Thailand#s Securities and Exchange Commission steps up protection for retail investors

Stocks and Financial Services Press Releases Friday August 26, 2016 17:04
The Asian Banker--29 Aug--Asian Banker

The Securities and Exchange Commission (SEC) is stepping up measures to protect retail investors by supervising the process of cross-selling securities and debt instrument products at bank branches and requiring mutual fund companies to install board members who are tasked with protecting unit holders' interests.

Banks that offer cross-selling securities and debt instrument products will soon be required to have a clear structure regarding which department will take ultimate responsibility for selling such products, secretary-general of the SEC Rapee Sucharitakul told the Bangkok Post in an exclusive interview.

"What we want to do is create a benchmark to prevent mis-selling," he said.

Mutual fund companies, which are owned by banks, currently dominate 90% of the country's assets under management, totalling 4 trillion baht, while banks also play a role in advising corporate clients to issue debt instruments, which will be put in mutual fund portfolios, and distributing mutual fund products.

The securities regulator will require banks to create a product governance framework by clarifying which cross-selling securities and debt instrument products are suitable for retail investors and matching those products with retail clients' risk-taking profiles, he said.

For example, if a product carries high risks, it should not be recommended to ageing customers.

Banks must provide customers with the pros and cons of putting money into cross-selling securities and debt instrument products. They must also monitor staff in cases where banks offer direct incentives from selling such products to their counter tellers or relationship bankers as this could lead to a conflict of interests.

Relationship bankers offer a broad array of financial products and services that are beyond simple current and deposit account products.
Moreover, banks will set up a compliance system to check whether their relationship bankers or counter tellers explain the risks of investment and if buyers are really aware of such risks, Mr Rapee said.

The SEC will amend laws to force asset management companies to either set up a new board or add independent directors to protect the interests of unit holders, he said, adding that such a structure will help improve companies' transparency and credibility.

"In other countries, they have a board of trustees to oversee unit holders and whether those funds disclose enough information, but there is no such board here. The interests of shareholders and unit holders may not be the same," he said.

In the meantime, Mr Rapee said the intensifying search for yield behaviour of investors has prompted the SEC to rethink the risks of high-net-worth investors.
"Our concept is changing and we're shifting regulations. We think that high-net-worth investors should have different protection from institutional investors," he said.
He said the regulations that supervise high-net-worth investors should be in between those of institutional investors and retail investors.
Currently, the same SEC regulations are applied to both high-net-worth investors and institutional investors because they are considered as having a good grasp of investment. (Aug 26, 2016)--

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