SEC to hold hearing over investor classifications

SEC to hold hearing over investor classifications

The SEC logo at the headquarters on Vibhavadi Rangsit Road. (Photo by Patipat Janthong)
The SEC logo at the headquarters on Vibhavadi Rangsit Road. (Photo by Patipat Janthong)

The Securities and Exchange Commission (SEC) is conducting a public hearing to redefine and reclassify types of investors as it considers including investment knowledge, financial literacy and financial prowess as qualifications to better protect inexperienced investors from risk.

According to the SEC's proposition, investors will be reclassified into four groups: professional investors (PI) with proven experience in investments or credentials as experts or analysts; qualified investors (QI) with a net worth of over 60 million baht; affluent investors (AI) with a net worth above 30 million; and retail investors.

In addition to their financial assets, QI and AI must meet qualifications regarding knowledge about investment products and risks, which can be based on their experience with risk assets and asset management, in accordance with criteria specified by the SEC.

Individual investors as well as institutional investors can qualify as PI if they have an investment planner (IP) or investment consultant (IC) licence; are angel investors with a net worth exceeding 50 million baht; have revenue of more than 4 million baht or have more than 20 million baht in their investment portfolios; or have at least three years of experience investing in small and medium-sized enterprises or startups.

However, individuals with IP and IC licences can only be classified as PI for products for which they are licensed. For example, if they are a licensed IP or IC for trading stocks and bonds, they will be accredited as a PI for only stocks and bonds, not other investment products.

Holders of IP and IC licences or individuals with any certified investment licences such as CFA or CISA can also qualify as AI and QI if their financial status meets the criteria.

Under the new criteria, retail investors will only be able to invest in products that have passed the screening process for quality, information, and plain products (or QIP instruments) by the SEC, such as equities, real estate investment trusts, rated bonds, perpetual bonds, investment-grade bonds, and structured notes with principal protection.

Retail investors can also invest in products with low impact and no ongoing requirements such as crowdfunding and initial coin offerings, but only a limited amount.

AIs are allowed to invest in risky products with more complex and higher risks such as unrated bonds, non-investment grade bonds, non-diversified funds, and structured notes without principal protection.

QI and PI are allowed to invest in "super-risky" products.

If the proposition is accepted and enforced, the new criteria will apply to all types of financial products the SEC supervises except cryptocurrencies.

Qualifications for crypto traders are different from those for other products.

The public hearing is open to public opinions on the SEC website until May 21.

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