SEC wants firms to apply fairness test

Service should justify fees, Rapee insists

Capital market intermediary companies should assess whether fees charged on securities trading and investment in funds are fair compared with the quality of services, says the Securities and Exchange Commission (SEC).

SEC secretary-general Rapee Sucharitakul said the market regulator wants to see fairness on fees charged by securities and asset management firms in order to generate sustainability for the industry.

The move would also enhance service quality for all customers and investors, Mr Rapee said.

For instance, asset management companies charge an upfront fee for customers when purchasing a mutual fund, along with front-end and management fees.

Most asset management companies are charging a considerably high rate, while customers receive little information and suggestions from sales agents, he said.

For the front-end fee, some active funds are charging a higher fee for the value-added aspect of active fund management at 2-3% of an investment amount, while the index funds, which have a passive management style, are charging a 0.5% fee, said Mr Rapee.

The investment returns of some active funds are no different than those of index mutual funds, he said.

“I don’t mean they should not charge a fee — the higher rate of fees is like a car passenger’s expenses, where a limousine may have a higher expense for better services,” Mr Rapee said.

“But some funds have fees similar to riding in a limousine but the service quality of a tuk-tuk.”

The SEC held a seminar yesterday titled “Thailand SEC Policy Dialogue 2018: Regulating by Market Forces”, to present research about the capital market.

Mr Rapee said businesses should be cognizant of sustainability, while financial regulators and the finance industry should create market forces to provide the public with a healthy understanding of investment, encouraging questions from investors to capital market intermediary companies.

Stock Exchange of Thailand president Pakorn Peetathawatchai said service fees are an ordinary aspect of doing business, but the challenge to the SET as an intermediary is twofold: creating market competition and disseminating market information.

“Without market competition and information, we may only depend on regulatory reform, and this may cause a major burden for the market players, as opposed to the notion of self-regulation,” Mr Pakorn said.