Earlier, the SEC conducted a public hearing on the proposed principles and draft amendments to the net capital rules for business operators regarding the definition of Qualified Subordinated Debt. The comments and suggestions gathered from the public hearing were taken into consideration when the SEC reviewed the proposed principles, the draft amendments and other related issues. 

The SEC is now conducting this public hearing on the draft amendments which contain the key points as follows:  

(1) Qualified Subordinated Debt that can be excluded from the total liabilities in the net capital calculation* shall require business operators to postpone the principal repayment and cancel or postpone the payment of interest or any other returns upon occurrence of any of the following events:

  (a)  business operators are unable to maintain net capital 

  (b)  business operators default on the clearing and settlement of securities with the clearing house or their clients in case of securities companies, or business operators default on cash settlement or physical delivery with the derivatives clearing house or their clients in case of derivatives business operators, unless such default is not caused by financial problems or lack of liquidity and has been approved by the SEC. 

(2) Subordinated debt, qualified by the former definition and issued before or on the effective date of the amendments, can be excluded from the total liabilities in the calculation of net capital, only the portion not exceeding the shareholders’ equity, for up to one year from the effective date of the amendments. This is to provide business operators with sufficient time to amend the terms and conditions in the subordinated debt contracts in compliance with the specified definition.  

The purpose of these proposed amendments is to ensure that business operators have sufficient capital to cover risks associated with their operation and support business continuity. This will protect investors and build confidence in business operators, as well as prevent systemic risk, without imposing unnecessary burdens on business operators. 

The consultation paper is available at: https://www.sec.or.th/TH/Pages/PB_Detail.aspx?SECID=993 and the legal hub at: https://law.go.th/listeningDetail?survey_id=MzgwN0RHQV9MQVdfRlJPTlRFTkQ=. Stakeholders and Interested parties are welcome to submit comments and recommendations via the websites or emails: bhumipisuth@sec.or.th, sawarin@sec.or.th and arthipha@sec.or.th. The public hearing ends on 7 June 2024.  

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Notes: 

* The existing rules require that business operators maintain net capital not less than the minimum by: 

(1) Maintaining the net capital (NC) with liquid assets, after deducting total liabilities and risk values, not less than the specified amount; and   

  (2) Maintaining the net capital ratio (NCR) by ensuring that the ratio of NC to general liabilities (total liabilities and financial derivatives liabilities, minus special liabilities), plus clients’ assets required as collateral for derivatives positions traded on an organized exchange is not less than the specified ratio.