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SEC supervision

Supervision Objectives

            The Provident Fund Act B.E 2530 specifies that a fund management company, hereby called "management company", must hold a private fund management license. The main responsibility of a management company is to generate returns to members of provident funds. Furthermore, a management company has to facilitate the process of fund registration and the modification of rules and procedures, as well as assist in communication with the Securities and Exchange Commission (SEC). However, a management company must not be the employer of employees who are members of the fund. 
            The supervision can be separated into two parts, management company supervision and fund supervision. As for management company supervision, the SEC requires management companies to demonstrate their readiness in managing provident funds, both in terms of staff and operation in order to create confidence of members and prevent damages that may occur to the assets of the funds. As for fund supervision, the SEC, acting as provident fund registrar, will consider application for registration, with particular attention on the fair treatment of members.
  1. Management Company Supervision
             1.1 Licensing
                    A management company must hold a private fund management license approved by the Ministry of Finance. A management company must fulfill all requirements mentioned in the Ministerial Regulations No. 15 (B.E. 2543), which are:
  • Management company must be a commercial bank, finance company, securities company, mutual fund management company, life insurance company, or newly established limited company or public limited company to undertake securities business in the category of private fund management.
  • Management company must have a strong financial background, no adverse track records, and be ready in terms of personnel and operational systems such as systems regarding investment decision making, compliance with fund's investment policy and regulations, allocation of securities, prevention of conflict of interest and insider trading, internal check & balance, and information disclosure. Furthermore, appointed fund managers of the management company must be approved by the SEC.
             1.2 Conduct of Business
                    A management company must conduct investment strategy with care by using their utmost fiduciary duty, knowledge and readiness of staffs, and operation systems. Furthermore, the SEC regulations also require the conformity to fund's investment policy and restrictions agreed upon with fund committee. A management company should know its customers, their investment objectives, investment experience, expected returns, and level of risk exposure in order to create the most suitable investment policy.

             1.3 Investment Regulations
                    A management company must comply with the SEC investment regulations concerning provisions on types of assets and securities a provident fund is allowed to invest, maximum proportional investments in each asset class, and conflict of interest transaction, etc. Furthermore, if the management company engages in foreign investment activities, it will have to comply with foreign investment regulations as well.

             1.4 Segregation of Assets
                    A management company must segregate accounts and assets of the fund from its own. The fund's assets must be kept with a custodian approved by the SEC. The responsibilities of custodian includes safekeeping of financial assets, arranging settlements of any purchases and sales of financial assets, collecting information on financial assets and the derived income, ensuring the accuracy and completeness of assets and the interests incurred, and providing regular reports on all their activities to the management company.

             1.5 Asset Valuation 
                    A management company has to calculate the Net Asset Value (NAV) of provident funds on the mark to market basis. As a result of the implementation of unitization system, a management company has to calculate unit price of the provident funds at least once a week and update the number of units held by each member based on SEC regulations when contributions are made to the fund from employees and employer. Furthermore, NAV calculated by a management company must be endorsed by an NAV Verifier as NAV is crucial in calculating a provident fund’s units at the time of contribution remittance and at the time benefits are paid back. Therefore, the NAV Verifier must be approved by the SEC and operates under the SEC regulations.

             1.6 Disclosure
                    A management company must disclose information relating to fund management to fund committee so that the fund committee can evaluate the management company's performance periodically. In addition, the information disclosure must follow the SEC regulations.

              1.7 Fund Manager
                     A fund manager is an authorized person by a management company to undertake investment decisions according to the investment policy agreed with the fund committee. The person must be registered with the SEC, passed the examination of CFA/CISA level 1 with at least 2 years of working experience in an investment field during the recent 5 years, or obtained a certificate (level 3) in CFA/CISA, or being permitted by a foreign capital market regulator, which is accepted by the office to perform the duties similar to fund manager. In addition, he/she has to attend and pass the fund manager course arranged by the Association of Investment Management Companies (AIMC). Furthermore, the manager shall have no prohibited characteristics as specified by SEC Act.

              1.8 Investor Contact
                     A investor contact is an authorized person by a management company to contact and provide information about fund management, regulations, investor rights, and responsibilities of the management company, and recommend investment policies that are suitable for the customer’s investment objectives.

       2.    Supervision of the Fund

              A registered Provident Fund is regarded as a juristic person and considered as a separate entity from the employer. The fund will be overseen by fund committee, whose key responsibilities are to coordinate with external parties and supervise the management of the fund. Furthermore, the fund’s articles shall include rules and regulations apply to fund members.

               2.1 Fund Committee
                      By law, the fund committee has wide-ranging duties to supervise a provident fund. However, the law does not specify the responsibilities of a fund committee in details. As a result, the SEC has established ‘code of best practice’ which specifies fiduciary duties of the fund committee. Furthermore, the fund committee has to regularly monitor the performance of a management company as well.

                2.2 Fund Registration
                       A management company appointed by the fund committee is responsible for filing a request for provident fund registration with the SEC. The established fund shall be a juristic person and considered as a separate entity from the employer and the management company. The employer will have to choose to either establish a single fund, which consists of one employer whose fund size is relatively large, or join a pooled fund with other employers whose fund size ranges from small- to medium-sized. Therefore, a pooled fund shall consist of fund committee and rules which apply to all companies under the fund, and fund committee of each individual employer and rules which apply to a specific company.

                2.3 Fund Articles
                       A fund article contains governing rules and regulations of a provident fund which apply to fund committee and fund members; therefore, it is required to contain necessary details according to the Provident Fund Act B.E. 2530.

                2.4 Fund Administration
                       A management company is required to have a well-structured operation system to effectively perform tasks such as collecting contribution amounts, paying benefits to fund members, and performing member records, etc. In addition, a sufficient internal control and data security are also required in order to ensure accuracy and completeness of the membership management system under the SEC regulations.
last updated date 10/05/2553

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