Family Wealth Management in Thailand

For the typical investor, the general goal of investing is to build a diverse portfolio that will help them achieve their financial goals by ensuring that their money is managed efficiently. For wealthy families, the objectives are slightly different: mostly venture investment, tax optimisation and a stable succession plan for the next generation.

Given these particular needs, the scheme of the investment structure will change depending on its size, the complexity of the estate and the nature of the assets involved. Whilst there are a number of arrangements for organising family wealth management, one of the most popular schemes is to set up a fund to invest directly and privately in selected assets.

A fund that has been set up to invest in selected assets, with the purpose of achieving high gains for its investors may very well be considered as a regulated private fund, and therefore the management of that fund may be subject to Thai securities regulations.

In general, private fund management in Thailand is regulated by the Securities and Exchange Act B.E. 2535 (1992) (as amended) (the SEC Act) Unless otherwise permitted by the relevant regulations, the management of private funds with the following characteristics will generally be subject to the SEC Act:

Considering the above, in order to decide whether the management of the fund of a wealthy family is subject to the SEC Act, it is the  definition of what is considered as the ordinary course of business that is particularly crucial. 

The ordinary course of business of a regulated private fund consists of two main elements: (i) the act of solicitation and (ii) the act of holding itself out as a service provider or business operator. The interpretation of the definition of solicitation by the Securities and Exchange Commission (the Thai SEC) is broad in order to have extraterritorial jurisdiction over solicitation with elements involving targeted investors in Thailand, which is not limited by the number of investors ie, only two targeted investors could fall under the definition of solicitation or whether the investment is made in or outside Thailand. However, implementation of the SEC Act and other relevant regulations by the Thai SEC is still limited to claims that comes to their attention.

In accordance with the Thai regulatory perspective explore above, the Thai SEC tends to view funds that have been set up with the purpose of family wealth management to not be subject to the SEC Act because they lack the ordinary course of business criterion.

Generally, the portfolio for wealth management in such funds is mostly limited to private assets such as family businesses, private equity, venture capital and real estate of the family rather than being built through actively seeking out or soliciting investment from prospective investors.

Mostly, wealthy families tend to delegate a family member to manage the families wealth (the Manager) Thus, the Manager will manage the fund for the ultimate purpose of family wealth management and for their own benefit. It could be argued that this does not constitute the ordinary course of business of a regulated private fund because the nature of the management is the protection of the best interests of the Manager and their family assets and not holding itself out to provide the service to others outside the family. It is worth noting that the Thai SEC narrowly and conservatively interprets the definition of family.

In conclusion, even though a wealthy families fund management may have certain similarities with that of the management of a regulated private fund under the SEC Act, the extent to which wealthy families keep their funds within the family and refrain from managing them in a way that could be construed as the ordinary course of business may result in such an operation not being categorised as a regulated private fund under the SEC Act.