Investment firms in the crosshairs

The Capital Market Supervisory Board (CMSB) under the Securities and Exchange Commission (SEC) has resolved to disallow securities issuing companies or“investment companies” from offering new securities to the public to protect investors’ interests.

Ruenvadee Suwanmongkol, secretary-general of the SEC, said the resolution at the board’s most recent meeting on Tuesday is to prevent investment companies from legal infringement, including regulatory arbitrage.

The board defined investment companies as companies that allocate more than 40% of their assets to passive investment, or investing without participating in management.

This includes investment in securities, digital assets and futures contracts, but investment with the purpose of hedging would be excluded.

Under the new ruling, only noninvestment companies would be able to offer newly issued securities to the public.

However, financial businesses are exempted from the ruling, including commercial banks, financial enterprises, credit foncier businesses, securities companies, life insurance firms and non-life insurance firms.

These companies are already under the supervision of corresponding agencies, said the SEC.

Investment for liquidity management will also remain unaffected, including investment in government bonds, money market funds, fixedincome bonds, investment in associates that are unaffiliated with an investment company, investment in subsidiary companies, and investment to create synergy for the company’s core business.

The CMSB also stipulated that listed companies that have passive investments making up more than 40% of their total assets are obliged to disclose investment information in a financial statement to be used for tracking.

The SEC warned that securities issuing companies and listed companies that fail to comply with the new set of rules will be prohibited from offering all types of securities to investors and the general public under the Securities and Exchange Act of 1992.