The Securities and Exchange Commission (SEC) is preparing to ban Thai investors from trading non-voting depository receipts (NVDRs), aiming to close an avenue for fraud in the capital market following the More Return Plc (MORE) case.
SEC secretary-general Pornanong Budsaratragoon said during an interview with the Bangkok Post the ban was endorsed by the SEC's Capital Market Supervisory Board and will be announced later.
NVDR, a trading instrument initiated by the Stock Exchange of Thailand (SET), allows foreign investors to invest beyond the foreign ownership limit. The NVDRs are themselves listed securities on the bourse.
Foreign investors holding NVDRs are eligible to receive benefits, such as dividends, rights issues and warrants, in the same manner as if they invested in an ordinary share. However, they have no right to vote at company shareholders' meetings.
The MORE case is considered a misuse of NVDRs, she said. The regulator will order this channel to be closed to Thai investors, allowing only foreign investors to trade using this instrument, said Ms Pornanong.
In November last year, the SET found MORE stocks had been bought and sold through the NVDR channel during the first two weeks of the month for at least 3.17 billion baht.
The transactions caused widespread damage because investors who bought MORE shares did not settle payment within two working days as required.
Although NVDRs have the objective of facilitating foreign investment, they previously did not prohibit Thai investors from using this channel. Very few Thais traded NVDRs because they can fully trade via the SET main board with no limits on shares.
MORE is a small stock that normally does not appeal to foreign investors.
Ms Pornanong said the SEC might consider changing the period for investors to settle their security transactions. The current period is within two business days (T+2), which may drop to only one business day (T+1), or payment the same day the transaction is made (T+0), she said.
"Most trading orders can be settled within one day, which would make the Thai market more efficient. But trading that involves foreign investors from different time zones would be more difficult. The SEC needs to look into all aspects," said Ms Pornanong.
"As long as we are not trading stocks using the blockchain system, we still have an intermediary securities company. Therefore, the T+2 settlement system, which is similar to the bond market's, is probably still needed, but in the future it will be quicker, in line with the global market trend."
As for the perpetrators in the MORE case, legal investigations are proceeding, she said.
In terms of law enforcement, the SEC needs to enhance its authority to proceed as a market regulator more efficiently, said Ms Pornanong.
The SEC currently hands over cases for further investigation to related agencies, such as the Department of Special Investigation and the Anti-Money Laundering Office.
In the long term, the SEC Act should be amended to provide investigative powers, with completed probes sent directly to a prosecutor, who decides whether to proceed with filing a lawsuit in court, she said.
This change would shorten the procedure and empower the SEC to work more efficiently in the long term, said Ms Pornanong.