Chapter 4
Securities Business
 
Division 7
Mutual Fund Management
 
 
Section 117.
 
 
In the management of a mutual fund, a securities company may set up and manage a mutual fund only when its application to set up the mutual fund has been given an approval by the Office in accordance with the rules, conditions and procedures as specified in the notification of the SEC.
 
 
Section 118.
 
 
In applying to set up a mutual fund in accordance with Section 117, a securities company shall also submit the following documents:
(1) details of the mutual fund project as specified in the notification of the Office;
(2) draft commitment between the unit holders and the securities company;
(3) draft agreement appointing the mutual fund supervisor.
 
 
Section 119.
 
 
The commitment between the unit holders and the securities company shall contain at least the following material provisions:
(1) powers, duties and responsibilities of the securities company;
(2) appointment, conditions for replacement, and remuneration of the mutual fund supervisor;
(3) rates and payment procedure of fees and remuneration for the mutual fund management;
(4) rights of the unit holders;
(5) dissolution of the mutual fund either by expiration of the mutual fund project or due to any other reason;
(6) other particulars as specified in the notification of the SEC.
 
 
Section 120.
 
 
The commitment referred to in Section 119 and the agreement appointing a mutual fund supervisor shall not contain any unfair limitation of liabilities of the securities company and of the mutual fund supervisor towards the unit holders.
Any provisions in the commitment or in the agreement which are contrary to the provisions of the first paragraph shall be void.
 
 
Section 121.
 
 
A mutual fund supervisor shall be a commercial bank or a financial institution which has qualifications as specified in the notification of the Office.

In issuing the notification in accordance with the first paragraph, the Office shall specify the following important matters:
(1) capital fund, net total assets and business operation of the person who will become the mutual fund supervisor;
(2) relationship between the mutual fund supervisor and the securities company;
(3) arrangement of organizational structure and internal controls necessary for fulfilling the duties of the mutual fund supervisor.
 
 
Section 122.
 
 
When an approval has been given to a securities company to set up and manage a mutual fund in accordance with Section 117 and prior to the offer for sale of investment units to the public, the securities company shall arrange for the appointment of a mutual fund supervisor.
 
 
Section 123.
 
 
The offer for sale of investment units to the public shall be made only after a securities company has delivered or distributed a prospectus containing the date of approval for the setting up and the management of the mutual fund.

The prospectus shall be in the form as specified in the notification of the Office and wherever there are corresponding particulars in the prospectus and the details of the mutual fund project, the material facts stated therein shall be the same.
 
 
Section 124.
 
 
Money received from the sale of investment units of each mutual fund project shall constitute a pool of assets which the securities company shall be required to register with the Office as a mutual fund in accordance with the rules and procedures as specified in the notification of the SEC.
The registered mutual fund shall be a juristic person with the objective of enabling the securities company to make an investment in accordance with the approved mutual fund project in which case the securities company shall be responsible for the operation of the mutual fund.
The mutual fund under the second paragraph shall have the same nationality as the securities company responsible for the operation of the mutual fund.
 
 
Section 125.
 
 
In the management of a mutual fund, the securities company shall proceed as follows:
(1) manage the mutual fund strictly in accordance with the approved mutual fund project and the commitment made with the unit holders;
(2) deposit the assets of the mutual fund into the custody of the mutual fund supervisor;
(3) prepare correct and complete accounts of investments of the mutual fund;
(4) prepare investment reports of the mutual fund for the mutual fund supervisor in accordance with the rules and procedures specified in the notification of the Office;
(5) prepare and maintain a unit holders register in accordance with the rules and procedures specified in the notification of the Office with the approval from the SEC;
(6) arrange for the collection of returns on investments of the assets of the mutual fund and deposit them into the custody of the mutual fund supervisor.
 
 
Section 126.
 
 
In the management of a mutual fund, the securities company shall be prohibited from:
(1) engaging in any act which may create a conflict of interest with the unit holders as specified in the notification of the Office;
(2) investing in or holding shares of the securities company responsible for the management of that mutual fund;
(3) investing in or holding investment units of other mutual funds managed by the same securities company;
(4) investing in or holding securities of any company exceeding the ratio specified in the notification of the Office; in this regard, the Office may set a
requirement in accordance with the type of securities or the type of business of such company;
(5) borrowing in the name of the mutual fund or creating any encumbrances on the assets of the mutual fund.
except entering into derivative or engaging in the transaction in accordance with the rules, conditions and procedures ad specified in the notification of the SEC.
In issuing the notifications under subsection (4), the Office shall have the power to set requirements to be observed by the securities company for each or all of the mutual funds for whose operations the securities company is responsible.
(As amended by Section 4 of the Securities and Exchange Act (No.3) B.E. 2546)
 
 
Section 127.
 
 
The mutual fund supervisor shall have the power and duty to:
(1) ensure that the securities company strictly complies with the provisions of Section 125;
(2) accept into custody assets of the mutual fund and separate them from other assets as well as ensure the disposition of the mutual fund in accordance with the mutual fund project;
(3) prepare deposit and payment accounts of the assets of the mutual fund;
(4) prepare a report to the Office in the event that the securities company has done any act or omitted to do any act which has caused damage to the mutual fund or has not acted in accordance with Section 125;
(5) file a legal action in court to cause the securities company to perform its duties or to claim compensation for damage from the securities company for the benefit of unit holders as a whole or when instructed by the Office.
Expenses incurred from such legal action on behalf of the unitholders of any mutual fund shall be paid from the assets of that mutual fund.
 
 
Section 128.
 
 
In cases where the securities company does any act or omits to do any act which causes damage to the mutual fund or fails to perform its duties in accordance with Section 125, the mutual fund supervisor shall prepare a detailed report concerning such matter and submit it to the Office within five days from the date on which the mutual fund supervisor has knowledge of such event.
In cases where the Office receives the report under the first paragraph and considers that the act of the securities company may have an adverse effect on the interests of unit holders as a whole, the Office shall have the power to order the securities company to rectify the said act or to refrain from doing the act which may have such adverse effect or which is a violation of the duties of the securities company as referred to in Section 125.
In cases where the securities company fails to comply with the order of the Office given under the second paragraph, the Office shall have the power to:
(1) remove the securities company responsible for the operation of the mutual fund and replace it with another securities company; in this regard, the replacing securities company shall be deemed to assume all rights and obligations of the securities company thus removed;
(2) order the securities company to dissolve the mutual fund.
 
 
Section 129.
 
 
In the management of a mutual fund, the securities company shall proceed in accordance with an approved mutual fund project.

Alteration or modification of the mutual fund project or alteration in the management if not made through the resolution by the majority of the unit holders who hold more than half of all that mutual fund's investment units sold shall require an approval from the Office.
In cases where the alteration or the modification is made through a resolution of the unit holders, the securities company shall submit a report thereof to the Office within fifteen days from the date of the resolution.
The securities company shall notify all the unit holders of such alteration and modification and shall publish them in at least one local daily newspaper within fifteen days from the date on which the approval is given by the Office or the date on which the resolution is passed, as the case may be.
 
 
Section 130.
 
 
Upon the dissolution of the mutual fund, the securities company shall appoint a liquidator to collect and distribute assets to the unit holders as well as to do all other acts as may be necessary for the completion of liquidation in accordance with the rules, conditions and procedures as specified in the notification of the SEC.
The liquidator under the first paragraph shall be given prior approval from the Office.
Expenses and remuneration arising from liquidation of any mutual fund shall be paid from the assets of that mutual fund.
 
 
Section 131.
 
 
After the completion of the liquidation, the liquidator shall apply for registration of the dissolution of the fund with the Office.
The liquidator shall transfer ownership of any assets remaining after registration of the dissolution of the mutual fund to the Office.
 
 
Section 132.
 
 
The provisions of Section 47, Section 48, Section 80, Section 81, Section 82, Section 83, Section 84, Section 85, Section 86, Section 87 and Section 89 including the related penalty provisions shall apply mutatis mutandis to the offer for sale of investment units to the public and to legal action taken against the mutual fund supervisor.
Expenses incurred from such legal action on behalf of the unit holders of any mutual fund shall be paid from the assets of that mutual fund.