ASEAN Regulators Implement Cross Border Securities Offering Standards

1 April 2013... The ASEAN Capital Markets Forum (ACMF) announced today that the securities regulators in Malaysia, Singapore and Thailand have implemented the ASEAN Disclosure Standards Scheme (Scheme) for multi - jurisdiction offerings of equity and plain debt securities in ASEAN. 

 

The Scheme aims to facilitate fund raising activities as well as to enhance the investment opportunities with in ASEAN capital markets.

 

Issuers offering equity and plain debt securities in multiple jurisdictions within ASEAN will only need to comply with one single set of disclosure standards for prospectuses, known as the ASEAN Disclosure Standards , bringing about greater efficiency and cost savings to issuers. 

 

The Scheme operates on an opt-in basis and ASEAN members will adopt the Scheme as and when they are ready to do so. Malaysia, Singapore and Thailand are the first three ASEAN jurisdictions to implement the Scheme.

 

The Scheme replaces the ASEAN and Plus Standards Scheme that was announced on 12 June 2009 and is one of the capital market initiatives undertaken by the ACMF as part of the regional capital market integration plan endorsed by the ASEAN Finance Ministers in April

2009 in Pattaya, Thailand. 

 

Mr. Lee Chuan Teck, Chairman of the ACMF and Assistant Managing Director of the Monetary Authority of Singapore, said “The implementation of the Scheme is another significant achievement in the ACMF’s continuing efforts to foster ASEAN capital market integration. With the Scheme in place, issuers will only need to prepare one set of prospectus for a multi-jurisdiction offering in the region. The ACMF hopes that this will encourage more companies to offer securities across ASEAN and help promote ASEAN as integrated capital market for fund-raising.”

 

“The initiative represents a significant milestone towards creating a more efficient environment for access to capital across the region, and is a key initiative by ASEAN capital market regulators to promote greater cross-border investment flows and grow the region’s capital markets. The fully harmonised disclosure standards will allow issuers more seamless access to financing opportunities within the region while facilitating investors’ decision making in multi-jurisdiction offerings,” said Ranjit Ajit Singh, Chairman of the Securities Commission Malaysia. 

 

“I am proud of this achievement. The arrival of the fully harmonized set of disclosure standards simply proved that ACMF is determined to make fund raising process most efficient for companies looking to expand their businesses. It creates more opportunity for ASEAN to channel our savings to promote growth of our own region. I hope that, in the near future, more ASEAN securities regulators will join Malaysia, Singapore and Thailand in adopting the ASEAN Disclosure Standards, yet enlarging the impact of this Scheme.” said Mr Vorapol Socatiyanurak, Secretary-General, the Securities and Exchange Commission, Thailand.

 

Further information on the Scheme is available in Appendix I. Details on the implementation of the Scheme can be found on the websites of the Securities Commission Malaysia ( www.sc.com.my), the Monetary Authority of Singapore (www.mas.gov.sg) and the Securities and Exchange Commission, Thailand (www.sec.or.th).

Thailand Regulator Lays Down New rules for Multi-Class Structure For Existing Mutual Funds

The Securities and Exchange Commission (SEC), Hong Kong allows existing mutual funds to offer multiple classes of investment units to investors and allows classification of investment units by currency.

SEC Secretary-General Vorapol Socatiyanurak said: the SEC has allowed mutual funds to offer multiple classes of investment units either they are existing or newly-established mutual funds while only the latter are permitted under existing regulations. In addition, asset management companies could offer multiple classes of investment units classified by currency to investors. The revision aims to facilitate more flexibility for asset management business; broaden business opportunities; and provide a wider variety of investment choices for investors which contribute the development in Thai capital market.

In this regard, the multi-class structure offered by existing mutual funds must not prejudice the right of existing unit holders.  Details of the proposed structure must be defined in the amended investment fund scheme, such as classes of investment units, right and return of each class, fees or other expenses payable by unit holders of each class, which must conform to each class of investment units.

Due to the fact to Thai investors are not allowed to invest in foreign-currency investment units offered in Thailand. The asset management companies, therefore, must clearly clarify that the products are offered only to foreign investors.

“The SEC promotes private sector’s operational flexibility and expansion of business opportunity amidst the dynamic financial environment. This will help serving investors’ demands,” concluded Mr. Vorapol.

Thailand Regulatory Revision Concerning Return Payment of Property sector Fund

The Securities & Exchange Commission, Thailand (SEC) is seeking public comment on the revision to regulation governing return payment from the investment of property sector fund. The revision aims to solve tax differences between indirect investment through property sector fund and direct investment in property fund established and managed in Thailand (Thai property fund). 

Under the proposed regulations, property sector fund must pay dividend to unit holders the entire amount of return obtained from Thai property fund in any accounting period. Omission of dividend payment is, however, allowed in the accounting period where dividend to be paid is lower than 0.25 baht per unit. In addition, to prevent any impact  from the revision, the SEC will allow asset management company to prepare the operating system and amend project details, including inform every unitholder of the changes at least 60 days in advance. Within such period, asset management company must repurchase the fund’s units at least once, while unitholder may exit from the fund with no fee charged.

The consultation paper is available on the SEC website at www.sec.or.th. Stakeholders and the interested public are welcome to submit comments through the website, or through facsimile number 0-2695-9915 until June 14, 2012.

New Regulation of Real Estate Investment Trust (REITs) in Thailand

The SEC, Thailand Board and the Capital Market Supervisory Board have approved regulations on establishment and management of Real Estate Investment Trust (REITs) to offer a new investment alternative, develop fund raising framework and investment in real estate to be in line with international practice and facilitate more flexibility for investment in real estate. 

Regulator revealed that “The SEC introduces REITs to facilitate development of fund raising for real estate and real estate investment to be in line with international practice by utilizing trust to create the investment vehicle having company with expertise in real estate investment and management perform duty of REITs manager. 

REIT regulations are partially similar to those governing listed company in the areas of issuance and offer for sale of securities, information disclosure and investor protection. Investment regulations are generally comparable to that of Type 1 property fund but offer  more flexibility and impose less restriction; for instance (1) company with expertise in real estate investment and management is eligible to participate in REITs establishment and management, (2) no restriction on type of investment property is imposed while investment overseas is allowed. In addition, up to 10% of total property can be invested in project under construction and (3) loan for investment or improvement of property is permissible up to 35% of NAV or 60% of NAV, if gaining investment grade. 

Certain aspects of REIT regulations also share similarity with share offering regulations; for instance right of REIT holders to protect their own interest, pre and post offering information disclosure and allocation through securities underwriter, holding of annual REIT holders’ meeting and REIT holders’ right to approve an acquisition or disposition of key assets and related-person transactions.

Key persons in establishment and management of REITs include (1) REIT manager which may be company founded to manage REITs and having expertise on real estate investment and management or asset management company, providing that the company must be approved by the SEC. REIT manager has duty to seek the SEC approval for offer for sale of REITs and (2) trustee which has duty to take custody of REITs’ property and monitor REIT manager’s compliance with trust deed. Trustee must be commercial bank, securities company, asset management company, financial institution or wholly owned subsidiary of the said entities and must be approved by the SEC Board to undertake trust business (professional trustee). 

“REITs will be a new investment alternative for those interested in real estate investment with less restriction than Type 1 property fund due to REITS’ international features and more flexible rules on investment. After REIT regulations become in force, asset management company and Type 1 property fund will have one year adjustment period during which the SEC will continue approving establishment of new Type 1 property fund and existing funds’ increase of scheme capital,” said SEC Deputy Secretary-General.

Thailand Regulator Proposed Revision Concerning Proportion of Investment Unit Holding in Retail Fund

The Securities and Exchange Commission (SEC), Thailand is seeking public comment on proposed revision concerning proportion of investment unit holding in mutual fund for general investors (retail fund). The revision is based on existing key principles aiming to ensure that (i) retail fund’s investment units will be allocated to general investors; (ii) retail fund will not be used to seek undue benefit for any particular individual, in particular tax privilege; and (iii) any person or group of persons will not be allowed to dominate mutual fund management.

Key proposed revisions require retail fund and money market fund to comply with rule preventing any person or group of persons from holding more than 1/3 of total investment units sold which has already been applicable to other types of mutual funds. In case where any person or group of persons holds investment units in the amount exceeding the said limit, asset management company will be prohibited from distributing dividend and counting vote in the excess portion. The prohibition, however, will not apply if excess holding is not resulted from making additional investment, providing that asset management company must arrange to have appropriate measure to prevent other unitholders from being dominated, for example. 

The consultation paper is available on the SEC website at www.sec.or.th. Stakeholders and the interested public are welcome to submit comments through the website, or through facsimile number 0-2263-6332 until June 5, 2012.

Thai Regulator Proposed Regulations of Offer for Sale of ASEAN Collective Investment Scheme

The Securities and Exchange Commission, Thailand allows offer for sale of ASEAN Collective Investment Scheme (“ASEAN CIS”) to non-retail investor in Thailand within first half of 2012. This is under the Implementation Plan for ASEAN Capital Markets Integration in 2015 aiming at facilitating cross-border securities offerings in the region, strengthening potential of ASEAN capital markets and providing more alternatives to non-retail investor in Thailand. In addition, offer for sale of ASEAN CIS to retail investor will be allowed by the end of this year. 

Criteria for CIS to be offered will include (1) offer must be made only to institutional investor and high net worth investor with specified investment experience, financial status or income, (2) CIS operator must be subject to supervision of ASEAN capital market regulator which is a member of International Organization of Securities Commissions (IOSCO) and Signatory A of IOSCO MMOU concerning Consultation and Cooperation and the Exchange of Information, (3) CIS operator must appoint licensed securities broker as selling agent and (4) selling agent must comply with specified criteria including distribution of offering circular (fact sheet) prepared in Thai.  

The draft regulation includes qualifications of CIS to be offered to non-retail investor in Thailand, conditions relating to offer of CIS, duty of selling agent as well as procedure for filing of application for inspection on qualifications of CIS and allocation of quota for offshore securities investment. Stakeholders and the interested public are welcome to submit comments through the website until April 24, 2012.

Thailand Regulator Issues Draft Regulations on Overseas Investment through Derivatives Broker

The Bank of Thailand (BOT) has approved the proposal to allow retail investors to invest in derivatives traded on foreign derivatives exchange without limiting investment objective only to risk management. The proposed draft regulations aim to provide investors with more variety of investment alternatives and promote new income channels for securities companies as well as increase experiences in overseas investment.

Under the proposed regulations, derivatives brokers must have infrastructure in place to render service to retail investors to trade derivatives on foreign derivatives exchange. While the investment objective in relation to derivatives trading will no longer be limited, derivative brokers, in providing the service, will be required to comply with rules and practices prescribed by the Association of Securities Companies with the SEC approval. 

Thailand Regulator Allows Voluntary Credit Rating by Foreign CRAs

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.