Fund Investment Ratios Revised by SEC to Boost Flexibility and Investor Benefits
Securities and Exchange Commission (SEC)
The Securities and Exchange Commission (SEC) has recently made significant revisions to its consideration criteria and guidelines for funds with investment ratios that deviate from specified standards. These updates aim to enhance flexibility in fund management while ensuring maximum benefits for investors.
Flexibility in Managing Investments
Starting from October 16, 2023, the new criteria will grant fund managers greater flexibility by lifting investment restrictions on deposits and debt instruments. These assets will now adhere to the same investment ratio criteria as other types of investments. Additionally, the SEC has taken into account the importance of considering investor interests in these decision-making processes.
Implementation and International Standards
The Capital Market Supervisory Board, in its meeting number 3/2023 on March 21, 2023, approved the principles for improving fund investment ratios. By increasing flexibility in managing investments and promoting competitiveness for management companies, these changes align with international standards. The SEC sought public comments on the principles and drafts between June and July 2023, with the majority of commentators expressing agreement.
Key Announcements by SEC
The Securities and Exchange Commission has subsequently released two crucial announcements regarding the improvement of fund investment ratios. The main points of these announcements are as follows:
- Criteria and Procedures: In cases where investment ratios are incorrect, the SEC has expanded the criteria for consideration and procedures. It now includes instances where the management company is unable to maintain the specified investment ratio due to passive breaches. Factors such as unusual fluctuations in asset values, excessive unit redemptions, or downgraded credit ratings of invested instruments will not be considered as active breaches by the management company. Corrective actions can be taken by the management company within a specified timeframe. However, if no corrections are made at the discretion of the management company, permission from the mutual fund trustee or arrangement of a Provident Fund Committee becomes necessary. These criteria are effective from April 16, 2024.
- Investment Ratio by Asset Type: Deposit and debt instruments issued by legal entities under Thai law will now follow the same investment ratio criteria as other types of assets. Calculations will consider issuer assets or counterparties to reduce the risk associated with single entities. Similarly, investment ratios will be calculated per business group to avoid concentrated investments in companies from the same group. These criteria came into effect on October 16, 2023.
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Note: Two related publications:
- Capital Market Supervisory Board Announcement No. Thor. 21/2023, which addresses Fund Investment (No. 23) and includes Appendices 4 – Retail MF, Appendix 4-AI, and Appendix 4-UI.
- Capital Market Supervisory Board Announcement No. Thor. 22/2023, focused on criteria, conditions, and methods for requesting permission or notification through electronic means (No. 3), including Appendix 1.
#Funds #ThanksStock – SEC improves criteria for fund investment ratios Increase flexibility in fund management Taking into account maximum benefits from investors
The Securities and Exchange Commission (SEC) has revised the consideration criteria and guidelines for action in cases where funds have investment ratios that deviate from the specified criteria. Increase flexibility in managing investments Considering the benefits of investors is important. In force from 16 April, 2024, including lifting investment restrictions on deposits and debt instruments. The investment in such assets will follow the same general investment ratio criteria as other types of assets. Effective from October 16, 2023
According to the Capital Market Supervisory Board in its meeting no. 3/2023 on March 21, 2023, decided to approve the principles for improving the criteria relating to the fund’s investment ratio. Increase flexibility in managing investments and increase competitiveness for management companies. and raise the level to be consistent with international standards Including considering investors’ interests as important, the SEC opened for comments on the principles and draft publication in June – July 2023, with the majority of commentators agreeing.
The SEC has therefore issued two announcements to improve the criteria relating to fund investment ratios*, the main points of which are as follows:
(1) Improve the criteria for consideration and proceduresIn case of wrong investment of fund ratioBy adding cases where the management company is unable to maintain the investment ratio in accordance with the specified criteria. Due to events beyond the control of the management company (passive breach), the management company will not be considered to have breached the criteria, such as the value of assets invested in by the fund increasing or decreasing more than usual. Unit holders redeemed more units than usual. or if the credit rating of the instrument in which the fund invests has been downgraded, etc., from the beginning it would have been considered an action by the management company (active break) and would be considered against the criteria.
In addition, it will improve the management company’s procedures in the event of a passive breach by allowing the management company to take corrective action to meet the specified criteria. But if the management company uses its discretion not to make corrections within the specified period Permission from the trustee of the mutual fund is required. or Must arrange for a Provident Fund Committee, as the case may be, including such persons, to follow the progress of corrective actions at least once a month until the correction is made The said criteria have been published in the Royal Gazette . and effective from 16 April 2024
(2) Improve the criteria for the investment ratio calculated by asset type (yield limit) The fund in deposits and debt instruments issued by legal persons under Thai law, payers or counterparties, will follow the same general investment ratio criteria as other types of assets. To make investments more efficient, such as investment ratio criteria calculated in accordance with issuer assets or counterparties (single entity limit) to reduce the risk of any single issuer or counterparty. and criteria for investment ratios calculated per business group (group limit) to reduce the risk of intensive investment in companies in the same business group, etc. The said criteria have been published in the Royal Gazette. and it has been effective ever sinceOctober 16, 2023
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Note: * Two related publications as follows:
(1) Capital Market Supervisory Board Announcement No. Thor. 21/2023 regarding Fund Investment (No. 23) and Appendix 4 – Retail MF, Appendix 4-AI and Appendix 4-UI attached to this publication.
(2) Capital Market Supervisory Board Announcement No. Thor. 22/2023 regarding criteria, conditions and methods for requesting permission or notification by electronic means (No. 3) and Appendix 1 attached to this publication.
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