Retail funds

Available vehicles

What are the main legal vehicles used to set up a retail fund? How are they formed?

Pursuant to section 119 of the SEC Act, retail mutual funds are formed by way of the written commitment between the licensed securities company and the unitholders and between the appointed mutual fund supervisor and the securities company.

In this regard, a securities company (an asset management company) must file an application to the SEC to establish a retail mutual fund together with project details, a draft obligation between unitholders and the AMC, a draft contract on the appointment of trustees and a draft prospectus. Once approved, a retail mutual fund has the status of a juristic person separate from the AMC.

There are two ways to apply for SEC approval of a retail fund:

  • normal approval; or
  • auto-approval.

It should be noted that only ‘uncomplicated’ retail mutual funds can apply for auto-approval.

Laws and regulations

What are the key laws and other sets of rules that govern retail funds?

The key laws are the relevant provisions of the SEC Act and the rules and regulations issued by the CMSB and the Office of the SEC.

There is no self-regulatory scheme per se, although there are certain guidelines issued by the office of the SEC on the operating systems of fund management businesses, which cover, among other things, the roles and responsibilities of high-level management, investment management systems, back office supporting systems, compliance systems and internal control systems.

The SEC regulatory principles that govern retail funds in Thailand are:

  • the AMC shall manage the mutual fund with integrity, care and diligence in the best interests of unitholders, with professional knowledge and competence;
  • when investment units are offered for sale to the public, the selling agents must distribute a simplified prospectus using clear language to interested investors; and
  • the AMC must strictly comply with the governing regulations and the investment policy specified in the mutual fund project and prospectus.

Must retail funds be authorised or licensed to be established or marketed in your jurisdiction?

Retail mutual funds must be authorised and licensed by the Office of the SEC to be established and marketed in Thailand. Section 117 of the SEC Act provides that a mutual fund must be approved by the Office of the SEC in accordance with the applicable rules, conditions and procedures specified in the CMSB notifications.


Who can market retail funds? To whom can they be marketed?

Securities companies licensed by the SEC to establish and manage retail mutual funds can market retail funds to potential retail customers and the general public.

Managers and operators

Are there any special requirements that apply to managers or operators of retail funds?

The fund manager assigned by the AMC must hold a licence issued by the SEC. The fund manager’s qualifications must include having satisfied professional standards set by the Association of Investment Management Companies. In addition, the fund manager is required to have passed CFI or CISA level 3 or 1 (if level 1, then the fund manager must have work experience in securities, investment or risk management relating to securities investment or analysis for not less than two years within five years prior to the application date).

Investment and borrowing restrictions

What are the investment and borrowing restrictions on retail funds?

SEC Notification TorNor 87/2558, together with the applicable appendices and the SEC manuals, stipulates the types or classes of investable securities or assets that may be used by retail mutual funds. Generally, the investable assets (restricted to retail funds) must meet the following requirements:

  • there must be no conditions or stipulations causing investors to assume obligations that exceed the value of the investment;
  • the securities must be transferable (and where there exists a feature of non-transferability, the right of claim can be assigned); and
  • information on such securities can be accessed on a consistent basis and the fair value information must also be accessible.

In addition to the above general investment criteria, Appendix 3 of TorNor 87/2558 also provides for special rules on specific types or classes of securities for retail funds, including:

  • Collective Investment Scheme (CIS);
  • infrastructure funds and property funds, or real estate investment trusts; and
  • derivatives.

With regard to derivatives, there are certain conditions for investable derivatives (eg, index derivatives, OTC derivatives and credit derivatives). The investment limits applicable to retail mutual funds are provided in detail in Appendix 4 - retail MF-PF. These include the following investment limits:

  • single entity limit;
  • group limit;
  • product limit; and
  • concentration limit.
Tax treatment

What is the tax treatment of retail funds? Are exemptions available?

Retail funds are a separate legal entity from the AMC and are currently not regarded as taxable entities under the Thai Revenue Code. Therefore, any benefits that retail funds receive from their business (eg, dividends, capital gains or interest), are exempted from income tax.

However, in August 2018, the Cabinet approved a draft amendment of the Thai Revenue Code, which specifies that mutual funds will be regarded as taxable entities under the Thai Revenue Code. Accordingly, once the draft amendment becomes effective, any income from dividends, capital gains and interest that the retail funds receive will be subject to corporate income tax.

Asset protection

Must the portfolio of assets of a retail fund be held by a separate local custodian? What regulations are in place to protect the fund’s assets?

Pursuant to section 125 of the SEC Act, the portfolio of assets of a retail fund managed by a licensed securities company must be deposited into the custody of the mutual fund supervisor (the fund supervisor). Section 127 of the SEC Act further stipulates that, to safeguard the fund’s assets, the assets of the retail mutual fund (which are accepted into the custody of the fund supervisor) must be separated from other assets. Finally, the fund supervisor must ensure the disposition of the mutual fund assets in accordance with the mutual fund project.


What are the main governance requirements for a retail fund formed in your jurisdiction?

As part of the management of a retail mutual fund by the AMC, the following main governance requirements must be observed:

  • management of the retail mutual fund strictly in accordance with the approved mutual fund project;
  • deposit of the mutual fund’s assets to the fund supervisor;
  • preparation of accounts of investments;
  • preparation of investment reports for the fund supervisor;
  • preparation and maintenance of a unitholder registry in accordance with the rules and procedures specified in the Office of the SEC notification with the CMSB’S approval; and
  • arrangement for the collection of return on investments of the fund assets and depositing them into the custody of the fund supervisor.

What are the periodic reporting requirements for retail funds?

The AMC is required to regularly evaluate the performance of funds and disclose the operational results and other material information at each particular period to investors and the general public.

In addition, pursuant to clause 12 of SEC Notification No. KorNor. 30/2547, the aforementioned requirement to disclose extends the fund manager’s duty to disclose information that would sufficiently allow investors and general public to uninterruptedly obtain such information at all times as appropriate to the circumstances.

Issue, transfer and redemption of interests

Can the manager or operator place any restrictions on the issue, transfer and redemption of interests in retail funds?

The fund manager or operator may not place any restrictions on the issue, transfer and redemption of interests in retail funds.