Trading laws too soft

Trading laws too soft

The statement from CP All Public Company announcing the decision of its audit committee and independent directors made last Thursday to retain the positions of its four executives, including chairman Korsak Chairasmisak, tainted with insider trading convictions by the Securities and Exchange Commission is a big letdown and a scandal in itself.

As the country's largest convenience store chain with its ubiquitous 7-Eleven brand name, the inaction decision goes against public expectations that the company should show accountability to restore trust and confidence of the public and investors.

Although the Securities and Exchange Commission (SEC) deserves praise for not letting insider trading go unpunished, it needs to clarify why it has only imposed fines on the four CP All executives of a total of 33.34 million baht and spared them criminal charges.

The CP All statement to protect its executives reads, in part: "After reviewing the facts and taking into consideration the SEC punishment and the prior behaviour and performance of the individuals and their exceptional skills and experience, which would be difficult to replace, while balancing these factors with the overall effects and benefits to the company, as well as ensuring that this situation can never happen again, we have decided that it is appropriate for the individuals to continue in the business."

The company has promised to set up a corporate governance committee to improve its existing corporate governance system. 

While its response to the insider trading scandal leaves much to be desired, the Association of Investment Management Companies should be lauded. It has been pressuring CP All to show accountability without fear and favour. The association plans to request CP All's directors to review their stance amid growing calls from foreign investors for stronger insider trading laws and give the SEC more authority to remove guilty executives rather than leaving it to their companies' decision.

According to the law, those involved with insider trading face a maximum two-year jail term and a fine of up to two times the profit gained or both.

The weak law compounded by weak enforcement may explain why only a few cases of insider trading made it to the court, letting many offenders off the hook. According to SEC records, only three major cases were brought to courts while the other cases were settled by fines with the SEC, including the CP All insider trading case.

The latest insider trading episode which involved CP All's top executives should serve as a catalyst. The SEC law should be amended to increase civil and criminal penalties to prevent executives in listed companies from using insider information for personal gains. Stricter law and punishment is necessary to protect investors, shareholders and the stock market's credibility itself.

In the United States for instance, the maximum jail term for insider trading is 20 years or fines up to three times the profits gained from the illegal deal. According to The Wall Street Journal, the median jail sentence from 2009 to 2011 was 30 months for insider trading. The Justice Ministry and local US attorney's offices have the authority to bring criminal prosecution against the culprits.

Like corruption, insider trading amounts to public fraud as it involves trading of a public company's stock. Therefore, it should be treated accordingly. This requires stricter law and legal enforcement to safeguard investors.

Editorial

Bangkok Post editorial column

These editorials represent Bangkok Post thoughts about current issues and situations.

Email : anchaleek@bangkokpost.co.th

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