SEC: Law amendments needed to stamp out securities crimes

SEC: Law amendments needed to stamp out securities crimes

Thailand's securities laws need to be changed to close enforcement loopholes, according to Vasant Thienhom, deputy secretary-general of the Securities and Exchange Commission.

He singled out three aspects of the enforcement process that need to be changed: the lengthy time required now for the investigative process; the multiple steps involved in enforcement; and the lack of civil penalties under the law.

In the past, an investigation into a share-manipulation or insider-trading case could take as long as 2-3 years. Improved technology, better co-ordination among state agencies and greater understanding of the SEC Act have helped shorten the time to 18 to 24 months, an improvement from the past but still a relatively long period.

Mr Vasant said the growing complexity of securities crimes was another complication to enforcement.

"Take share manipulation for instance. The current law is relatively restrictive in the definition of traders acting in concert. Violators aren't necessarily limited to family members or relatives, but in practice groups of people who act in a collaborative manner," he said.

The investigation process is only the first step of the legal process in prosecuting securities crimes. Evidence is then submitted to the Department of Special Investigation for review, before the case is forwarded to the Attorney-General's Office. Only when prosecutors agree to file the case with the Criminal Court are the wheels set in motion, a process that could take up to 10 years before a final ruling is reached.

Undermining the enforcement process is the fact that each law-enforcement agency may not share the same views as the SEC's. They may also interpret the same laws differently, weakening the validity of the cases.

The Office of Justice Affairs is considering a change in the enforcement process that would treat the initial SEC complaint as the primary one, which would help reduce the time required for prosecution. The DSI is now responsible for drafting the case for the prosecutors, based on evidence and the initial complaint developed by the SEC.

Mr Vasant said if the SEC's complaint can be used as part of the final case, without the need for duplicate work, it should help expedite the enforcement process, which in turn will strengthen deterrents against potential lawbreakers.

Adding civil penalties to the SEC Act would also be a strong advancement, and help bring Thailand's securities law on par with those in other countries.

The SEC Act now prescribes only criminal penalties, which involves a significantly longer process than civil ones. The Finance Ministry is therefore considering an amendment to the law.

Another change underway is to allow victims of certain crimes, such as false reporting, management fraud or other violations to file claims for redress under other laws, such as the labour or environmental laws. A draft law is under review by the Council of State.

Mr Vasant said the launch of the Asean Exchange Linkage this August with the Malaysian and Singaporean stock exchanges is another factor pushing the need for legal reform.

The Thai SEC Act, for instance, defines insider trading as the incidents where company management, directors and their families use privileged information for personal gains. In contrast, the securities laws in other countries consider insider trading to be the use of privileged information by any party for gains.

Mr Vasant said among securities brokers, violations are common, the most typical being missing records tracking conversations between marketing staff and investors discussing trade orders.

The SEC plans to be more forthright in identifying brokers whose staff have their licences suspended for rule violations, part of a "social sanction" policy.

Over the past two months, 54 cases of violation were found by the SEC, most involving failure to maintain records of trading orders but also including a handful of fraud cases and other code of conduct violations.

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