SEC tightens rules on NVDRs

SEC tightens rules on NVDRs

The Securities and Exchange Commission (SEC) is prohibiting local securities companies from accepting orders for purchases, transfers or exchanges of securities that would result in Thai investors gaining more possession of non-voting depositary receipts (NVDRs).

Effective as of Monday, the new regulation has been published in the Royal Gazette to reflect the SEC's original intention of introducing NVDRs to support foreign investors' participation in the Thai stock market without being subjected to a foreign limit.

"The SEC board views that it's appropriate to amend the regulations related to the provision of NVDR transaction services by securities companies to prevent the misuse of such securities as a tool to evade compliance with relevant regulations such as compulsory reporting on the acquisition and disposition of securities, or to conceal shareholding information," the regulator said in a statement.

Such practices could lead to inappropriate behaviour in the capital market or a lack of information that might affect the decision-making of investors, it added.

The SEC has, therefore, amended the relevant regulations to prohibit local securities companies from accepting orders of purchases, transfers or the exchange of securities that would result in Thai investors gaining more possession of NVDRs.

"In the case where a local securities company has a foreign securities company as a client, the company would be required to notify the foreign client not to accept purchase orders, transfers or exchanges of securities that would result in Thai investors holding more NVDR securities."

In addition, local securities firms are required to inform foreign clients to disclose their client information on NVDR-related transactions to ensure the company is aware of the true identity of the clients and their beneficiaries involved in NVDR transactions who are Thai nationals, according to the SEC.

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