Non-retail pooled funds

Available vehicles

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

Pursuant to section 134 of the SEC Act, the main legal vehicle used to set up a non-retail mutual fund is affected by way of a written agreement between the AMC and a person or a group of persons that has authorised the AMC to manage the non-retail pooled fund (called a private fund in Thailand) pursuant to which the AMC is required to manage the fund in accordance with the rules, conditions and procedures specified in the CMSB notification, including appointing a custodian approved by the Office of the SEC.

Laws and regulations

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

In Thailand non-retail private funds are pooled funds collected from no more than 35 investors, managed by a licensed AMC and investing in securities in accordance with the agreements made with the private investors. A non-retail private fund is not a juristic person, unlike a retail mutual fund.

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. Generally, the investment of a non-retail fund’s assets is subject to SEC approval unless otherwise exempted.

It should be noted that SEC supervision and regulation of non-retail private funds is considerably less strict than those of retail funds, whether in terms of types of investable assets or investment limits. Generally, a licensed private fund manager can invest in almost any type of assets as long as the investment does not deviate from the fund’s investment policy as stipulated in the fund management agreement.

Authorisation

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

Non-retail funds (or private funds) must be approved and authorised by the Office of the SEC to be established and marketed in Thailand.

It should be noted that, pursuant to SEC Notification KorNor 43/2549 (2008), a foreign securities company may solicit certain institutional investors to provide fund management services without first having obtained an SEC licence. A foreign securities company is defined as ‘any juristic person which is granted permission to undertake securities business by a foreign regulator which is an ordinary member of the International Organization of Securities Commissions’.

Marketing

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

A securities company licensed by the SEC to establish and manage non-retail private funds can market non-retail funds. Non-retail private funds can be marketed to certain qualified investors, such as institutional investors, ultra-high net worth (UHNW) individuals and high net worth (HNW) individuals (as defined in the SEC notifications and BOT regulations).

Ownership restrictions

Do investor-protection rules restrict ownership in non-retail funds to certain classes of investor?

Ownership of non-retail funds is restricted to qualified Thai investors in accordance with the definitions of qualified investors, including accredited investors (AI), institutional investors, HNW investors and UHNW investors.

Managers and operators

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

Supervision of non-retail private funds is considerably more relaxed than that of retail mutual funds. Therefore, there are no special requirements that apply to managers or operators of non-retail funds (other than that the non-retail private fund’s assets must be segregated from the AMC’s proprietary portfolio).

Tax treatment

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

As non-retail funds are regarded as private funds in Thailand, the private fund’s investors will be the owner and beneficiary of the income received by the fund. Accordingly, the benefits that the fund received from the investment will be regarded as the investors’ income and are subject to personal income tax or corporate income tax, as the case may be, under Thailand’s Revenue Code.

Asset protection

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

The portfolio of assets of a non-retail private fund must be deposited with and held by a separate SEC-approved custodian appointed by the AMC, pursuant to section 135 of the SEC Act. Also, pursuant to section 136, the securities company is required to segregate the assets of the person authorising the management of the fund from its assets.

Governance

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

In managing a non-retail private fund, the fund manager or AMC must manage it with honesty and care to preserve the interests of the person who has authorised the management of the private fund, using the knowledge and competence of a professional, in accordance with section 133 of the SEC Act.

Reporting

What are the periodic reporting requirements for non-retail funds?

As stated in the answer to question 21, 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 non-retail investors.

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