Under its regulatory guillotine initiative, the Office of the Securities and Exchange Commission (the "SEC") issued a public hearing on proposed amendments to debt securities regulations in September 2021. The proposed amendments aim to improve regulatory standards, remove a cascade of regulations governing different types of debt securities and revise the regulations to be in line with the upcoming notification relating to the amended definition of investor types. We highlight the key issues below.
1. Streamlining debt and equity securities rules
(a) To reduce misinterpretation, the SEC aims to amend existing debt securities regulations to be consistent with equity securities regulations, such as the financial reporting standards, and prohibited characteristics of issuers.
(b) The SEC plans to create consistency between the debt securities rules and the upcoming new definitions of investor types–which will affect the types of products an investor can invest in, depending on the classifications illustrated below NB: Based on current plan of the SEC, new types of investors and eligible investment products are not meant to be applicable to local intermediaries’ offering of offshore securities and derivatives to investors in Thailand.
(c) The SEC plans to introduce a timeframe for the debt securities offering to be completed within six months from the approval date, similar to the time length for equity offerings.
2. Consolidation of debt securities issuance and offering rules
The SEC proposes to merge 11 existing notifications regarding debt securities issuance and offerings into one master notification, to facilitate compliance by stakeholders. Any types of debt securities offered under the new notification can be denominated in either Thai Baht or a foreign currency.
3. Other regulatory developments
(a) Enhancement of investors protection
(i) A medium term note program ("MTN") that is provided for public offerings ("PO") requires an intermediary to perform product screening exercises and PO ratings, regardless of the type of investors targeted for the inaugural offering under the MTN.
(ii) For collateralized debt securities, the qualifications of the collateral will be more specific. For example, a guarantor must not be a natural person, and shares of the issuer or a subsidiary company must not be provided as collaterals.
(iii) For a PO of long-term debt securities, only an issue rating can be used.
(b) Structured notes
For structured notes, limited companies and public limited companies will only be allowed a one-time offering, while financial institutions are still allowed both one-time and shelf-filing offerings–which will be expanded to a two-year term like in the MTN case.
(c) Changes for a Private Placement ("PP10") offering
A PP10 offering will be much more limited, with a capped total offering value of THB 50 million, and a limit of 10 investors at anytime (the current rule is no more than 10 investors within any four-month period). To neutralize the impact of the new requirements, the SEC proposed to relax some criteria for the issuer, such as elimination of the requirement of a resolution by a board meeting or shareholders meeting for a PP10 offering.
Closing thoughts
Given their potential impacts on the current market practice, the proposed amendments and detailed regulations are still subject to rounds of hearings and are not yet finalized. The current plan of the SEC is to announce the final rules by the end of this year, with a certain grace period before becoming effective. The new rules, particularly for the new definitions of investors, may affect the business plans of participants and potential entrants to Thailand's capital markets. Hence, they will be worth in-depth analysis, and transition plans should be put in place.
