The SEC, at the meeting No. 11/2022 on 15 August 2023, resolved to approve the principles for revising the net capital rules* specifically on the use of subordinated liabilities in maintaining net capital to increase flexibility. The SEC has also reviewed the haircut rates used in calculating the net capital to align them with the current situations and cover risks associated with various instruments in which business operators invest. Additionally, the definition of special liabilities will be revised to include other outstanding liabilities for greater flexibility. 

The essences of the proposed revisions are as below:  

          (1) The business operator can temporarily use subordinated liabilities in excess of the shareholders’ equity portion without counting it as total liabilities in calculating net capital. This shall provide a period of time for the business operator to take corrective actions to ensure that the subordinated liabilities portion not considered as total liabilities does not exceed the shareholders' proportion. In this connection, the definition of such subordinated liabilities will be revised with conditions that the business operator must cancel interest payments or any other returns or postpone the deadline for interest or other return payments if any events that may arise having effect on net capital of the business operator, as specified by the SEC;       

          (2) Haircut rates on position risks of certain types of instruments will be adjusted while additional haircut rates for position risks for shares traded on the LiVE Exchange and depositary (LiVE Exchange) and depositary receipts (DR) will also be determined; 

         (3) The definition of special liabilities will be revised to include other outstanding liabilities that the business operator has segregated to fully accommodate the repayment of such liabilities at all times. Examples include proceeds from the sale of securities that government agencies have ordered the business operator to suspend repayment to customers.

The consultation paper is available in Thai version only at https://www.sec.or.th/TH/Pages/PB_Detail.aspx?SECID=934. Stakeholders and interested parties are welcome to submit comments and suggestions on the website or via email: bhumipisuth@sec.or.th, sawarin@sec.or.th, and arthipha@sec.or.th. The public hearing ends on 25 September 2023.  

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Remark: 

* Business operators must maintain capital not less than minimum requirements as follows: (1) Maintaining net capital (NC) with liquid assets less liabilities and risk haircuts not less than the specified value;

(2) Maintaining net capital ratio (NCR) with the ratio of NC when compared to general liabilities (total liabilities and derivatives liabilities, subtracted by special liabilities), plus assets pledged as collateral for futures contracts, not less than the specified ratio.

** Subordinated liabilities means liabilities that determine the rights of creditors lower than ordinary creditors. Such liabilities have no guarantees and conditions for creditors to call for repayment before the maturity date, only in the portion of liabilities not exceeding the shareholders’ equity.

*** Position risk means the risks occurred from price changes of instruments or underlying assets in a way that causing potential loss to business operators. This happens when the operators take positions (either long or short) in these securities, assets, or derivatives.