As part of its regulatory guillotine initiative, the Office of the Securities and Exchange Commission (the “SEC”) held a public hearing on proposed changes to debt securities regulations in September 2021. The proposed changes are intended to improve regulatory standards, remove a cascade of regulations governing different types of debt securities and revise the regulations to comply with the upcoming notification on the amended definition of types of investors. We highlight the key issues below.
1. Rationalization of the rules relating to debt and equity securities
(a) In order to reduce misinterpretation, the SEC aims to amend existing debt securities regulations to be consistent with equity securities regulations, such as financial reporting standards and specifications. prohibited from transmitters.
(b) The SEC plans to create consistency between the rules on debt securities and the upcoming new definitions of types of investors, which will affect the types of products in which an investor can invest, based on the classifications illustrated below. below. The SEC, new types of investors and qualifying investment products are not intended to apply to the offer by local intermediaries of offshore securities and derivatives to investors in Thailand.
(c) The SEC plans to introduce a deadline for the offering of debt securities to be completed within six months from the date of approval, similar to the duration of stock offers.
2. Consolidation of the rules for issuing and offering debt securities
The SEC proposes to merge 11 existing notifications regarding the issuance and offerings of debt securities into one main notification, to facilitate compliance by stakeholders. All types of debt securities offered under the new notification can be denominated in Thai baht or foreign currency.
3. Other regulatory changes
(a) Strengthening investor protection
(i) A Medium Term Note (“MTN”) program that is provided for public offerings (“PO”) requires an intermediary to perform product selection exercises and PO ratings regardless of the type of ‘investors targeted for the inaugural offer under the MTN.
(ii) For secured debt securities, the qualifications of the collateral will be more specific. For example, a guarantor need not be a natural person and the shares of the issuer or a subsidiary should not be pledged as collateral.
(iii) For a PO of long-term debt securities, only an issue rating may be used.
(b) Structured notes
For structured notes, public limited companies and public limited companies will only be allowed a single offer, while financial institutions are still allowed both single offers and deposit offers – which will be extended to a term. two years as in the MTN. Case.
(c) Modifications for a Private Placement offer (“PP10”)
A PP10 offering will be much more limited, with a total value capped at THB 50million and a limit of 10 investors at any one time (the current rule is no more than 10 investors in a four month period). To neutralize the impact of the new requirements, the SEC has proposed relaxing certain criteria for the issuer, such as eliminating the requirement of a resolution by a board meeting or a shareholders’ meeting for a PP10 offer.
Given their potential impacts on current market practice, the proposed changes and detailed regulations are still the subject of rounds of hearings and not yet finalized. The SEC’s current plan is to announce the final rules by the end of this year, with a certain grace period before they go into effect. The new rules, especially for the new definitions of investors, may affect the business plans of participants and potential entrants in Thailand’s capital markets. Therefore, they will deserve careful analysis and transition plans should be put in place.
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