The establishment and launch of the CIS market in Cambodia has undergone carefully planning and consideration, based on the efforts of the Securities and Exchange Regulator of Cambodia (SERC) through research and experience from other countries and the International Organization of Securities Commissions (IOSCO), and based on the roadmap of the “Financial Sector Development Strategy 2011-2020”, which was updated to the “Financial Sector Development Strategy 2016-2025” of the Royal Government of Cambodia under the wise leadership of Samdech Hun Sen, former Prime Minister of the Kingdom of Cambodia, and is currently being updated to the “Financial Sector Development Strategy 2021-2030”.
SERC, under the leadership of His Excellency Dr. Aun Pornmoniroth, Deputy Prime Minister, Minister of Economy and Finance, and Chairman of the Non-Bank Financial Services Authority, has been working diligently to continue to prepare the necessary regulations for not only the successful launch of the CIS project market, but also to ensure that the CIS business is conducted in a transparent, accountable, safe, efficient and fair manner, with the goal of protecting the interests of public investors and making this CIS market able to provide a strong and sustainable contribution to the development of the financial sector as well as the national economy as a whole.
In fact, with the active efforts of the SERC and with the active participation of the private sector and development partners, regulations related to the CIS business have been approved and implemented continuously, while some regulations have been actively prepared by the SERC.
Regulations for CIS business
In accordance with Prakas No.003/18 SERC on Licensing and Collective Investment Scheme Business Supervision dated May 29, 2018, CIS must be approved by the SERC and have the following characteristics:
I. Collecting cash or valuables through the issuance of fund units or through electronic systems, including crowdfunding, or in other forms approved by the SERC to establish a public fund, private fund, or real estate investment fund.
II. All cash or valuables collected are used and managed by the fund management company in CIS to generate financial returns or returns that come as rights or benefits on assets for members who have interests in the CIS, even if the members do not control the daily operations of the CIS.
III. The assets of the CIS must be held by trustee that operates on behalf of the CIS.
IV. CIS can be an open-ended fund or a closed-ended fund.
V. CIS can be managed in the form of contracts or companies.
The business operations in the CIS market involve several key players such as fund management companies, trustees, fund distributors and fund administrators. Currently, SERC has issued licenses and/authorisation to all players involved in CIS market and launched this market at the end of 2023.
Definitions of operators in the CIS market
I. Fund management company: Establishes and manages the funds to invest with clear and professional analysis to maximise profits for the funds at an acceptable level of risk, and those investment schemes shall be approved by the SERC.
II. Trustee: An independent company that has no interest or relation with the fund management company, it is responsible for monitoring the fund management company to ensure their operations are in accordance with the laws and regulations in force and representing the legal ownership on assets of investment.
III. Fund distributors: Refers to a company that is licensed/authorised by the SERC to conduct the following fund distribution business:
a. Distribute, redeem or settle fund unit of the collective investment scheme.
b. Advise on fund unit investment to investors.
IV. Fund administrator: Refers to a company that is licensed/authorised by the SERC to provide the following services:
a. Transfer the ownership of fund unit.
b. Calculate the property of investment.
c. Evaluate the net asset and pricing of fund unit.
Investor protection for CIS businesses
The SERC is the authority responsible for managing, supervising, and developing CIS business in the Kingdom of Cambodia.
Investor protection for CIS businesses is a primary task and priority that the SERC attaches the highest importance to. The laws and regulations in force for CIS businesses set out several mechanisms to protect investors in CIS, including a legal framework to manage and supervise participants in CIS business, and continuing to monitor and supervise the business operations and service provision of all participants in CIS business.
Many laws and regulations have been prepared and promulgated to regulate players in CIS business. No legal entity or individual is permitted to conduct business or operate in the CIS business without having adopted the laws and regulations in effect.
In addition to the Law on Issuance and Trading of Non-Government Securities and the Sub-Decree on the Implementation of the Law on Issuance and Trading of Non-Government Securities, the SERC has prepared many regulations with the aim of regulating all players in the CIS business and other participants in the CIS business to ensure efficiency, transparency, accountability and order in the market and, in particular, to ensure the protection of public investors.
Members of the public can find all these Prakas on the SERC website at https://www.serc.gov.kh/khmer/m23.php?pn=3.
The regulations in the CIS business stipulate several requirements for granting licenses/authorisation from the SERC in order to conduct business operations and provide services in the CIS business, such as financial requirements, management structure, human resources, technology systems, location, requirements on shareholder capital levels, business guarantee deposits and governance, and so on.
In particular,authorisation from the SERC must be requested before establishing a fund unit. The SERC conducts a thorough review of all the above requirements before granting licenses/authorisation.
After a license/authorisation is granted, the SERC will continue to monitor the compliance with laws and regulations related to all participants through on-site inspections on operational efficiency, compliance with licensing requirements, code of conduct and regular reviews reporting whether there are any violations that affect the interests of public investors.
In addition, currently we see that there are many scams happening all over the world. In the Kingdom of Cambodia, these issues also occur, which affects market confidence.
The SERC pays close attention and cooperates closely with relevant authorities to prevent this issue.
On March 14, 2024, the SERC issued a joint statement with the General Commissariat of National Police of the Ministry of Interior to remind the public to be very careful about advertisements that attracted to make illegal and fraudulent investments online.
On September 5, 2024, the SERC issued a joint statement with the Telecommunications Regulator of Cambodia to take measures to block websites, social media and other telecommunications networks that advertise securities without a license or authorisation from the SERC.
Therefore, investors must clearly understand legal investments through companies licensed by the SERC by being able to find a list of those companies on the SERC's official website, as well as reporting companies that do not have a license or authorisation to the SERC via the SERC's official phone number, email and Facebook.
At the same time, in order to promote publicity and awareness, the SERC created a Telegram Channel called “Securities and Exchange Regulator of Cambodia (SERC) and All About the Securities Sector” to disseminate knowledge and the latest news related to SERC and Securities Sector, and a Telegram Channel SERC Alert to disseminate knowledge and remind investors and the general public to be careful of scams.
***Disclaimer: This article has been compiled solely for informative and educational purposes. It is not intended to offer any recommendations or as investment advice. The SERC and Phnom Penh Post are not liable for any losses or damages caused by using it in such a way.
Prepared by៖ SecuritiesandExchangeRegulator of Cambodia
Securities Intermediaries Supervision Department
Email៖ [email protected]
Telephone៖ 023 855 611
