Effective today, the Securities and Exchange Commission has issued measures prohibiting Thai investors from purchasing additional depositary receipts for interests arising on underlying Thai securities, or NVDRs, except in the case of obtaining rights arising from the holding of NVDR securities. Before the declaration enters into force or in the event of legal transfer
What is NVDR? Why does the SEC prevent Thai people from trading anymore? How will this measure affect trading in the stock market? The SPOTLIGHT team has compiled the answers in this article.
What is NVDR?
NVDR is a depositary receipt for interest arising on underlying Thai securities (non-voting depositary receipt). It is considered a type of instrument whose reference securities are Thai stocks. The purpose is to facilitate foreigners to invest in Thai stocks without foreign investment restrictions (foreign limit) and the ability to receive dividends from Thai stocks.
Currently, every NVDR on the market is released by “NVDR Thai Company Limited” It is a company established by the Stock Exchange of Thailand. The company will purchase and hold Thai stocks that investors are interested in and then transfer the rights to hold those stocks to NVDR, making the shareholding percentage in Thai NVDR companies reflect the group of stocks that foreign investors are interested in at that time.
Interested parties can purchase NVDR through brokers. At a sale price equal to the market price of the stock on which the NVDR is based, holders of the NVDR will receive benefits from the purchased shares in almost all respects similar to purchasing Thai shares directly, such as receiving dividends. And get profit from the price difference in trading
but One right that NVDR holders will not have as direct shareholders is voting rights at shareholder meetings. As the name says, it is “non-voting”.
In the past, the SEC allowed both foreign and Thai investors to hold NVDRs before issuing an order prohibiting Thai investors from purchasing additional NVDRs, which took effect on April 1. 2567
Why is the SEC preventing Thai investors from buying more NVDRs?
The Securities and Exchange Commission has issued new measures to control the use of NVDR by Thai investors. Because it turns out that some Thai investors use NVDR as a way to avoid certain restrictions and regulations, such as using it to avoid reporting stock trades. Hiding information about stock holdings may cause investors to lack information that may affect their investment decisions.
In addition, the SEC believes that there is no need to allow Thai investors to trade NVDR anymore because Thai investors can hold Thai stocks directly. And actually get the full benefits of the shareholding including the right to vote at shareholder meetings.
Therefore, the SEC decided to issue an order prohibiting securities companies from accepting purchase orders, receiving transfers, or exchanging securities that result in an increase in NVDR securities for Thai investors, except in the case of obtaining rights arising from holdings. It enters into force or in the event of legal transfer
Simply, After April 1, 2024, Thai investors will not be able to purchase additional NVDR, but can continue to hold NVDR or convert it into common shares through the securities company. You can then keep it or resell it.
If the client is a foreign securities company, the custodian or custodian of securities in a foreign country, or the operator of another person, securities companies must inform clients of the service restrictions.
These clients are required to disclose information that could identify the true identity of each beneficiary dealing with NVDR securities who hold Thai nationality. By requiring securities companies to file a report with the Securities and Exchange Commission at the end of each month and at the close of the shareholder registry.
Will this affect stock trading in Thailand?
From the SEC's interpretation, prohibiting Thai investors from purchasing NVDR will have no impact on stock trading in general because trading NVDR is no different from trading common stocks. The NVDR trading order will be sent to the exchange's trading system. They can be paired with orders to sell common stock. There is no difference from trading ordinary common stocks.
Therefore, this new measure will not affect the company's market capitalization, the value of shares or the number of shares on the market because NVDRs and common shares have a similar status. Only holders of NVDR will have voting rights at shareholder meetings.