THAILAND: SEC Proposes Principles and Draft Announcements on Providing Services Supporting NC Bond Sales

Tuesday March 25 2025

On 25^th March 2025, the Securities and Exchange Commission (SEC) has proposed principles and draft announcements regarding the sales process for subordinated debt instruments issued by securities companies or derivatives business operators for capital maintenance (Net Capital Bond: NC Bond) to reflect the risks of the instruments and be consistent with the criteria for granting permission to issue and offer such products.

Since NC Bonds are debt instruments that securities companies (Securities Companies) or futures business operators, or collectively called “business operators”, can use to maintain their capital (Net Capital: NC), such instruments must be subordinated instruments with conditions for postponing or cancelling interest payments and postponing principal payments during the period when the business operator experiences liquidity-related events.

The SEC is therefore open to feedback to improve the criteria that securities companies must comply with when selling NC Bonds in addition to offering general instruments (plain products) to be consistent with the sale of high-risk or complex products with similar risks, as follows:

1. Select personnel who contact and provide service to customers to be those who can sell high-risk or complex products.
2. Assess the customer’s knowledge and capabilities (knowledge assessment) before contacting and providing services. In the case of instruments that do not specify a redemption period or are redeemable upon dissolution of the company, a knowledge test of the customer must be conducted before the first investment, in the same manner as the sale of subordinated perpetual bonds.
3. Provide information to enable customers to understand the nature and risks of the instruments, including warnings about the risks involved.

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