In essence, trust is being used as mechanism for fund mobilization through two channels: "active trust", and "passive trust". The active trust involves portfolio management of institutional investor, for instance, the Real Estate Investment Trust, while the passive trust is aimed for the facilitation of public offering, especially in Employee Stock Option Program, and securitization.67 The bond issuer could set up the trust in order to ensure interests payment payable to the investors, where trust’s properties will be excluded from issuers’ properties (or originators and SPVs’ properties in case of securitization), and will not be enforced in case of the insolvency of issuers. Therefore, investors could be more secured that they will receive interests, and receive their money back.68
The introduction of trust law to the Thai law system, thus, could remove certain barriers in fund mobilization since the public offering procedure previously required the appointment of bondholder representative acting on their behalf for the purpose of monitoring their interest. This means that any secured creditors have to be party to the security documents, where there is bondholder representative. Therefore, the TTCMA could provide an easier procedure, where trustee, in that capacity, is appointed through the bond issuance. It will protect the interests of the bondholder, as well as hold the securities for the bonds.69
C Compliance with international standard
Overall, Thailand ranks in the top peers among other mature and emerging markets, which could be discussed as follows:
1 The survey from the World Bank Doing Business
Under the umbrella of the World Bank Group, Doing Business is a survey on regulatory environments and how they influence the ease of doing business across economic and over time.70
The 2011 survey turned out that71, with due regard to legal impact and regulations on local business,72 Thailand ranked 12th out of 183 economies in the area of investor protection73 and 25th out of 183 economies in the area of contract enforcing.74 These two results reflect the strength of Thai legal framework75 that it could ensure market prudence, while protecting the rights of bondholders76.
2 CG Watch's assessment
The Asian Corporate Governance Association ("ACGA"), based in Hong Kong, is an independent, non-profit membership organization. CG Watch is a report about corporate governance assessment in Asia conducted by ACGA, with the collaboration with Credit Lyonnais Securities Asia – Asia-Pacific Market.77
The ACGA examined 580 companies throughout Asia, and it turned out that Thailand ranked fourth among other assessed countries. There was a huge improvement especially in the area of regulatory improvement; namely legal enforceability. The main contributing factor was driven from the initiative and collaboration among capital market participant: public and private sector. The improvement also includes an increasing engagement of retail investors receiving a good practice among listed companies, and other market participants. The overall market deems to adopt practice of good corporate governance, which investors are firmly protected.78
3 The assessment of the Financial Sector Assessment Program ("FSAP")
FASP is a joint initiative between the International Monetary Fund and the World Bank. The assessment reflects a satisfactory level of Thailand's compliance with the international standards; the International Organization of Securities Commission Objective ("IOSCO") and Principles of Securities Regulation. The SEC went through the assessment in 2007. In this regard, the assessors indicated that the Thai regulatory framework of capital market, including supervision of securities settlement systems, is "fundamentally sound, secure, efficient and reliable79, wherein the country’s financial regulatory and supervisory structure generally exhibits a high level of compliance with international standards."80 The assessment involved certain legal aspects, for instance, the enforcement of securities regulation.
4 The World Bank’s country assessment program on Corporate Governance
In 2005, Thailand participated in the World Bank's program on corporate governance, and received the “World Bank’s country assessment program on Corporate Governance - Report on the Observance of Standards and Codes” ("CG-ROSC") as the assessment result. The assessment was benchmarked against the OECD principles in relation to corporate governance practice.
In terms of result, Thailand, in comparison with other Asian countries, could fulfil the international standards, and was satisfactorily ranked 22nd out of 32 principles without failing below international standards in any particular areas of assessment. This was due to the fact that there were the reforms of corporate governance, including the structure and function of the board of directors of listed companies, according to the amendment of SEA, as well as the establishment of Thai Institute of Director Association and the DSI for investigating in any violation under the SEA.81 The SEC has further strengthened its surveillance activities, by launching the Directors' Handbook and established Director Registry System.82
IV The Assessment of Bondholder Protection under Thai Laws: a Comparative Analysis
A Comparative Analysis of Thai Bondholder Protection Regime
This section will provide a comprehensive analysis with respect to the related issues of bondholder protection. In this regard, the comparison will be drawn from varieties of jurisdictions: both common and civil law systems in order to exhibit an analysis supporting the argument that bondholder protection in Thailand is fundamentally sound, secure, and reliable that the legal framework can ensure the certainty and market stability. The system is in good compliance with international standard. However, there are several deficiencies within the bond market required to be identified and handled, as follows:
1 The comparative analysis of different model types of supervision
In essence, a key feature of regulatory regime is to establish semi-governmental regulator, where it comprises of legislative, executive and judicial powers. For most countries, such state authority would impose an intervention in the market through the enactment of regulations.83
Taking into account the differences of regulatory regimes in various jurisdictions, it could be analyzed that there are three stereotypes of financial supervision being practised around the world, composing of:"institutional scheme"; the "twin peaks" model; and the “single supervisor".84
The main characteristic of the institutional scheme is that the main business line of a financial service firm would determine its classification and scope of authorized activities. In this regard, different supervisors will be set up for banking, insurance and securities through the scheme of the "three pillar". This scheme is still found in several European countries where banking, insurance and securities supervision are exercised by three different bodies to ensure prudential supervision, consumer protection and conduct of business policy.85
The twin peaks model, in contrast, focuses on the goal rather than the business line. Each supervisor is responsible for all firms, and activities of all firms engaged in supervised activities, regardless of their institutional status. Therefore, in jurisdiction adhered to the peaks model will find that one institution being engage in prudential supervision, while another supervising the conduct of business rules. This scheme is primarily implemented in Australia and the Netherland.86
Jaruporn Intrararung, Trust and the transaction in Capital Market
(2010) the Securities Commission of Thailand
<http://www.sec.or.th/investor_edu/info_media/article/2550/Content_0000000828.jsp?categoryID=CAT0000316> at 1 February 2011.
70. See Doing Business, 'About Doing Business: Measuringfor Impact '(2011)
< http://www.doingbusiness.org/~/media/fpdkm/doing%20business/documents/annual-reports/english/db11-chapters/db11-about.pdf> at 11 January 2011
74. See The International Bank for Reconstruction and Development and the World Bank, 'Doing Business 2011: Making a Difference for Entrepreneurs' (2011) Doing Business, 2.
77. See the Asian Corporate Governance Association, About ACGA (2011) < http://www.acga-asia.org/content.cfm?SITE_CONTENT_TYPE_ID=21> at 12 January 2011
78. Jamie Allen, ‘The Asian Corporate Governance Association’ (paper presented in the Thailand in CG Watch 2010, Top Talk, Bangkok, 14 December 2010.
80. Monetary and Capital Markets and Asia and Pacific Departments, 'Financial System Stability Assessment- Thailand' (2008) The International Monetary Fund, 1.
81. See IMF Survey Online, above n79.
82. See Corporate Governance Assessment , 'The Report on the Observance of Standards and Codes (ROSC)' (2005) The World Bank Group, i, 1.
83. Philip Wood, Law and Practice of International Finance (2008), 325.
84. See general Eddy Wymeersch, 'the Structure of Financial Supervision in Europe About Single, Twin Peaks and Multiple Financial Supervisors' (2006) Ghent University - Financial Law Institute, 10-20.