As the Thai stock market faces a downturn, Thai investors have shown increased interest in depositary receipts (DRs), which offer the same tax benefits as Thai stocks while providing access to foreign securities. However, recent speculation in the media has raised concerns among regulators and the market, raising questions about whether DR issuers actually hold the underlying foreign securities purported to be backing the DRs. This has brought the structural integrity of DR programs under scrutiny. Why This Question Matters In global practice, DRs are understood to be backed by the foreign securities they reference, giving investors economic exposure that closely mirrors direct ownership. When the issuer does not hold the underlying securities directly, the risk profile shifts to the strength of its custodial, hedging, and liquidity arrangements. Those arrangements determine whether DR holders receive equivalent economic and voting rights, how corporate actions are transmitted, and whether conversions or redemptions can be completed in full and on time. In Thailand, the standardized DR disclosure templates and the express allowance for global custodians indicate a regulatory focus on transparency and structural safeguards that preserve these outcomes, even if the issuer’s name does not appear on the foreign share register. Thai Rules for DR Offerings Thai DR offerings are governed by specific Securities and Exchange Commission (SEC) notifications and standardized prospectus forms. These instruments establish the disclosure regime for DR structures, risk factors, and the issuer’s arrangements to support the DR program. The framework expressly contemplates the use of a global custodian, indicating that DR issuers are not required to hold the underlying foreign securities directly in their own name if sufficient controls and operational arrangements are in place for the issuer to deliver economic benefits and, where applicable, underlying securities to DR holders when required. More broadly, the relevant SEC
