Bangkok, Friday 9 November 2018 - SEC is conducting a public hearing on the revision of guideline on mutual fund’s liquidity risk management tools in order to provide asset management companies a wider range of tools managing liquidity risks, to increase the fund management efficiency and to reduce potential risks to the financial system and the economy.
SEC has
proposed additional risk management tools that asset management companies are
able to select and use when dealing with events or factors causing investors to
panic-sell or redeem their investment units en masse. In such events, mutual
funds are forced to dispose of their assets in a fire sale leading to a plummet
in market price. This situation could be unfair to existing investors because of
low qualified assets left in the fund portfolio and they have to bear the costs
associated with the asset sales. Meanwhile, the proposed risk management tools that
fund managers can choose to use include:
-
Adjusting the investment unit value to
reflect the costs incurred from selling or buying assets in the fund portfolio,
-
Charging additional fees from the buyer/seller
of investment units if the sale/purchase value exceeds the threshold determined
by the asset management company,
-
Charging additional fees from the redeeming
investor when the redemption is made before the prescribed term,
-
Setting the daily redemption value of the
mutual fund,
-
Dividing mutual fund assets by the degree
of their liquidity or the ease/difficulty of valuating the invested assets.
Asset
management companies are required to state which liquidity risk management
tools they choose to use clearly in the investment management scheme and in the
fund prospectus.
The
consultation paper can be found at www.sec.or.th/hearing. Stakeholders and interested parties are welcome to make
comments and give suggestions via SEC’s website, or facsimile at 0-2263-6203 or
0-2033-9938 or email: dusit@sec.or.th or narumon@sec.or.th. The public hearing ends on 7 December 2018.