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Thailand’s top securities regulator is proposing new measures to prevent the capital and digital asset markets from being abused for technology‑related crimes and money laundering.
Last week, the country’s Securities and Exchange Commission (SEC) announced a consultation on new approval requirements for “funding providers” and “financial supporters of major shareholders,” under which they would be deemed major shareholders themselves and require regulatory approval.
According to the SEC, identifying and appropriately classifying the backers of shareholders and businesses is important because “any involvement of such sources of funds or financial supporters with unlawful activities, such as money laundering, may pose legal, credibility, and reputational risks for the business operators, as well as adversely affect the overall credibility in the financial system.”
The move is part of a broader shake-up by the Thai regulator to provide more clarity to the complex ownership structures of companies, particularly in areas such as digital assets, where anonymity, or pseudo anonymity, is commonplace and can obfuscate financial backing.
Thailand moves to shed light on murky ownership
In March, the SEC revised its criteria for determining persons deemed to be major shareholders of securities and digital asset businesses, with a view to better reflecting the ultimate “controlling persons” and “strengthening overall credibility and market confidence.”
The revised criteria meant that indirect ownership was henceforth determined by tracing shares held through other companies and calculating each person’s true portion based on their proportional stake (pro rata) in those entities.
Additionally, characteristics indicating controlling power now include being a spouse, a cohabiting couple, “minor children,” and “persons whose conduct demonstrates a concerted intention to exercise voting rights in the same direction or to allow others to exercise their voting rights.”
These new rules came into force on March 4, after which business operators were required to review the status of their major shareholders and submit approval requests for any individuals who meet the new criteria within 180 days.
With “ultimate controlling persons” accounted for, the SEC has now turned its attention to the source of funds and financial support to shareholders and businesses, to ensure they are coming from legitimate sources that can be appropriately verified.
2 new principles
With this in mind, the SEC proposed two new principles for determining persons deemed to be major shareholders.
Firstly, any person who provides funding or financial support to a direct major shareholder, or indirectly through the acquisition of shares of the business or shares of a legal entity that is a shareholder, will be deemed to be a major shareholder themselves, for which the business operator is required to obtain approval from the SEC.
This includes guarantors, contractual arrangements, or investments in any instruments that result in the funding of major shareholders, whether conducted directly or through intermediaries. However, the SEC caveated this by clarifying that ordinary business transactions, such as lending by financial institutions, were excluded.
Secondly, if a major shareholder is a public or government entity, such as a ministry, bureau, department, public organization, or government agency, the SEC will require the business operator to examine the shareholding structure only at the entity level, since these entities “are already subject to government supervision and oversight.”
The SEC invited stakeholders and interested parties to comment on the proposals by April 22.
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