This is the first in a series of quarterly articles prepared by Tilleke & Gibbins’ capital markets practice group in Thailand, with a view to providing periodic updates on material changes to the relevant rules and regulations pertaining to securities laws in Thailand. Here are some of the key updates for the first quarter of 2024.

Amendments to “investment company” prohibition

The Securities and Exchange Commission (SEC) has amended the rules on the offering of securities and information disclosure where listed companies operating as an investment company would face consequences from regulatory arbitrage. The amended rules, which took effect on January 1, 2024, can be summarized as follows:

• A company (excluding financial institutions) will be deemed an investment company if it invests in securities, derivatives, or digital assets without active participation in the management of the target business, and the total of the passive portfolio exceeds 40 percent of the company’s total assets according to its most recent financials.
• Listed companies falling under the above definition of an investment company must disclose information related to their investments in the notes to their financial statements until the passive investment portfolio is less than 40 percent of their total assets.
• The Stock Exchange of Thailand (SET) will publish a warning label (either “C” for caution or “SP” for trading suspension) next to the ticker symbol of any listed company that is deemed an investment company. Once this is done, the company will be unable to offer any securities under the Securities and Exchange Act of 1992 (as amended) (SEC Act), such as shares, warrants, and underlying shares, as well as debt instruments.

Amendments on offering of newly issued bonds by foreign issuers

Rules on the offering of newly issued bonds in Thailand by foreign issuers were revised by the SEC with a view to ensuring that the risk profiles of foreign issuers, as well as the change in the landscape of the bond markets, are suitable. The amended rules, which took effect on January 1, 2024, can be summarized as follows:

• Foreign issuers can now file an application for sale of bonds denominated in Thai baht (THB) in Thailand with the SEC directly without having to obtain prior approval from the Ministry of Finance.
• Foreign issuers of THB-denominated bonds must (1) obtain an investment grade issue rating from an international credit rating agency, (2) appoint a bondholder representative, and (3) register the THB-denominated bonds with the Thai Bond Market Association. If an existing foreign issuer would like to roll over the outstanding non-investment grade bonds issued as of December 31, 2023, the SEC can grant a temporary exemption to mitigate the impact on the issuer, as well as the relevant investors and the bond market.
• The criteria for issuance and offering of foreign currency-denominated bonds (or FX bonds) by foreign entities in Thailand were also amended to be in line with the amendments to the rules for offering THB-denominated bonds.

Amendments on bills deemed as securities and offering of bills

The SEC amended a few rules governing the issuance of bills to be in line with the Thai private sector’s current practices so that only certain types of bills are now deemed as securities that fall under the regime of Thailand’s SEC Act. Effective from February 1, 2024, the amended rules stipulate that bills deemed as “securities” are bills of exchange or promissory notes payable or issued by a company and given to the lender or payee to evidence the rights under the bills, with the objective of raising funds from more than 10 investors (including all issued and unredeemed bills) at any given period, as well as solicitation or advertisement thereof.

The SEC also amended the relevant rules on the offering of bills to be in line with the amended definition of bills, with effect from March 16, 2024. Accordingly, an offering of bills via private placement to up to 10 placees (or PP10) is no longer deemed an offering of securities, resulting in PP10 offerings of bills falling outside of the SEC’s authority.

Amendments to audit committee and free-float requirements

The SET started implementing new rules on audit committees and free-float requirements from March 25 and 29, 2024, respectively. Listed companies must have at least three audit committee members (any vacancy in the committee must be rectified within three months with a possible extension for up to another six months) and must maintain their free float by having at least 150 nonstrategic shareholders holding at least 15 percent of the total issued shares. Noncompliance with these requirements may lead to the SET publishing warning labels, such as “CC” for “Caution—Noncompliance” or “CF” for “Caution—Free Float,” which could be further escalated to “SP” for trading suspension. If the SET has published the SP sign for two years (for audit committee noncompliance) or one year (for free-float noncompliance), then the listed company will be subject to delisting. During the period of noncompliance, the listed company must report on the rectification progress every quarter when it submits its quarterly financials to the SET.

Amendments on results reporting for initial public offerings (IPOs)

In order to allow investors to make an informed decision before investing in an IPO, the SEC amended the rules on the reporting of the results of the IPO, effective from March 1, 2024. Issuers are now required to submit a supplemental report (81-1 Short-Form), which includes two key pieces of information: (1) post-IPO shareholders, their shareholdings, and their locked-up shares (if any), and (2) the top 40 investors in the IPO shares, their shareholdings in comparison to the total offering, and the allocation details. This information must be reported to the Office of the SEC (via the SET’s electronic system) at least two business days prior to the first trading day or within 30 days after the closing of the offering, whichever is earlier.

Amendments on reporting of securities and derivatives held by directors, executives, and auditors of listed companies

As part of its regulatory guillotine initiatives, the SEC amended the rules on reporting of securities and derivatives held by directors, executives, and auditors of listed companies to streamline the reporting process and allow for more flexibility while still ensuring that information on key movements of such securities and derivatives is sufficiently and readily available. Key amendments to the rules include:

• Extension of the reporting period for small transactions and consolidation of the report of such small transactions (to every six months or when the total value exceeds THB 3 million, whichever happens first);
• Exemptions for any director or executive who is the spouse or cohabiting partner of another director or executive of the same listed company if one of them has already submitted a report to the SEC; and
• Further clarification of the reporting deadline for acquisition of newly issued shares (date of paid-up registration with the registrar of public companies) and convertible securities (date of issuance of the convertible securities).

Amendments on provision of non-voting depository receipt (NVDR) transaction services by securities companies

To ensure that NVDRs are only invested in by foreign investors and not misused by Thai investors in order to circumvent relevant rules, the SEC has amended the regulations related to the provision of NVDR transaction services by securities companies. With effect from April 1, 2024, securities companies are now prohibited from accepting orders for purchase, transfer, or exchange of securities that would result in any Thai investors acquiring an NVDR, unless the transaction is as a result of NVDRs acquired before the amendment came into effect or any transfer of NVDRs by the operation of law. Moreover, local securities companies must give notice to clients who are foreign securities companies, foreign custodians, or service providers to other parties of this new limitation and require that these clients disclose the identity of all beneficiaries involved in the NVDR transactions who are Thai nationals or entities. In addition, the local securities companies must file a report with the SEC at the end of every month and upon closing the share register.

For more information on any of these updates, or on any aspect of capital markets law and regulations in Thailand, please contact Yaowarote Klinboon at [email protected] or Karinevidch Olivero at [email protected].