Insurance and Consumer Protection Law

       · Escrow Account Act

Escrow Account Act B.E.2551 prescribes an “intermediary” also called “escrow agent” to assume the task of ensuring debt obligation settlement in line with terms agreed in a bilateral contract. The context of Act is that plenty of reciprocal contracts for “agreement to purchase a property” had been carried out mainly on the basis of mutual trust and credibility between the contractual parties. [A party to the contract has the obligation to transfer or deliver the property or document which is the debt security, and the other party to the contract has the obligation to pay the sum specified in the contract.]  In cases where one of the contractual parties does not meet agreed terms, the entire trading system could grind to a halt, affecting the entire economy. The gist of the Act is summarized below.

1. In entering into any reciprocal contract, parties to the contract may mutually agree to appoint an “escrow agent,” on a voluntary basis.

2. Financial institutions and other juristic persons as specified by the Ministerial regulation can apply for an Escrow Agent License. Initially, such licenses would be granted exclusively to financial institutions to fulfill the functions assigned by the Act because of their credibility and financial security. In the future, should other juristic persons emerge prepared, as credible and secure as financial institutions, and should the escrow account system prove to be in demand, the Ministry of Finance will consider issuing ministerial regulation authorizing other juristic persons to apply for such business license. 

3. The Minister of Finance is the competent authority in enforcing this Act and has the authority to appoint officers, issue ministerial regulations and relevant announcements.

4. The Act prescribes a regulatory commission for escrow account affairs, with the Permanent Secretary for Finance serving as the chair, membership comprising Director-General of the Land Department, Director-General of the Fiscal Policy Office; representative of the Office of the Consumer Protection Board, Bank of Thailand and a maximum of five other experts (specializing in finance, accounting, tax, law, consumer protection and asset sales) appointed by the Minister. The Commission is tasked with issuing relevant announcements and offering advice to the Minister of Finance relating to those announcements to supplement the act. The Permanent Secretary for Finance appoints Ministry of Finance bureaucrats to serve as the secretary and assistant of the commission, with the Fiscal Policy Office acting as the Commission’s secretariat.

5. The Act forbids any individuals other than Escrow Agent of the contractual parties to use or display professional title of “Escrow Agent,” or any other terms that carry similar meaning in business conduct.

       · Deposit Protection Agency Act B.E.2551

The intent of the Act is to promote savings among the general public and in conformity with the conduct of fiscal policy and national development strategies to ensure that protection of retail depositors is efficient and meeting objectives and to maintain stability of the financial institutions system.

The Act aims at setting up an organization to replace the Financial Institutions Development Fund (FIDF) whose mandate and function are limited, and to boost the public confidence in savings. The Act prescribes the formation of a deposit protection agency that guarantees money deposited in member financial institutions. The agency is also in charge of handling problematic members, settling account obligations, among others, in order to enhance security of the financial institutions system.

       · Life Insurance Act B.E.2535

Aims to regulate and define criteria of life insurance business and to ensure its efficiency.

       · Casualty Insurance Business Act B.E.2535

In order to regulate and define criteria of casual insurance business and to ensure its efficiency.

       · Insurance Commission Act B.E.2551

To set up an Insurance Commission to regulate the insurance business and to protect the right of insurers.

       · Car Insurance Act B.E. 2535

To enable those affected by car accidents to be compensated and to be paid for damages fairly and promptly.
 
   Savings and Investment Law

        · Securities and Exchange Act B.E.2535

Aims to regulate securities trade, by legislating a Securities and Exchange Commission and Office of the Securities and Exchange Commission; to define rules for initial public offering of stock, to define criteria for securities brokers, and to set up the Stock Exchange of Thailand.

       · Provident Fund Act B.E.2530

The Act has the objective of promoting setting up of provident fund on a voluntary basis by the employer and employee, for the fund to serve as welfare upon employees’ resignation, and to encourage savings mobilization from the private sector. The Act sets out operational principles and management in order to ensure that the Fund is secure and beneficial to employees, to provide assurance in case the employees die, resign from their jobs or resign from the Fund.

       · Derivatives Act B.E.2546

Aims to regulate trading of derivatives, and prescribes a futures exchange and define criteria for those operating the futures trading.

       · Royal Enactment on Special Purpose Juristic Persons for Securitization B.E.2540

Certain sections in the law do not conform with current securitization transactions, and pose obstacle to the development of securitization business, as well as lacking in certain sections to foster development of such transaction. It is therefore amended on the following points:

1. Amend and add clearer definition and coverage of securitization in various types.

2. Legalize the transfer and receipt – in that such transaction means to provide security and to receive security.

3. Improve various sections to accommodate the fact that special purpose juristic persons can set up trust.

4. Require that special purpose juristic persons and their debtors jointly define interest rates to be calculated from the asset, in case where interest rate calculation is not possible under the original formula. And in case a special purpose juristic person and its debtor cannot agree mutually to a rate, they will use the rate announced by the Office.

5. Mandate the Minister who is the competent officer under the bankruptcy law, with advice of the Securities and Exchange Commission, to define the characteristics of asset transfer that does not actually constitute a transfer and which is a fraudulent act causing disadvantage to the creditor as defined in the bankruptcy law.

6. Repeal the requirement for the asset holder of the special purpose juristic persons as creditor with preferential right over asset transferred previously from other creditors, and add a new dimension allowing special purpose juristic persons to receive the right over disputed asset that is a case pending in court.

7. Legalize the right of special purpose juristic persons to be protected in compulsory performance over cash flow arising in the future from asset posted as security, regardless of whether the claim takes place before or after the security provider goes bankrupt.

       · The Trust for Transactions in Capital Market Act B.E.2550

Trust for transactions in the capital market serves as an instrument to enhance the efficiency and potentials of transactions in the capital market. Currently, certain types of transactions in the capital market are already applying the principle of a trust, but its applications were constrained within the old legal framework. In addition, the existing legal framework was not conducive to allowing trust to function to its maximum efficiency, and with the type of flexibility required. There was thus a need for a specific law on such trust.

Trust is a legal fiduciary relationship, formed out of trust between the individual known as “trustor” who transfers or creates ownership or rights to asset, for the “trustee” to manage the asset for the benefit of “beneficiary.”

Creation of a trust: A trust can be founded with the intent of the “Trustor” with clearly defined “Beneficiary,” as well as asset in trust. All these materialize in the form of a written contract between the Trustor and the Trustee, and a trust is only completed when the Trustor has transferred the rights to asset to the trustee.

Qualification of the Trustor, Trustee and Beneficiary: The Trustor and the Trustee must be juristic person by legal definition. A Trustee must be a juristic person authorized by the Securities and Exchange Commission to function as a Trustee. The “beneficiary” can either be an individual or a juristic person. Moreover, the Trustor and the Trustee may be the same entity, with Trustor required to express the intent to found a trust in writing.

Role of the Trustor : Once the process of creating a trust is completed, the Trustor has no contractual obligation with the Trustee or the beneficiary, except in cases where a contract explicitly defines the role and responsibility.

End of Trusteeship: The Trustee duty ends in one of the following advents:  resignation, dismissal in line with terms specified in the contract, or by court order, ordered suspended or dismissed by the SEC Office and the competence of the Trustee ends. Once the trusteeship ends, it has no consequence upon the trust founded, but it can be used as ground to switch the Trustee.

 Regulation of Trustee involves two aspects:

1. Regulation of financial credibility, by requiring asset to be posted as security to vouch for the credibility.

2. Regulation of credibility and trust in conducting the business, with the Act legislating a number of measures to this effect such as qualification of the Trustee’s board and management, requiring the Trustee to provide trust management policy and record of the Trust asset management along with rationale and justification; and control over operations of Trustee employees.