There seems to be some confusion on the subject so let me see if I can help to clarify the issues. There is a big difference between Association and private organisers. Their reason for existence are both different.
An Association is to serve the chess community. That is their primary purpose. Go and look at their Constitution and you will see this.
Some have argued that the State Associations are autonomous. Actually they are not. There may have been some confusion in the past when they were under the ROS (Registrar of Societies) but today they are directly under the MCF and COS. (Commisioner of Sports)
The old argument stems from the fact that some of the State Associations may have predated MCF. A little like the concept of Federation. The States pre-existed the Federation and so the powers of the Federation is circumscribed by the powers given to them at the point of forming.
This argument doesn't hold anymore. First and foremost all State Associations were dissolved and then rejoined MCF under COS regulations. MCF is the body authorised by FIDE to promote chess in Malaysia. And so today the State Associations have re-applied to join MCF under the rules and conditions set by MCF which is circumscribed by FIDE, COS and OCM.
And so the State Associations are not autonomous anymore, if they ever was, and now come directly under MCF rulings.
Now you see a differentiation of roles. Private organisers are again different. They exist for profit and their purpose is to bring in additional value that Associations cannot achieve.
Take Datmo for instance. The organisers put in the effort that the Associations are unable. They have business contacts and have done the work of presentation to corporate sponsors etc. Private organisers have more leeway to negotiate with MCF for different conditions that are in line with business realities.
And finally we now come to KL Open. There is nothing wrong with the Invitational. But there is something wrong with the structure of the KL Open. The Open come under KLCA, a State Association. And a State Association is meant to serve the chess community.
Now this begs the question if the KL Open is doing that. It is not a private organiser and so it cannot be selective on who is allowed to join in without sufficient and legitimate grounds. More so since it is sub-ed out to a Chess Academy.
Now it is then possible for an ailing Academy to attack other trainers and coaches who are perhaps doing better than them. They are now able to use the Tournament to ban National players from participating. This is an abuse of the use of a State Association.
So you see Datmo actually had more rights to ban players as a private organiser. But KL Open does not have the same right. They are a State Association who's primary function is to serve the chess community without prejudice.