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SEC public hearing on proposed amendments to term fund rules to mitigate concentration risks and avoid misunderstanding of product characteristics



Monday 15 July 2019 | No. 85 / 2019


Bangkok, 15 July 2019 – The SEC is seeking public comments on the proposed amendments to the rules governing supervision of term funds to mitigate concentration risks through diversified asset allocation, and ensure sufficient and appropriate information for decision making to prevent the misunderstanding that term funds are deposits in commercial banks.

Term fund is highly popular among investors, asset management companies and commercial banks. As of the end of Q1/2019, the total net asset value was approximately 770,000 million baht and 96 percent of the term funds were offered to retail investors. The key specific characteristics of term fund are the inability to redeem investment units before maturity date and the possibility of concentration risk due to investment in products of any single issuer. Under such conditions, a credit risk on any specific issuer in a term fund’s portfolio could adversely affect the net asset value of the fund and may weaken the overall confidence in the mutual fund industry.   

The SEC therefore is proposing to amend the rules on term funds by, for example, (1) increasing investment diversification and reducing the deposit limit in cash or cash equivalent of any specific issuer (single entity limit) from the previous 20 percent to 10 percent, and (2) requiring more disclosure in the fact sheet of prospectus to ensure that investors would receive sufficient and appropriate information for their decision making without the misunderstanding that a term fund is a cash deposit in a commercial bank and that the investment in a term fund is risk free. The proposed amendments would also require the presentation of a risk spectrum that reflects levels of risk in proportion to investment concentration in any country or any sector. For example, a higher-than-80-percent concentration in any sector would represent high risk. In addition, a risk warning statement would have to be printed on the cover of the term fund’s passbook.

The consultation paper is available at www.sec.or.th. Stakeholders and interested parties are welcome to submit comments through the website, or facsimile: 0-2033-9660, or email: dusit@sec.or.th or ratanant@sec.or.th. The public hearing ends on 8 August 2019.


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