"Widening investment options will help them boost earnings because mutual fund operators now have massive retained profits and cash flow," said Duangmon Chuengsatiansup, SEC's director of investment management supervision.

Mutual fund firms are already allowed to invest their liquidity in short-term debt instruments and deposits.

The equities and bonds must be held for at least one year, she said.

If fund managers cannot meet the minimum holding requirement, they need to obtain approval from their board of directors and must report to the SEC within five days after making the transactions.

The SEC also issued criteria concerning management of conflicts of interest and the improvement of transparency.

Transactions among funds under each mutual fund management company must be approved by the SEC, and trades where no market prices exist to serve as a benchmark, must get the nod from custodians or clients first.

The SEC's permission ahead of investment is also required.

The securities watchdog revised regulations to broaden investment alternatives for private and provident funds.

"The amendment is to allow them to have more alternatives in revenue sources while balancing their risks to fit better with each type of mutual fund. For instance, private and provident funds are allowed to invest in futures and structured notes," she said.

Private funds can also engage in short sales and stock borrowing-and-lending. Foreign investment funds are now permitted to buy domestic short-term debt instruments, but only for liquidity management purposes.

SEC assistant secretary-general Pravej Ongartsitigul said the SEC is willing to encourage insurers and brokers to invest more to serve the forthcoming Deposit Insurance Agency (DIA).

Following the DIA's setup, more money is expected to flow into mutual funds. The country has 18 mutual fund companies.

To attract capital from the Middle East, the SEC is supporting the Stock Exchange of Thailand in creating an Islam index and the SEC has already signed a cooperation agreement to exchange information, she said.

Siriporn Chanjindamanee

The Nation