The Securities and Exchange Commission (SEC) is preparing to launch a second round of public hearings on stricter margin loan regulations amid concerns that some brokerages have allowed misuse of margin credit for non-investment purposes.
Surasak Ritthongpitak, assistant secretary-general of the SEC, said the regulatory amendments will likely prohibit securities firms from issuing margin loans that are used for purposes unrelated to stock market investment.
The new rules are expected to take effect in the third quarter this year.
"Margin loans are intended to help investors enhance their positions in capital markets by pledging securities as collateral," said Mr Surasak.
"However, we've found some firms are allowing clients to use the borrowed funds for non-investment activities, which violates the fundamental purpose of margin lending."
If securities are pledged and the funds are used for other personal or business uses, it essentially becomes a personal or multi-purpose loan, which only licensed financial institutions can provide, as authorised by the Bank of Thailand, he said.
The SEC conducted the first round of hearings about margin loans in February and is revisiting some areas of concern.
"The second round will refine key aspects to ensure more robust risk management practices among securities firms," said Mr Surasak.
He acknowledged the proposed tightening of rules may significantly impact securities businesses, especially at a time when market conditions are unfavourable.
Brokerages are concerned stricter loan limits could reduce revenue and force clients to scale back their margin portfolios.
While some of the new measures may be enforced in the third quarter this year, others will allow firms more time to adapt, said Mr Surasak.
The total outstanding value of margin loans as of the end of April was roughly 62 billion baht, according to the SEC.
Earlier this year, the regulator adjusted margin loan requirements, including changes to initial margin levels for initial public offering stocks, alignment of credit limits with brokers' financial conditions, concentration limits on client collateral, and credit risk assessments.
The SEC also removed mutual funds from the list of marginable securities and disqualified them as collateral for both margin loans and securities borrowing and lending transactions, citing systemic risks that could trigger widespread forced sales of fund units.
Furthermore, brokers are now required to verify that margin credit is used solely for securities trading.
Mr Surasak said the SEC conducted several investigations into naked short selling, the practice of selling shares without owning them first, but found no violations.
A recent incident involving a broker was due to a system error and involved an insignificant volume of shares, he said.
A centralised platform known as the Security Bureau is being developed to allow brokers to track margin loans across firms, said Mr Surasak.
The system, in collaboration with the Association of Securities Companies, is expected to start on Feb 1, 2026.