SEC News Release

No. 65/2012

Tuesday, June 26, 2012

 

SEC introduces accredited investor regime and allows investment in more diversified products


Bangkok, June 25, 2012 The SEC Board and the Capital Market Supervisory Board resolved to specify types of accredited investors (AI) and allow an offer for sale of the following products to AI: (1) unrated bonds and (2) non-retail mutual funds that invest in unrated or non-investment grade debt instruments without limit on the investment proportion. The resolutions aim to provide those seeking to raise funds with more opportunities and alternatives in issuing financial instruments. At the same time, investors with higher risk-taking capability will have more investment alternatives, while receiving appropriate level of protection.

AI comprises (1) institutional investor* such as commercial bank, mutual fund, provident fund and (2) investors with high net worth, which means (i) an individual who has at least 50 million baht in total assets or 4 million baht in annual income or 10 million baht investment in securities , the amount of which can be combined with spouses) , or (ii) a juristic person having shareholders equity at the minimum of 100 million baht or securities investment at the minimum of 20 million baht.

As AI is deemed sophisticated investors with higher risk-taking capability, the SEC allows issuer and intermediary to offer for sale of complex or high risk financial instruments to AI. However, certain products permissible for AI are allowed to offer to retail investors, providing that the SEC will prescribe appropriate initial subscription by taking into account the instruments complexity and risk level.

At the first stage, the SEC will allow offer for sale of unrated bonds to AI and the summarized significant features of securities (fact sheet) must specify that the product is allowed to offer to AI only. In addition, asset management company will be allowed to establish non-retail mutual funds investing in unrated or non-investment grade debt instruments without limit on investment proportion but company limit will, however, apply in that investment in each bond issuer must not exceed 25% of the funds NAV. If asset management company wishes to offer for sale of such fund to retail investors, investors initial subscription must be prescribed at the minimum of 500,000 baht and the company limit applicable to mutual funds will also apply (the fund will be allowed to invest not exceeding 15% of NAV in the instruments issued by non-financial institution and not exceeding 20% of NAV in the instruments issued by financial institution). Moreover, asset management company must disclose information on risks associated with the product in fact sheet.

In term of sales conducts, the SEC requires that intermediaries have operational procedure to ensure that investors are qualified as accredited investors as specified in the regulations. AI must have good understanding about the product and receive sufficient information before making investment decision. Intermediaries must comply with know your customer/client due diligent rule and request investors to take suitability test. In addition, intermediaries must inform AI to be aware that they might receive less information than that receive in the course of public offering of securities. Taking suitability test may be exempted for (1) institutional investor (2) high net worth juristic person who denies taking the test and seller is confident that investor has good understanding about the product and (3) funds managed by a licensed private fund or mutual fund management company.

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*Remark Institutional investors include:
(1) Bank of Thailand
(2) Commercial banks/ banks established under specific law
(3) Finance companies/Credit foncier companies/ Securities companies
(4) Non-life insurance companies/Life insurance companies
(5) Mutual funds
(6) Provident funds
(7) Private funds in which every individual or juristic person assigning the management of such funds is institutional investor or qualified as high net worth investor
(8) Organizations or juristic persons established under specific law and having main objective in investment management, for example, the Government Pension Fund, Social Security Fund
(9) Derivatives business operators/ derivatives business operators operated under law on agricultural futures trading
(10) International financial institutions
(11) Deposit Protection Agency            
(12) The Financial Institutions Development Fund
(13) The Stock Exchange of Thailand
(14) Statutory corporations
(15) Juristic persons in which persons under (1) to (14) hold shares in aggregate of more than  seventy-five percent of total shares with voting right
(16) Foreign investors with the same characteristics as such investors under (1)-(15) mutatis mutandis
(17) Individual registered as qualified fund manager/ derivatives fund manager
(18)  Other types of investors as specified in the SEC notification