This section provides details on specific rules and regulations for the protection of both resident and foreign investors. Specific rules on mutual funds, provident schemes, and insurance operations are also discussed below.

Investor Participation and Protection

Investor Participation

Retail Investors

Except for taxation, there are no specific rules governing retail investors in the Thai bond market. The Thai Bond Market Association (Thai BMA) provides a special website for retail investors, Thaibond.com. Most financial institutions in Thailand provide services for retail investors interested in buying and selling bonds. Linked below are the web sites of some of these financial institutions.

For taxation issues for retail or individual investors in Thailand, refer to the Rules and Regulations—Securities Issuance and Trading—Taxation section of this website.

There are no restrictions on foreign investors investing in Thai securities. Direct and portfolio investments are freely permitted. Capital can be freely transferred into the country and deposited in a foreign currency account with an authorized bank within 7 days. Investment funds, dividends, profits, and interest payments after settlement of taxes can be repatriated freely. Securities, promissory notes, and bills of exchange may be sent abroad without restriction.

Section IV of the Bank of Thailand (BOT) link below discusses exchange regulations for foreign investments.

Also linked below are guidelines for handling complaints for nonresidents, published by the Securities and Exchange Commission (SEC).

Professional Service Providers

The links below provide directories of professional service firms in Thailand.

Investor Protection

Bondholder Rights

The Civil and Commercial Code and the Bankruptcy Act cover basic bondholder rights.

The Civil and Commercial Code covers the principles and rules for civil law for business and individuals. Obligations, contracts, mortgage, and other forms of loan security fall under the Civil and Commercial Code, as well as liquidation procedures for insolvent debtors.

Under the Bankruptcy Act, creditors, including the bondholders, can file a petition with the Bankruptcy Court for a rehabilitation or bankruptcy proceeding against a debtor’s business.

Indenture agreements in bond issues can also specify a trustee or bondholder representative. This trustee oversees bondholder rights, including the filing of claims and demand payments from the issuer or guarantors. Bondholders can sue and claim for damages from the trustee in case the trustee acts in bad faith or causes damages to bondholders.

Foreign bondholders have rights similar to Thai bondholders.

Bond documents (e.g. prospectus, term sheets, or indenture agreements) may also contain covenants and relevant default clauses specific to the bond issue to provide additional protection for bondholders. The Thai Bond Market Association (ThaiBMA) provides copies of corporate bond prospectuses.

Prevention of Fraud

The Enforcement Department of the Securities and Exchange Commission (SEC) investigates and gathers evidence on possible offenses under the Securities and Exchange Act, the Provident Fund Act, and the Royal Enactment on Special Purpose Juristic Persons for Securitization.

Typical violations under SEC purview include insider trading, share-price manipulation, false or misleading information regarding securities, operating securities businesses without proper licenses, mismanagement, and fraud.

Ethics

The Stock Exchange of Thailand (SET) serves as a center for trading listed securities. It is a self-regulatory organization that governs member companies’ conduct in dealing securities. SET is also responsible for marketplace surveillance, and supervising and enforcing disclosure standards for listed companies. It provides essential systems for securities trading, such as a clearing house, securities depository center, and securities registrar.

The Thailand Futures Exchange (TFEX), a subsidiary of SET, is a derivatives exchange that offers products for effective hedging. It is governed by the Derivatives Act of 2003 under the supervision of SEC. The TFEX trading infrastructure is designed to ensure a fair, orderly, and transparent market by offering market participants a high-quality, cost-efficient, and comprehensive range of services—including an order entry facility, a matching system, and market dissemination through an electronic trading platform.

SET also operates the Bond Electronic Exchange (BEX). The relevant trading rules are linked below. Guidelines on membership, registration, and other requirements are available at the SET website, which is also linked below.

The Thailand Bond Market Association (ThaiBMA) operates the secondary bond market, registers dealers, and monitors all market activity. It is self-regulatory, and operates standards and conventions for bond trading. The link to the ThaiBMA website below provides guidelines on membership, registration and trading of debt instruments, registration of traders, ethics and good practices of dealers, and reporting requirements.

Cross-Border Portfolio Investment

The Bank of Thailand (BOT) publishes Exchange Regulations in Thailand, which offers general information on cross-border portfolio investment rules. It is available on the BOT website, which is linked below.

Given recent appreciation pressures on the THB, additional regulations were promulgated by BOT to curb currency speculation.

Capital Inflows

The Foreign Business Act

Under the Foreign Business Act (FBA) of 1999, foreign firms are generally restricted to 49.99% ownership of local companies. Other laws in banking and insurance, for example, impose limits of less than 49.99% on certain sectors. The FBA also sets guidelines for establishing trading partnerships with other countries. The Cabinet is currently amending the FBA, with several drafts under study.

Recent Regulations

In December 2006, BOT set an unremunerated reserve requirement on short-term capital inflows (excluding those related to trading goods and services), requiring financial institutions to withhold 30% of foreign currencies bought or exchanged with THB. An immediate exemption was made for investments in listed equities on an unhedged basis.

In January 2007, BOT eased restrictions by offering options to either maintain the unremunerated reserve requirement withholding amounts or hedge them against foreign risks under certain conditions.

Two months later, in March 2007, the unremunerated reserve requirement was relaxed for nonresidents holding government bonds, treasury bills, or BOT bonds longer than 3 months. Nonresidents selling foreign currencies against THB for investment in bonds, treasury bills, debentures, bills of exchange, promissory notes, and unit trusts—whether listed on the Stock Exchange of Thailand (SET) or not—can now either comply with the unremunerated reserve requirement or fully hedge their investments with local financial institutions. Additional details are available through the BOT links below.

In July 2007, BOT began to allow nonresidents to engage in THB swaps or other hedging contracts with domestic banks, on the condition that the underlying transactions were initiated before 19 December 2006. This further relaxation of the 30% reserve requirement was aimed at reducing the THB1.5–THB2.0 per USD gap between onshore and offshore exchange rates.

The BOT lifted the unremunerated reserve requirement in March 2008. Thai banks are allowed to trade foreign exchange with nonresidents without needing to set aside 30% of foreign funds kept in domestic accounts. The BOT requirement of full foreign exchange hedging for incoming speculative funds invested in Thai fixed-income instruments and related mutual funds was also abolished. Beginning in February 2008, the BOT increased the amount of Thai investment abroad and made regulations that would permit residents to deposit foreign currencies. In addition, the Ministry of Finance has adjusted the structure and management of public debt and considered to make use of the Public Debt Management Act to improve the balance of capital flows.

Capital Outflows

In January 2007, BOT relaxed exchange control regulations on capital outflows. Limits on nonresident investments or lending to businesses abroad were raised to USD50 million per year from USD10 million per year. Resident investors are allowed to invest or lend in businesses abroad up to a maximum of USD20 million per year. In December 2007, BOT relaxed the unremunerated reserve requirement. allowing a parent company (or its Thai subsidiaries) and companies registered on the Stock Exchange of Thailand (SET) to transfer a maximum USD100 million per year offshore for direct investment or lending.

BOT also allows the Government Pension Fund, Social Security Fund, provident funds, mutual funds (excluding private funds), securities companies, insurance companies, and specialized financial institutions to invest in securities abroad issued by Thai residents without limitation. The maximum for investments issued by nonresidents is USD50 million, subject to limits set by the board of directors. BOT approval is not required for investments below USD 50 million.

In July 2007, foreign exchange controls for capital outflows were further relaxed through the following measures:

• companies listed on the Stock Exchange of Thailand (SET) were permitted to purchase foreign currencies up to USD100 million per year to invest abroad, subject to certain conditions;
• the limit on fund remittances abroad by individual residents was adjusted to USD1 million equivalent per year (depending on the purpose);
• an individual resident’s repatriation requirement for foreign currency receipts was extended from within 120 days to within 360 days;
• the requirement for individual residents to sell or deposit foreign exchange receipts from abroad within 15 days was removed; and
• institutional investors were permitted to invest in deposits with financial institutions abroad without approval from authorities. (However, the deposited amount is to be counted as part of the total amount allowable for investing abroad.)

Beginning 1 September 2007, the Securities and Exchange Commission (SEC) further relaxed regulations on offshore investment by local investors. SEC subjected institutional investors to a limit of USD50 million for securities obtained through authorized securities brokers or purchased from authorized securities dealers. It subjected to limit individual investors to USD5 million for securities obtained through authorized private fund operators. Investments in securities listed on regulated exchanges may be made through authorized securities brokers.

Previously, offshore investments were only allowed for mutual funds, provident funds, and proprietary portfolios of securities and asset management companies.

In February 2010, BOT increased the foreign investment limit for the Securities and Exchange Commission (SEC) to USD50 billion to allocate to securities companies, mutual fund companies, and individual investors (through investments with private funds or securities companies). The removal of the unremunerated reserve requirement also includes additional measures to prevent speculation on the THB that include revision of rules for domestic financial institutions borrowing THB from nonresidents, revision of rules regarding the provision of THB by domestic financial institutions to nonresidents, and revision of the structure of Nonresident Baht Accounts; specifically, segregating Nonresident Baht Accounts for Securities from Nonresident Baht Accounts to allow the transfer of THB between the same types of accounts and to prohibit transfers between different types.

In compliance with BOT rules, authorized securities business operators must report clients’ offshore portfolios. Also, SEC now allows listing and trading of foreign securities such as transferable custody receipts of leading foreign stocks, exchange traded funds, and related products; and shares of foreign companies listed on SET, although specific rules and conditions have yet to be finalized by SEC.

Further details regarding regulatory developments on currency speculation are available through the BOT links below.

Mutual Funds

The asset management industry in Thailand has developed in terms of size and product availability. Investment companies are developing the industry. The three primary types of funds constituting the market are mutual funds, private funds, and provident funds.

At the end of 2007, the Securities and Exchange Commission (SEC) reported that there were 41 securities companies, 21 asset management companies, and 3 venture capital companies.

The Thai pension system is small but complex. There are multiple schemes covering different portions of the work force, but with low overall coverage. Private sector employees are covered by the mandatory Old Age Pension Fund (OAPF). The Social Security Fund (SSF) is managed by the Social Security Office. Central government officials are covered by the Government Pension Fund (GPF). Local government officials are covered by their own individual schemes. Private teachers are covered by a separate provident fund. The Provident Funds and Retirement Mutual Funds offer voluntary coverage schemes for corporations and individuals.

The insurance sector has expanded since licensing reforms were made in 1997. As of February 2008, there were 100 registered insurers comprising 25 life insurance companies. Insurance companies commonly invest in government and state-owned enterprise (SOE) bonds, and promissory notes subject to certain limits. Details on the rules and regulations of Thailand’s insurance sector can be found by following the links provided below.

Currency Exchange Controls

BOT administers the Exchange Control Act and uses a managed-float exchange rate regime. All foreign exchange transactions are done through authorized banks, subject to Exchange Control Act restrictions and BOT regulations.

Import or Export of Currencies

Domestic Currency

A maximum of THB500,000 per person is allowed to be exported when traveling to Cambodia, Lao PDR, Malaysia, Myanmar, and Viet Nam. The limit for travel elsewhere is THB50,000. There are no restrictions on importing THB, though these are subject to the unremunerated reserve requirement (see the Rules and Regulations—Investment Management—Cross Border Portfolio Investments section of this website for more detail).

Foreign Currency

BOT recently abolished the requirement for Thai residents to sell or deposit foreign exchange currency receipts from abroad within 15 days. The rule change aims to give businesses and individuals more flexibility in managing foreign exchange receipts and also allows financial institutions to set their own procedural guidelines, which must be announced to the public.

Domestic or Foreign Currency Accounts

Resident Accounts

BOT liberalized foreign exchange regulations in July 2007, allowing residents to maintain foreign currency accounts with financial institutions in Thailand. In December 2007, it was further liberalized. The following conditions summarize BOT limits on resident accounts:

• Foreign currency originating abroad—there is no limit on the balance outstanding for accounts regardless of whether a future foreign exchange obligation exists.
• For foreign currency funds originating within Thailand and obtained through THB conversion, or through foreign currency borrowing from local financial institutions: a) without future foreign exchange obligations—the total outstanding balance cannot exceed USD100,000 for individuals and USD300,000 for corporations; or b) with foreign exchange obligations—the total balance outstanding cannot exceed USD1 million for individuals or USD100 million for corporations.

Nonresident Accounts

Nonresidents can maintain foreign currency accounts with BOT-authorized banks, provided that the funds originated abroad.

For settlement purposes, nonresidents can maintain non-interest bearing savings or current accounts. For other purposes, nonresidents can only open fixed accounts with maturities of 6 months or more. The total value of outstanding Nonresident Baht Accounts per person must not exceed THB300 million at the close of any business day.

Borrowing or Lending

Local Currency Borrowings

Local financial institutions are allowed to borrow THB from nonresidents through swap transactions when there are no underlying trades or investments, but only for maturities above 6 months.

Foreign Currency Borrowings

Thai corporations with borrowings not exceeding USD1 million are exempt from the (i) requirement to fully hedge their investments with local financial institutions and (ii) unremunerated reserve requirement that requires financial institutions to withhold 30% of foreign currencies bought or exchanged with THB.