Securities and Exchange Commission (SEC), capital market regulator of Thailand has approved a draft revision to the regulation governing
investment advisory business to allow foreign credit rating agencies
(CRA) to disseminate voluntary rating reports to the local public.
The voluntary rating means more regional scale rating information, which would contribute to the Thai capital market policy to promote foreign investment for risk diversification and the increasing cross-border offering of debt securities among ASEAN markets. More and easier access to voluntary rating information will be useful for Thai and foreign investors alike, especially for clearer comparison between local and foreign products.
Under current regulations, foreign CRAs, if approved by the SEC, are allowed to conduct mandatory rating of debt securities offered to the public or instruments in which a fund plans to invest without the need to apply for an investment advisory license. The services provided by the said foreign CRAs are, however, limited only to permissible products and under specific conditions.
The revised regulation will widen availability of foreign CRAs’ rating information on local and foreign financial products or businesses so that local investors can make more use of comparative information and make informed investment decisions. The voluntary rating would increase visibility of Thai and regional products and thus support the upcoming integration of ASEAN capital markets.
The foreign CRAs allowed to provide voluntary rating, though not required to obtain the investment advisory license, must meet the following criteria:
- operating credit rating business legally under the law of home country;
- supervised by an IOSCO member regulator;
- not having a business premise in Thailand, except through shareholding in an SEC approved local CRA; and
- assigning rates for instruments or businesses for the purpose of regional or international scale comparison or for those specified to be credit rated under SEC regulations.
“We expect to see more fund mobilization and investments across ASEAN countries when the ASEAN Economic Community takes off in 2015. We are exploring opportunities and studying possible challenges for investors, fund raisers and business operators, and urging stakeholders to make careful preparation for new business environments. Investors unfamiliar with certain products should seek sufficient, well-round and useful information before making investment decisions. We hope this voluntary rating will do just that,” said SEC Secretary-General Vorapol Socatiyanurak.
The voluntary rating means more regional scale rating information, which would contribute to the Thai capital market policy to promote foreign investment for risk diversification and the increasing cross-border offering of debt securities among ASEAN markets. More and easier access to voluntary rating information will be useful for Thai and foreign investors alike, especially for clearer comparison between local and foreign products.
Under current regulations, foreign CRAs, if approved by the SEC, are allowed to conduct mandatory rating of debt securities offered to the public or instruments in which a fund plans to invest without the need to apply for an investment advisory license. The services provided by the said foreign CRAs are, however, limited only to permissible products and under specific conditions.
The revised regulation will widen availability of foreign CRAs’ rating information on local and foreign financial products or businesses so that local investors can make more use of comparative information and make informed investment decisions. The voluntary rating would increase visibility of Thai and regional products and thus support the upcoming integration of ASEAN capital markets.
The foreign CRAs allowed to provide voluntary rating, though not required to obtain the investment advisory license, must meet the following criteria:
- operating credit rating business legally under the law of home country;
- supervised by an IOSCO member regulator;
- not having a business premise in Thailand, except through shareholding in an SEC approved local CRA; and
- assigning rates for instruments or businesses for the purpose of regional or international scale comparison or for those specified to be credit rated under SEC regulations.
“We expect to see more fund mobilization and investments across ASEAN countries when the ASEAN Economic Community takes off in 2015. We are exploring opportunities and studying possible challenges for investors, fund raisers and business operators, and urging stakeholders to make careful preparation for new business environments. Investors unfamiliar with certain products should seek sufficient, well-round and useful information before making investment decisions. We hope this voluntary rating will do just that,” said SEC Secretary-General Vorapol Socatiyanurak.
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