Snapshot: Fund Management Regulation in Thailand


Fund management rules

Regulatory framework and authorities

How is fund management regulated in your jurisdiction? Who are the main authorities responsible for regulating funds, fund managers and those who market the funds?

Pursuant to the Securities and Exchange Act BE 2535 (the “Act”), the Securities and Exchange Commission (SEC) of Thailand and the Capital Market Supervisory Board (CMSB), a supervisory authority within the organizational structure of the SEC, are the government agencies that have the jurisdiction to regulate the management of funds in Thailand. The SEC and CMSB together have primary responsibility for regulating funds and fund managers. The organizational structure of the SEC includes the Office of the SEC. The functions of the SEC Office are to oversee day-to-day securities transactions, including the management of funds.

The Bank of Thailand (BOT), the central bank of Thailand, is also implicated, as the BOT regulates investment by Thai investors in financial products or securities, including offshore funds issued by foreign entities or originating from certain foreign markets, which involve outflows of Thai Baht and foreign currency capital to pay for securities or investment units issued abroad.

Fund management

Is the administration of funds regulated in your jurisdiction?

In Thailand, the SEC has the power to regulate fund administration services, which are bookkeeping, accounting, report preparation, registration, and trade regulations. Section 12 of the Act and CMSB Notification No. TorThor 35/2556 (2013) are the main regulations governing the services that can generally be provided by an asset management company (AMC) that manages a fund; however, the regulations also authorize the outsourcing of all or part of the services to be performed by a qualified third party.

Authorisation

What is the authorization or licensing process for funds? What are the main requirements that apply to managers and operators of investment funds in your jurisdiction?

Generally, the creation of a mutual fund is subject to SEC approval. Pursuant to Section 117 of the Act, a securities company (CMC) may establish and operate a mutual fund with the approval of the SEC Office in accordance with the rules, conditions and procedures issued by the CMSB. Sections 118 to 132 of the Act cover the activity of managing mutual funds, while sections 133 to 140 cover the management of private funds.

Once approved, the management and operation of a fund by an AMC is also supervised and controlled by the SEC. The key SEC notification that regulates the investment activities of retail mutual funds is GSMC Notice TorNor 87/2558 (2015). TorNor 87/2558 provides general investment guidelines and rules, while specific rules and details can be found in the appendices to TorNor 87/2558.

In Thailand, a securities company can operate a fund management business by obtaining a specific license. According to Ministerial Regulation BE 2551 (2008), there are four main types of license to undertake securities business in Thailand: Types A, B, C and D. The Type A license is the most comprehensive, covering various categories of securities. securities business, including fund management. The Type C license is a boutique asset management license covering the activities of mutual funds and private funds as well as, among other things, investment advisers.

Territorial scope of the regulations

What is the territorial scope of fund regulations? Can a foreign manager perform management activities or provide services to clients in your jurisdiction without authorization?

In general, a foreign fund manager cannot provide commercial securities or fund management services to clients in Thailand without a license or authorization.

Broadly, there are three options for a foreign securities firm to conduct management business or provide services to clients in Thailand:

  1. apply for an SEC license (management of mutual funds or private funds, or both);
  2. solicit and offer the foreign funds for sale through an intermediary such as an SEC-registered Thai securities firm, or a wealth manager or private banker; and
  3. solicit and offer foreign funds for sale directly to certain qualified Thai investors.

Option (1) would require foreign fund managers to establish a legal entity as a licensed local subsidiary in Thailand.

Under option (2), the foreign securities company is not required to apply for a license from the SEC because it can carry on business in Thailand, including offering for sale the foreign securities and units of investment, through the authorized local partner.

Acquisitions

Is the acquisition of a majority or minority stake in a fund manager in your jurisdiction subject to the prior authorization of the regulator?

The acquisition of a majority or non-controlling stake in a fund manager or AMC in Thailand is not subject to the prior approval of the SEC. Nevertheless, in accordance with the law and the notification of the Ministry of Finance concerning the conditions for obtaining the approval of a majority shareholder by the securities company, in the event of a change of majority shareholder or director of a securities company, including the AMC, the company must seek SEC approval prior to such a change.

Restrictions on compensation and profit sharing

Are there any regulatory restrictions on structuring fund manager compensation and incentive arrangements?

CMSB Notice No. TorThor 35/2556 (2013) (see “Fund Administration” above) provides standard business conduct for securities firms and derivatives intermediaries. The notice, however, only provides the general directive that, as standard conduct, the securities firm or the AMC should avoid “receiving or rewarding any gainful or other advantage, whether in the form of cash, things or services, more than would be received or rewarded in the course of a normal business practice”.

Date declared by law

Correct the

Indicate the date the above information is accurate.

April 18, 2020.

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