Duty to protect unitholders' interests introduced in Thailand

Chris Hamblin

23 April 2019

The regulator recently suspended the licence of Mr Pat Chaimahawon of Kasikorn Securities to do business as a capital market investment consultant for two months because he did not comply with a client’s instruction and gave investment advice that encouraged his client to expect returns without supporting information or documents. Cases like this one demonstrate its intention to force asset managers and advisors to keep their clients' best interests uppermost in their minds. With this in mind, it has prevailed on the Government to promulgate the fiduciary duty. The new securities law covers the following six areas.

The regulation of securities business. This includes a repeal of the former law's "minimum requirement of paid-up registered capital of a securities company" and allows the Securities and Exchange Commission (Thailand's regime is based on America's) to use its discretion to prescribe this-or-that level of paid-up capital, taking into account the nature the business and the risks involved. In addition, the SEC Board has the power to exempt certain business undertaking from being classified as securities business. It can do this in relations to the provision of services to a specific group of persons and/or a regulatory sandbox. This is Thailand's way of embracing new technology.
More supervision for mutual fund management. Every asset management company now has a fiduciary duty to protect the interest of unitholders. In so doing, it must lay out a policy for preventing and monitoring any act that may impose a conflict of interest, unfairness or damage to the unitholders' interest. In addition, the Act has revised the old Act's fund voting provisions. Unitholders are now entitled to ask the courts to revoke any resolution that contravenes the law or governing regulations.
More supervision to govern the Stock Exchange of Thailand in compliance with international standards, presumably set by IOSCO, the International Organisation of Securities Commissions.
Sections that attempt to make the capital markets more competitive. The important change that applies to HNW clients here is the Stock Exchange's new power to allow direct access for a person other than one of its members to purchase or sell listed securities. There are also measures to help it "promote fair competition for undertaking depository center business through scripless system for all types of securities throughout the whole process."
A new Capital Market Development Fund.
The SEC may now divulge confidential information that it acquires by exercising its powers in accordance with the Securities and Exchange Act to the regulators of auditors, or the regulators of underlying goods or variables of derivative contracts.