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Regulation Summary
Corporate structure, operational system and personnel
Prevention of conflicts of interest
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Operation
Engagement in non-securities businesses
Qualifications of fund managers

Corporate structure, operational system and personnel 

 
Asset management companies must implement a reliable operational system that supports segregation of duties, compliance, risk management, recruitment and monitoring of business operation. The system should also strengthen efficiency of internal control and recordkeeping for audit trails, and enforce an information barrier (Chinese Wall) to safeguard non-public information that could cause conflicts of interest.
 
Relevant notifications
 
• Notification of the Association of the Investment Management Companies No. SorJorKor. Ror 1/2544 Re: Investment Ethics and Codes of Conduct; 
Notification of the Capital Market Supervisory Board No. TorThor. 25/2556 Re: Outsourcing Operational Function relating to Business Operation to Third Party;
• Notification of the Capital Market Supervisory Board No. TorLorThor. 8/2557 Re: Rules on Personnel in the Capital Market Business.

 

Prevention of conflicts of interest

 

To uphold the best interest of clients, asset management companies must conduct due diligence and implement an efficient policy and procedure to prevent conflicts of interest. Such efforts should cover at least the following areas:

 

2.1 Affiliated transaction
2.2 Proprietary trading
2.3 Front running
2.4 Staff dealing
2.5 Soft dollar/rebate

 

Relevant notifications

• Notification of the SEC Office No. SorTor. 14/2558 Re: Rules on Protection and Management of Conflict of Interest

• Notification of the SEC Office No. SorTor. 15/2558 Re: Rules on Proprietary Trading

Notification of the Office of the Securities and Exchange Commission SorNor 36/2550 Re: Exemption on Amendment of Mutual Fund Management Scheme and Management Fees Collection

Notification of the SEC Office No. SorNor. 29/2549 Re: Acts that May Cause Conflicts of Interest on Fund Management and Protective Rules (codified);

• Notification of the Association of the Investment Management Companies No. SorJorKor.Ror. 2/2551 Re: Staff Dealing Rules for Securities Companies Which Are Licensed to Undertake Mutual Fund Management Business.

Circulation No. KorLorTor.Nor.(Vor) 20/2554 Re: Guideline (Best Practice) on Protection of Inside Information for Fund Management

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Advertisements on sale promotion of mutual funds must not contain any misleading or false information. Meanwhile, asset management companies must provide investors with appropriate services and complete information on mutual funds, especially those with special features.

 

Relevant notification

 

Notification of the Capital Market Supervisory Board No. TorThor. 35/2556 Re: Standard Conduct of Business, Management Arrangement, Operating Systems, and Providing Services to Clients of Securities Companies and Derivatives Intermediaries (Codified);

• Notification of the SEC Office No. SorThor. 10/2558 Re: Rules on Advertisement and Sale Promotion for Securities Companies and Derivatives Intermediaries.

Operation

 

To ensure that investors receive services to which they are entitled, and to maintain the same standards across the industry, asset management companies must comply with the rules and regulations on mutual fund management, e.g,, offering and redemption of investment units, fees and expenses, net asset valuation, payment in kind and merger and amalgamation of funds. 

 

Relevant notifications

 

• Notification of the Capital Market Supervisory Board No. TorNor. 27/2552 Re: Rules, Conditions and Procedures for Establishment and Management of Funds (codified);
Notification of the SEC Office No. SorKhor/Nor. 23/2552 Re: Rules, Conditions and Procedures for Management of Funds.

Engagement in non-securities businesses

 

To accommodate flexibility and timely adaptability in competitive environments, the SEC allows intermediaries to engage in businesses other than securities business on the condition that such businesses meet the following criteria:

 

5.1 Not imposing risks to clients’ assets or company’s financial condition;
5.2 Not causing conflicts of interest to the core securities business; and
5.3 Supporting the core securities business in optimizing benefits from the available resources. 

 

Relevant notification

 

• Notification of the SEC Office No. OrThor/Nor. 11/2546 Re: Engagement in Other Businesses by Securities Companies. (Claus 4 was repealed, and use Notification of the SEC Office No. SorThor. 45/2556 instead)

• Notification of the SEC Office No. SorThor. 45/2556 Re: Engagement in Other Businesses by Securities Companies. 

Qualifications of fund managers

 

To ensure that investors’ assets are managed for their best interest, fund managers must possess qualifications as stipulated and adhere to professional standards and the governing regulations. 

 

Relevant notification

 

• Notification of​ the Capital Market Supervisory Board No. TorLorThor. 8/2557 Re: Rules on Personnel in the Capital Market Business.

Last updated on 26 January 2015
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