Nov. 4--Securities regulators have launched new regulations aimed at helping retail investors better understand the potential risks of mutual funds.

Thirachai Phuvanatnaranubala, the secretary-general of the Securities and Exchange Commission, said the Association of Investment Management Companies have agreed to support the new rules as a means of simplifying information for investors.

Mr Thirachai said given the growing complexity of the financial markets and fund products, it is vital that investors understand potential risks.

Under the new rules, asset management companies will help classify the potential risks of a fund in an eight-step scale. Sales agents will be responsible for explaining the potential risks involved of each fund, with investors obliged to sign disclaimers stating that they understand the risk level before making an investment.

For money-market and fixed-income funds that permit daily redemptions, fund managers must manage investment assets to ensure sufficient liquidity to cope with redemptions. Fund managers must also ensure that investments are in top-quality bonds with suitable durations, and for foreign investments, full hedging against currency risk is required.

AIMC chairwoman Voravan Tarapoom said the rules were expected to be finalised by the first quarter of 2010.

"We will have to discuss how to standardise risk-measurement procedures. Each company has a different set of indicators," she said.

Mrs Voravan, also managing director of BBL Asset Management, said the rules were in line with the basic principle of "know your client", including their risk profile and investment goals.

"If [fund managers] understand the risk level that investors can accept, then one can make the right recommendations and help reduce any misunderstanding in communications," she said.

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