1. Introduction
The Securities business in Thailand is regulated by the Securities and Exchange Act B.E.2535 (1992), which is a new Act replacing the previous Securities Exchange Act. This Act creates and controls both the primary market and the secondary market. The purpose of this Act is to permit major development of and boost financial instruments in the Thai capital markets in order for the market to become efficient, international and global. The Securities and Exchange Commission (SEC) which has extensive powers to control and regulate the capital markets and securities industry. These powers include establishing polices and promulgating relevant rules and regulations for the promotion control and supervision of securities business, the stock market, Over-the -counter centres and organisations related to the securities businesses, issuing or offering of securities for sale to the public, the acquisition of securities for taking over and the prevention of unfair securities trading practices. The definition of "securities" is very broad and includes treasury bills, bonds, shares, debentures, investment units which are instruments or evidence representing the right to the property of a mutual fund, certificates representing the rights to purchase shares, debentures and investment units, and any other instruments as specified by the SEC.
Legally, only a licensed securities company can deal in the securities business. However, other financial institutions (for example, banks) are allowed to take
part in some type of businesses as permitted by the Bank of Thailand. A securities company which obtains a license from the Ministry of Finance upon the recommendation of the SEC can be involved in the securities business. Also, such a securities company can conduct business limited to the business for which it is licensed.
Securities business can mean any of the following: securities brokerage; securities dealing; investment advisory service; securities underwriting; mutual fund management; private fund management and any other business relating to securities as specified by the Ministry of Finance upon the recommendation of the SEC.
2. Securities brokerage
Securities brokerage means brokering or representing any person in the purchase, sale or exchange of securities in the normal course of business in consideration of a commission, fee or other remuneration therefrom. As for the trading of securities in the Stock Exchange of Thailand (SET), only a securities company with membership in the SET can do business as a broker in the SET. (At present Thailand has only one stock market, however, an over-the-counter centre will begin next year.)
3. Securities dealing
Securities dealing is the purchase, sale, or exchange outside the Securities Exchange or an over-the-counter centre of securities for one's own account in the normal course of business.
4. Investment advisory service
Investment advisory service is a service of giving advice to the public whether directly or indirectly concerning the value of securities or the suitability of investing in those securities or the purchase or sale of any securities in consideration of a fee or other remuneration excluding the giving of advice to the public in the manner as specified in the notification of the SEC.
5. Securities underwriting
Securities underwriting is the underwriting of all or part of the securities in a company or owner of underwriting, so it may be in the way of firm underwriting, best efforts or any other ways of underwriting agreed upon by both the issuer and the underwriter.
6. Mutual fund management
The Act allows a securities company which has a mutual fund license and has also been granted approval from the office of the SEC to operate and manage a mutual fund. Mutual fund management is the management of investments under a mutual fund project by issuing investment units in each project for sale to the public and investing the proceeds therefrom in securities or other properties or investing for a profit by other means.
A mutual fund supervisor serves as the fund's custodian. To be a supervisor, a commercial bank or a financial institution must meet the qualifications specified by the office of the SEC.
7. Private fund management
This type of business is relatively new to Thailand. It is defined as the management of funds of five or more persons or one or more group of persons to invest in securities in consideration of a fee or other remuneration. The business excludes the management of funds under the law relating to provident funds. In managing the private fund, the Act does not allow the securities company to manage a private fund for :
1. a group of persons comprising ten persons or more.
2. any customer who has an account of less than Baht 1 million (US$ 40,000).
3. any group of persons which has an account of less than Baht 10 million (US$ 400,000).
except otherwise specified by the notification of the SEC.
In managing the private fund, a custodian shall be appointed to maintain and look after the investor's assets.
NOTE: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
If you would like further advice please contact: David Ellis, Johnson Stokes & Master, 16th Floor, Princes Building, 10 Chater Road, Hong Kong; Tel 2843 4226; Fax no. : 2845 9121. Alternatively do a text search "Johnson Stokes and Master" and "Business Monitor".
