Bangkok, 21 August 2020 – SEC is seeking public comments on the proposed principles for amending the rules on subordinated perpetual bonds to enhance investor protection and the ecosystem for the sale process. The proposed amendment requires that subordinated perpetual bonds offered for sale to the public and high net worth investors (HNW)* have investment grade rating and the sale process be revised to ensure that investors have sufficient knowledge and understanding of such type of bond.
Given
the prolonged period of low interest rate in the Thai bond market, many debt securities
issuers are increasingly issuing for sale subordinated perpetual bonds which have
more complex features and offer higher returns than general debt securities.
Specifically, from 2012 to June 2020, the total offering amount of subordinated
perpetual bonds was 119,000 million baht. Of this amount, the majority
investors were retail investors, accounting for approximately 81 percent, and
HNW accounting for approximately 6 percent.
SEC
is therefore proposing principles for amending the rules on supervision of
subordinated perpetual bonds to strengthen investor protection and simultaneously
develop the debt securities market. In this regard, such type of bond to be
offered for sale to the general public and high net worth investors would have
to be investment grade products only. This is primary quality screening of the
bond issuers to check their capability of repaying obligations because such
bond does not specify a redemption period and thus may require that investors
hold such bond longer than general debt securities.
Additionally,
SEC aims to enhance the efficiency of the sale process ecosystem to ensure that
investors have sufficient knowledge and understanding of the subordinated
perpetual bond by (1) revising the risk acknowledgment form for clearer and easier
presentation including an emphasis on key warnings, and (2) requiring a test of
investors’ knowledge before first-time investment to assess investors’
investment suitability, which can be used as a tool for the seller to explain the
types of risks and returns for investors and promote investor education
regarding subordinated perpetual bonds via various channels.
The
consultation paper is available at https://www.sec.or.th/EN/Pages/PB_Detail.aspx?SECID=645. Stakeholders and
interested parties are welcome to give comments and suggestions via the website
or email: debt@sec.or.th. The public
hearing ends on 21 September 2020.
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Note: The definition of
high net worth investor is available at:
http://capital.sec.or.th/webapp/nrs/nrs_main_search_en.php?chkPost=1