Insider trading: Tougher laws needed

Insider trading: Tougher laws needed

30 months in jail typical punishment for insider trading in US, not just fine that only takes away illegal profits as in Thailand. Action needed before Thai stock market destabilised, foreign investor confidence destroyed & small investors ruined.

STOCK MARKET & CRIME

Insider trading: Tougher laws needed

23/12/2015
Tippatrai Saelawong

BIG SCANDAL IN THE STOCK MARKET

Recently, Thailand was hit by a big scandal in the stock market.

On Dec 2, the Securities and Exchange Commission (SEC) imposed a fine of 33.4 million baht on four CP All top executives for insider trading involving Siam Makro.

The case occurred in April 2013 during the negotiation phase between CP All and the Dutch trading company, SHV Holdings NV, in the takeover deal of Siam Makro.

CP All offered to pay 787 baht a share for the acquisition of a 64% equity share in Siam Makro, a premium over the market price at the time.

According to the SEC's investigation, the four CP All executives, including the chairman and two vice-chairmen, bought Makro shares at a price of approximately 500 baht a share during the period from April 10 to 19, 2013 before the public announcement of the deal from April 22 to 23, 2013.

The SEC accused the exectives of exploiting inside information to make a profit for themselves.

PRIVATE SECTOR CORRUPTION

Fighting against corruption does not only mean fighting against the embezzlement of public funds or the lack of public governance.

Fighting against the lack of governance and corruption in the private sector is also important.

The private sector is pivotal to the economic development of the country.

Corruption in the private sector can damage confidence of investors and entrepreneurs and increase the risks and costs of doing business.

THAI PENALTIES FOR INSIDER TRADING

In Thailand, insider trading can lead to penalties of a jail term not exceeding two years or a fine of up to two times the profit gained, or both.

Thailand Development Research Institute (TDRI) president Somkiat Tangkitvanich said the fines imposed by the SEC represent only 1 to 1.25 times the profit earned from the deal.

The regulator did even not file criminal charges against the offenders.

WHAT ABOUT PREVIOUS CASES?

Have insider traders got off this lightly in the past?

Records show during the period 2011 to 2014, the SEC uncovered one to four insider trading cases a year. Most wrongdoers faced only financial penalties. In 2014, 13 individuals were fined a total of only 31 million baht.

In fact, today's Bangkok Post editorial (24/12/2015, see here) notes, "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."

WIDESPREAD BECAUSE WORTH TAKING THE RISK

Experienced investors believe this illegal practice is widespread in the Thai stock market as returns from a violation are high while sanctions are mild, making it worth taking the risk.

The SEC law and its enforcement are still not vigorous and thus cannot deter insider traders from gaining huge profits in the Thai stock market.

The problems come from two weaknesses.

THAI PENALTIES MINIMAL

First, monetary penalties and criminal charges in Thai regulations are still minimal compared to those found in other countries.

In the US and Japan anyone caught involved in insider trading faces 20 years in jail or fines of up to three times the profits gained from the deal. Chinese law allows for fines up to five times of the ill-gotten profit.

Today's Bangkok Post editorial notes that, "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."

THAI PENALTIES NOT CONSISTENTLY APPLIED

Second, the SEC's sanctions are not sufficiently clear and transparent to both investors and the general public.

In the past, some insider cases faced criminal charges while others did not. Some faced stiffer fines than others. This may send a strong signal to insider traders that they may be able to get off with a small fine and avoid criminal sanctions.

MORE SEVERE PUNISHMENT FOR DETERRENCE

It may be time for the SEC to reconsider amending its law to allow more severe criminal punishment and monetary penalties, and making its enforcement decisions more transparent to dissuade future violations.

The SEC should act now before the practice becomes more widespread to the point that it destabilises the Thai stock market, destroys foreign investors' confidence and ruins small investors.

Tippatrai Saelawong is a researcher at Thailand Development Research Institute (TDRI). Policy analyses from the TDRI appears in the 'Bangkok Post' on alternate Wednesdays.

http://www.bangkokpost.com/opinion/opinion/803560/insider-traders-get-a-smack-on-the-wrist

http://www.bangkokpost.com/opinion/opinion/804828/trading-laws-too-soft

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Vocabulary

  • according to (prep): as stated or reported by somebody/something - ตามคำบอกเล่า, ตามรายงาน
  • accused: to be said to have done something wrong or committed a crime - ถูกกล่าวหา
  • acquisition: the process of buying something; something that has been bought - การซื้อ, การได้มาซึ่งการเข้าถือสิทธิ์
  • amend: to make changes to a document, law, agreement, etc. especially in order to improve it - การแก้ไขกฎหมาย
  • announcement: a spoken or written statement that informs people about something - การประกาศ
  • approximately: used to show that something is almost, but not completely, accurate or correct - โดยประมาณ
  • authority: power - อำนาจ
  • believe: being fond and think of something to be right and will follow it - เชื่อใจ,ศรัทธา
  • case: a matter that is being officially investigated or heard by a court - คดี
  • chairman: the person in charge of a committee, a company, etc - ประธาน
  • charge : an official statement accusing someone of committing a crime - ข้อกล่าวหา
  • clear (adjective): easy to see and understand - ชัดเจน
  • compare (verb): to show or state that somebody/something is similar to somebody/something else - เปรียบเทียบ
  • confidence: being certain of your abilities or of having trust in people, plans, or the future - ความมั่นใจ
  • court: the place where legal trials take place and where crimes, etc. are judged - ศาล
  • criminal: relating to illegal acts - เกี่ยวกับอาชญากรรม
  • culprit: someone who has done something wrong - ผู้กระทำความผิด
  • deal (noun): a formal agreement, especially in business or politics - ข้อตกลง, การตกลงซื้อขาย, การซื้อขาย
  • destabilise (verb): to make a system, country, government, object etc. become less firmly established or successful - ทำให้ไม่มั่นคง
  • deter: to make someone decide not to do something - ขัดขวาง, ยับยั้ง, ป้องกัน
  • deterrence: a thing that makes somebody less likely to do something (= that deters them) - การยับยั้ง,การกีดขวาง
  • development: the gradual growth of something so that it becomes more advanced, stronger, etc - การพัฒนา
  • dissuade: to persuade someone not to do something - ชักชวนไม่ให้ทำ,ห้ามปราม
  • editorial: a newspaper article in which the editor gives their opinion on an issue in the news - บทบรรณาธิการ
  • embezzlement: the crime of secretly taking money that is in your care or that belongs to an organisation or business you work for - การยักยอกเงิน, การฉ้อโกงเงิน
  • enforcement: the process of making sure that something happens, especially that people obey a law or rule - การบังคับใช้กฎหมาย
  • entrepreneur: someone who starts their own business, especially when this involves risks - นักลงทุนทางการเงิน
  • equity: the value of a company’s shares - กรรมสิทธิ์หุ้นส่วนในบริษัทห้างร้าน
  • exceed: to be more than something; to go beyond a limit - เกินกว่าที่กำหนด
  • executive: a senior manager in a business or other organisation - ผู้บริหาร
  • experienced (adj): having knowledge as a result of doing something for a long time, or having had a lot of different experiences - ซึ่งมีประสบการณ์, ชำนาญ
  • exploit: to use unfairly for your own benefit - เอาเปรียบ, หาประโยชน์ใส่ตัว
  • file: to take official action like making a complaint - ยื่น, ยื่นคำร้อง
  • financial: involving money - เกี่ยวกับเงิน, ทางการเงิน
  • fine: an amount of money that you have to pay because you have broken the law - ค่าปรับ
  • fine (line) (noun): a difficult or dangerous situation where you could easily make a mistake -
  • for instance: for example - ตัวอย่างเช่น
  • funds: money needed or available to spend on something - เงินทุน
  • gain: to obtain or win something, especially something that you need or want - ได้รับ
  • general public: people in general - ประชาชน, สาธารณชน, มหาชน
  • got off lightly: almost no punishment for crime; light punishment for wrongdoing -
  • governance: the activity of governing a country or controlling a company or an organisation; the way in which a country is governed or a company or institution is controlled - วิธีการปกครอง
  • holding company: a company that is formed to buy shares in other companies which it then controls - บริษัทผู้ถือหุ้นใหญ่หรือเป็นเจ้าของหุ้นใหญ่ในบริษัทอื่น บริษัทที่ถูกจัดตั้ง ขึ้นมาเพื่อซื้อหุ้นของบริษัทอื่น
  • holdings: the stock shares and part ownership in a company that someone owns or "holds" -
  • huge: very large - ใหญ่โต
  • ill-gotten (adj): of money or property that someone obtained in an illegal or dishonest way - โดยทุจริต, โดยมิชอบด้วยกฎหมาย
  • illegal: against the law - ผิดกฎหมาย, นอกกฎหมาย
  • impose: to introduce something, such as a new law or new system and force people to accept it - นำกฎหมายมาบังคับใช้
  • individual: a person considered separately rather than as part of a group - บุคคล
  • inside information (noun): information about a company that only people "inside" the company (insiders) such as high-level managers know about and can use to profit by selling and buying stock shares of the company -
  • insider trader: a person who buys or sells stock to profit from special "inside" information that other people do not have -
  • insider trading: illegally buying or selling stocks based on information not available to the public -
  • investigation: the process of trying to find out all the details or facts about something in order to discover who or what caused it or how it happened - การสอบสวน, การตรวจสอบหาข้อเท็จจริง
  • investor: a person or organization that invests money, i.e., uses money with the aim of making a profit from it, for example by buying property or buying shares in a company - นักลงทุน
  • involved (verb): taking part or having a role in something - เกี่ยวข้อง, มีบทบาท
  • jail (noun): a prison - เรือนจำ, ห้องขัง, คุก
  • jail term: the length of time a person is required to spend in jail -
  • Justice Ministry (noun): The ministry in charge of the criminal justice system in Thaialnd. As well as running prisons and aiding the Royal Thai Police, the ministry also run the government's drug and narcotic control policies - กระทรวงยุติธรรม
  • lack of: when there is not enough of something - ขาด
  • major: very large or important - สำคัญมาก
  • market price (noun): a price determined by supply and demand and people buying goods in a market -
  • maximum: the most possible - ที่สูงสุด ที่มากที่สุด
  • median (adj.): having a value in the middle of a series of numbers; a measure of where the middle is or what is normal or usual (measure of central tendency) - จุดกึ่งกลาง, ตรงกลาง, ค่ากลาง (ทางคณิตศาสตร์), ซึ่งอยู่ตรงกลาง, ระหว่างกลาง
  • mild: not strong - เบา, ไม่หนัก, ไม่รุนแรง
  • minimal: very small in amount - น้อยที่สุด, น้อยมาก
  • negotiations: formal discussion in which people or groups try to reach an agreement - การเจรจาต่อรอง
  • occurred (verb): happened - เกิดขึ้น
  • offender: a person who is guilty of a crime - ผู้กระทำความผิด
  • offer (verb): to make something available or to provide the opportunity for something - ให้, เสนอ
  • penalty: a punishment, or the usual punishment, for doing something that is against a law - โทษ
  • phase: a particular period of time during the development of something - ตอน, ขั้นตอน, ช่วง, ระยะ
  • pivotal: the central or most important thing or person in a situation -
  • practice: a way of doing something - การปฏิบัติ
  • premium: extra money paid; usually for extra service or product features -
  • private sector: businesses and industries that are not owned or controlled by the government - ภาคเอกชน
  • profit: money that you make from selling goods and services after all your costs have been paid - กำไร
  • prosecution: the process of accusing someone of a crime and asking a court of law to judge them - การดำเนินคดีตามกฎหมาย
  • public: open to people in general; intended to be seen or heard by people in general - อย่างเปิดเผยให้รู้
  • public: provided, especially by the government, for the use of people in general - ที่เกี่ยวข้องกับส่วนรวม, ที่เป็นของสาธารณะ
  • public (adj): belonging to the government -
  • recently (adverb): not long ago - เมื่อไม่นานมานี้, เมื่อเร็วๆ นี้
  • reconsider: to think again about a decision in order to decide whether you should change it - พิจารณาอีกครั้ง
  • record: a written account of something that is kept so that it can be looked at and used in the future - การบันทึก, รายงาน
  • record: a written account of something that is kept so that it can be looked at and used in the future - บันทึก, รายงาน
  • regulations: official rules that control the way things are done - ระเบียบ ข้อบังคับ
  • regulator: an official (or organisation) who makes certain that the companies who operate a system work effectively and fairly - ผู้มีอำนาจควบคุม
  • represent: to be an example or expression of something - แสดงให้เห็น, เป็นเครื่องหมายของ
  • return: the amount of profit that you get from something; the amount of money you earn - เงินรายได้
  • risk: the possibility that something dangerous or unpleasant might happen - ความเสี่ยง
  • sanction: an official order, such as the stopping of trade or business dealings, which is taken against a country, group or person in order to make it obey international law - การคว่ำบาตร
  • sanction (noun): a course of action that can be used, if necessary, to make people obey a law or behave in a particular way - การลงโทษ
  • scandal (noun): a situation in which people behave in a dishonest or immoral way that shocks people - เรื่องอื้อฉาว
  • Securities and Exchange Commission: the government agency, under the Finance Ministry which oversees and regulates Thailand’s capital markets. - คณะกรรมการกำกับหลักทรัพย์และตลาดหลักทรัพย์
  • sentence : a punishment given by a court of law - การตัดสินลงโทษ
  • settle: to reach a decision or an agreement about something, or to end a disagreement - แก้ปัญหา
  • severe: very serious and unpleasant - รุนแรง
  • share: any of the units of equal value into which a company is divided and sold to raise money. People who own shares receive part of the company's profits - หุ้น
  • signal: to be a sign that something exists or is likely to happen - ส่งสัญญาณ
  • sufficiently: having enough of something - เพียงพอ
  • takeover (noun): an act of taking control of a country, company, organisation, etc. - การครอบครอง
  • taking the risk: doing something danger that might end in success and some reward or might fail and end with damage or injury -
  • trader: someone who buys and sells things - ผู้ค้า
  • transparent: not keeping anything secret; open - โปร่งใส
  • uncover (verb): to discover something secret or hidden - ค้นพบ, ค้นพบข้อเท็จจริง
  • vice- (pref): the second person in charge of and managing an organization - รอง
  • vigorous (adj): very forceful or energetic - กระฉับกระเฉง
  • violation: an action that is against a law, agreement, principle, etc. - การฝ่าฝืน
  • widespread: happening or existing in many places, or affecting many people - อย่างแพร่หลาย
  • worth (noun): useful, important or good enough to be a suitable reward for the time spent or the effort made - คุ้มค่า, คุ้มค่ากับความพยายาม
  • wrongdoer: a person who breaks the law or does something "wrong" - ผู้กระทำผิดศีลธรรม, ผู้ละเมิดกฎหมาย
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