-counter (OTC) markets
• Onshore markets
• Offshore markets

Primary versus Secondary Markets

• New issuance of securities
• Trading of existing securities
• Role of issuers
• Role of investors
• Capital raising
• Liquidity in secondary markets

Exchange-Traded versus OTC Markets

• Exchange trading mechanisms
• OTC trading mechanisms
• Standardisation
• Customisation
• Counterparty considerations
• Transparency
• Liquidity considerations

Onshore versus Offshore Markets

• Domestic financial markets
• International financial markets
• Regulatory considerations
• Foreign participation

1.2 Islamic Banking

Fundamentals of Islamic Banking

• Principles of Islamic finance
• Shariah principles
• Ethical foundations of Islamic finance

Comparison with Conventional Banking

• Islamic banking versus conventional banking
• Interest-based financing versus Shariah-compliant financing
• Risk-sharing principles
• Asset-backed or asset-based transactions
• Prohibited elements in Islamic finance

Core Islamic Finance Principles

• Prohibition of riba
• Avoidance of gharar
• Avoidance of maysir
• Shariah compliance
• Ethical investment principles

Islamic Financial Practices

• Islamic banking operations
• Islamic financial products
• Islamic financial institutions
• Role of Shariah governance

1.3 Market Structure

Structure of Financial Markets

• Organisation of financial markets
• Market segments
• Market infrastructure
• Trading arrangements
• Financial system structure

Market Relationships

• Relationship between institutions and markets
• Relationship between issuers and investors
• Relationship between intermediaries and investors
• Flow of funds through the financial system

1.4 Market Participants

Financial Institutions

• Roles of financial institutions
• Functions within the financial system
• Financial intermediation

Financial Intermediaries

• Role of intermediaries
• Facilitating transactions
• Connecting investors and issuers
• Distribution of financial products

Investors

• Role of investors in financial markets
• Investor participation
• Investor decision-making
• Investor protection considerations

Interaction Among Market Participants

• Financial institutions
• Intermediaries
• Regulators
• Investors
• Issuers

1.5 Regulatory Authorities, Acts and Guidelines

Financial Regulators

• Roles of financial regulators
• Regulatory oversight
• Financial market supervision
• Investor protection

Regulatory Functions

• Maintaining market integrity
• Promoting financial stability
• Protecting investors
• Supervising market participants
• Establishing regulatory requirements
• Enforcing laws and regulations

Regulatory Framework

• Regulatory Acts
• Regulatory guidelines
• Rules governing financial market activities
• Investor protection framework

Key Regulatory Bodies

• Bank Negara Malaysia (BNM)
• Securities Commission Malaysia (SC)
• Other relevant Malaysian financial regulatory authorities

Investor Protection

• Regulatory protection of investors
• Regulatory oversight of financial products
• Market conduct requirements
• Compliance responsibilities

2. Regulations and Guidelines for Market Participants

2.1 Roles and Responsibilities of Licensed Organisation

Licensed Organisations

• Role of licensed organisations
• Regulatory responsibilities
• Organisational accountability
• Compliance obligations

Introduction of New Products

• Responsibilities when introducing new products
• Product governance considerations
• Product approval considerations
• Regulatory requirements

Sales Practices

• Appropriate sales practices
• Fair dealing
• Responsible product distribution
• Investor protection in product sales

Transparency

• Transparency requirements
• Clear communication
• Provision of relevant information
• Avoidance of misleading practices

Disclosure Requirements

• Product disclosure
• Risk disclosure
• Information provided to investors
• Disclosure obligations

Capital Market Product Guidelines

• Compliance with applicable product guidelines
• Regulatory requirements for capital market products
• Responsibilities of financial institutions

2.2 Roles and Responsibilities of Licensed Person

Licensed Persons

• Role of licensed persons
• Individual regulatory responsibilities
• Professional obligations

Capital Markets and Services Act (CMSA)

• Responsibilities under the CMSA
• Regulatory obligations
• Conduct requirements

Qualifications

• Required qualifications for selling capital market products
• Professional competency
• Licensing requirements

Selling Capital Market Products

• Responsibilities when marketing products
• Responsibilities when recommending products
• Compliance with applicable regulations

Know-Your-Client (KYC)

KYC Fundamentals

• Purpose of KYC
• Importance of client identification
• Understanding client circumstances

KYC Processes

• Client information gathering
• Customer profiling
• Understanding investor needs
• Investor protection through KYC

Investor Suitability

• Understanding the client
• Product suitability considerations
• Risk considerations
• Client needs and objectives

2.3 Categories and Permitted Activities for Investors

Investor Classifications

• Categories of investors
• Differences among investor classifications
• Regulatory treatment of investor categories

Permitted Activities

• Activities permitted for different investor categories
• Restrictions applicable to investors
• Regulatory conditions

Foreign Exchange Activities

• Foreign exchange activities
• Regulatory requirements for foreign exchange transactions
• Permitted foreign exchange activities

Bank Negara Malaysia Foreign Exchange Administration Rules

• Foreign Exchange Administration Rules
• Regulatory oversight of foreign exchange activities
• Investor and market participant obligations

2.4 Deposit Insurance

Deposit Insurance Fundamentals

• Purpose of deposit insurance
• Role in protecting depositors
• Contribution to financial system stability

Benefits of Deposit Insurance

• Protection of depositors
• Maintaining public confidence
• Supporting financial stability

Deposit Insurance Coverage

• Coverage provided by deposit insurance
• Scope of protection
• Eligible deposits

Deposit Insurance Limits

• Coverage limits
• Limitations of protection
• Deposits and products that may not receive the same protection

PIDM

• Role of PIDM
• Contribution to financial stability
• Depositor protection
• Maintaining confidence in the financial system

2.5 Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT)

AML/CFT Fundamentals

• Purpose of AML/CFT requirements
• Prevention of financial crime
• Regulatory framework

Money Laundering Process

• Understanding the money laundering process
• Stages and mechanisms of money laundering
• Identifying suspicious activity

Reporting Institutions

• Responsibilities of reporting institutions
• Compliance obligations
• Prevention and detection responsibilities

Customer Due Diligence

• Customer identification
• Customer verification
• Understanding customer relationships
• Ongoing customer due diligence

Financial Crime Prevention

• Preventing money laundering
• Countering terrorist financing
• Role of financial institutions
• Role of employees and licensed persons

AML/CFT Compliance

• Regulatory requirements
• Internal procedures
• Customer due diligence requirements
• Reporting responsibilities

3. Debt Securities and Structured Products

3.1 Introduction to Debt Securities

Debt Security Fundamentals

• Definition of debt securities
• Purpose of debt financing
• Debt securities as investment instruments

Basic Concepts

• Issuer
• Investor
• Principal
• Par value
• Face value
• Coupon
• Maturity

3.2 Overview of the Malaysian Bond Market

Malaysian Bond Market

• Structure of the Malaysian bond market
• Participants in the bond market
• Issuers
• Investors
• Intermediaries

Bond Market Functions

• Capital raising
• Debt financing
• Investment opportunities
• Market liquidity

3.3 What Are Debt Securities?

Nature of Debt Securities

• Debt obligations
• Issuer obligations
• Investor rights
• Repayment of principal
• Interest or coupon payments

Debt Security Characteristics

• Maturity
• Coupon structure
• Principal repayment
• Credit quality
• Market value

3.4 Classification of Debt Securities by Issuer

Classification Based on Issuer

• Types of debt issuers
• Government issuers
• Corporate issuers
• Other categories of issuers

Issuer Considerations

• Creditworthiness
• Repayment ability
• Default risk
• Credit quality

3.5 Different Features of Bonds

Bond Features

• Issuer
• Maturity date
• Par value
• Face value
• Coupon rate

Coupon Rate Structures

• Fixed-rate bonds
• Variable or floating-rate bonds
• Other coupon structures

Embedded Options

• Bonds with embedded options
• Impact of options on bond value
• Investor considerations

Maturity

• Short-term debt
• Medium-term debt
• Long-term debt

3.6 Seniority of Claims – The Ranking of Bonds

Bond Seniority

• Ranking of debt claims
• Priority of claims
• Seniority structure

Claims in Financial Distress

• Order of repayment
• Priority among creditors
• Implications for investors

Investment Considerations

• Seniority and credit risk
• Seniority and expected recovery
• Risk differences among debt securities

3.7 Yield Measures for Bonds

Bond Yield Fundamentals

• Yield concepts
• Return from bond investments

Yield to Maturity

• Yield-to-maturity (YTM)
• Relationship between price and yield
• Investment return considerations

Yield Curves

• Yield curve concepts
• Relationship between maturity and yield
• Interpretation of yield curves

Coupon Rate, Market Yield and Bond Price

• Coupon rates
• Market yields
• Bond prices
• Inverse relationship between yields and bond prices

Bond Valuation

• Factors affecting bond prices
• Interest rates
• Yield
• Maturity
• Coupon payments

3.8 Bonds: Trustee, Ratings, Tax and Risk

Bond Trustees

• Role of trustees
• Investor protection
• Monitoring issuer obligations

Credit Ratings

• Purpose of credit ratings
• Role of credit rating agencies
• Evaluating creditworthiness
• Credit quality assessment

Tax

• Tax considerations for bond investments
• Impact of tax on investment returns

Bond Risks

• Interest rate risk
• Credit risk
• Other investment risks

Duration

• Duration concepts
• Interest rate sensitivity
• Impact of changing interest rates on bond values

3.9 Risks When Investing in Bonds

Credit Risk

• Default risk
• Issuer creditworthiness
• Credit deterioration

Interest Rate Risk

• Effect of interest rate movements
• Relationship between yields and prices
• Duration sensitivity

Other Investment Risks

• Market risk
• Liquidity considerations
• Reinvestment considerations
• Product-specific risks

Risk Assessment

• Understanding investor risk
• Matching investment risks with investor circumstances
• Evaluating potential returns against risks

3.10 Introduction to Structured Products

Structured Product Fundamentals

• Definition of structured products
• Purpose of structured products
• Product structure

Components of Structured Products

• Investment component
• Derivative component
• Underlying assets

Role of Structured Products

• Risk and return characteristics
• Investment objectives
• Potential diversification

3.11 Different Types of Structured Products

Structured Product Categories

• Different forms of structured products
• Product design
• Payoff structures
• Risk-return characteristics

Product Features

• Capital protection characteristics
• Return mechanisms
• Underlying asset exposure
• Maturity
• Embedded derivatives

3.12 Understanding Derivatives

Derivative Fundamentals

• Definition of derivatives
• Role in financial markets
• Relationship with underlying assets

Types of Derivatives

Forwards

• Forward contracts
• Contract characteristics
• Risks

Futures

• Futures contracts
• Standardised contracts
• Market characteristics

Options

• Options
• Rights and obligations
• Option-related risks

Swaps

• Swap contracts
• Exchange of financial obligations or cash flows
• Risks

Derivatives in Structured Products

• Role of derivatives
• Product payoff structures
• Risk management
• Return generation

3.13 Underlying Assets for Structured Products

Underlying Assets

• Concept of an underlying asset
• Relationship between structured products and underlying assets

Asset Exposure

• Market exposure
• Price movements
• Performance dependence

Investment Considerations

• Risk of underlying assets
• Market volatility
• Product performance

3.14 Why Invest in Structured Products and Questions to Ask Before Investing

Reasons for Investing

• Risk-return objectives
• Portfolio diversification
• Exposure to underlying assets
• Customised investment strategies

Risk and Return

• Balancing risk and return
• Understanding potential gains
• Understanding potential losses

Questions Before Investing

• What is the product?
• How does the product work?
• What are the underlying assets?
• What are the risks?
• What is the investment horizon?
• What are the potential returns?
• What are the potential losses?
• What happens at maturity?
• What is the liquidity of the product?
• Are there applicable fees or charges?
• Is the product suitable for the investor?

Regulations Governing Structured Products

• Regulatory requirements for issuance
• Regulatory requirements for sale
• Investor protection requirements
• Disclosure considerations
• Sales conduct requirements

Structured Product Risks

• Market risk
• Credit risk
• Liquidity risk
• Derivative-related risk
• Product complexity
• Potential loss of investment