The Securities and Exchange Commission,Thailand was established in 1992 and performs the functions of the capital market supervisory agency with the status of an independent state agency.
The SEC was founded under the promulgation of the Securities and Exchange Act B.E. 2535, with a mission to:
“Develop and Supervise the Thai Capital Market to Ensure Efficiency, Fairness, Transparency, and Integrity”
The SEC’s 2010 - 2012 strategic plan focuses on four major goals:
1. To maintain orderly market
2. To ensure investor protection
3. To foster business innovation
4. To promote competition
The development of the country’s capital market is considered to be an important source of funds for medium to long-term investment. It enables entrepreneurs who are in need of capital for their business operations to mobilize funds directly from the public by issuing and offering diversity of securities. Public issuance and offering of various securities allows businesses to raise funds at lower cost than the conventional medium through loans from domestic and foreign financial intermediaries. The development of the capital market thus plays a crucial role in enhancing as well as fortifying the stability of the overall economic system.
Despite the fact that the Thai capital market plays such a crucial role in the country’s economic system, in the past, the supervision and development of the Thai capital market was governed under various laws and regulations. To initiate a new legal framework and mark a new era for the Thai capital market, on March 16, 1992, the Securities and Exchange Act B.E. 2535 (1992) or “the SEC Act” was promulgated and came into force on May 16, 1992 so as to reinforce the unity, consistency, and efficiency in supervision and development of the market. The enactment of the SEC Act empowered the Securities and Exchange Commission, Thailand to be established as an independent state agency with responsibility for supervision and development of the capital market under the direction and guidance ofthe Board of the SEC.
On July 3, 2003, the Derivatives Act B.E. 2546 (2003) was promulgated and came into force on January 6, 2004 so as to create a legal certainty for derivative contracts, provide a regulatory framework for derivatives markets and intermediaries, and allow the SEC to oversee the financial integrity of the market and take action to prevent adverse systemic effect.
Established on 16 May 1992, the Office of the Securities and Exchange Commission is an independent public agency under the Securities and Exchange Act B.E. 2535 (1992) with the duty to supervise and develop the Thai capital market to ensure efficiency, fairness, transparency and integrity.
The capital market has always been a major venue for fund mobilization of business sectors. Yet, prior to the SEC establishment, market development had concentrated more on the secondary market where trading of transferable securities was the main activity than the budding primary market where businesses issued securities for public offerings. Also a concern at the initial stage of development was the overlapped market supervision under the authority of multiple agencies as seen in the following areas:
The Ministry of Finance had the power to regulate securities trading on the Stock Exchange of Thailand (SET) by issuing regulations or approving those drafted by the SET Board of Governors, accepting listing and delisting and supervising securities businesses by approving rules issued by the Bank of Thailand, issuing and revoking licenses for securities business undertaking. Meanwhile, the Bank of Thailand issued regulations and supervised business operation of securities companies. The Stock Exchange of Thailand oversaw members’ operation pursuant to the rules drafted by the Bank of Thailand and approved by the Minister of Finance.
The Ministry of Commerce was responsible for registration of prospectus for securities offering of public limited companies and acted as the registrar under the Public Limited Companies Act B.E. 2521 (1978). The SET, meanwhile, oversaw the offering for sale of shares and debentures of limited companies that were under consideration for becoming listed or authorized companies as permissible by virtue of the Stock Exchange of Thailand Act B.E. 2517 (1974). Such practice was prevalent at the time as the law governing public companies was stricter, deterring many companies from becoming ones.
The dispersion of authority and supervision among several agencies and under several laws causes duplication of work, a lack of coherence and continuity. Besides, the highly active market in 1987 drew in short-term speculation that led to unfair market practice amidst inefficient investor protection.
To address the aforesaid issues, the Securities and Exchange Act B.E. 2535 (1992)
was promulgated, and the Securities and Exchange Commission was established thereunder as the independent regulator with the centralized roles for supervision and development of both primary and secondary markets. This new structure also facilitated issuance of new financial instruments and put in place effective regulations to ensure fairness and prevent exploitation of stakeholders.
As the market became more developed, new products were introduced and two laws were promulgated to support continuing development of instruments and transactions, namely the Derivatives Act B.E. 2546 (2003) and the Trust for Transactions in Capital Market B.E. 2550 (2007).
Securities issuance for public offering
Securities issuance for sale to the public must receive an approval from the SEC. The approval criteria include verification of disclosed information and the issuer’s compliance with corporate governance principles, for instance, transparent shareholding structure, appropriate checks and balances within the management, no conflicts of interest between executives and the issuing company, not operating illegal activities and disclosure of information necessary for making investment decisions such as financial status and operating results, risk factors, future plans and details of the public offering.
The SEC, however, does not approve appropriateness of securities prices (but requires that the issuer disclose its pricing criteria), nor does it verify the accuracy of the disclosed information. The issuer and the financial advisor who prepares information for disclosure are verifiers of the disclosed information.
After listing, the SEC continues to oversee the issuer’s disclosure of information to ensure that it is complete and timely and in compliance with governing regulations to protect the interest of investors. The SET is the frontline regulator overseeing primary disclosure of information. In addition, the SEC supervises transactions that have material impacts on shareholders such as acquisition or disposal of key assets, transactions with related persons and tender offers for business takeover.
The Stock Exchange of Thailand
The Stock Exchange of Thailand (SET) is a secondary market where efficient trading systems, clearing and settlement systems must be put in place. The SEC supervises duty performance of the SET and trading centers to ensure that investors receive correct amount of securities or capital gains on a timely basis.
In addition, the SET or trading centers is assigned the duty of frontline trading surveillance with a tracking system on trading irregularities to prevent and suppress unfair trading that exploits investors. Frontline information is examined before being forwarded to the SEC for further investigation and penalties against wrongdoers.
Securities companies, asset management companies and derivatives business operators are intermediaries in the capital market. To be entrusted by investors, they must earn licenses for undertaking respective businesses and their compliance must be regularly supervised by the SEC, taking into major account, their business stability, system robustness and personnel competency. This includes:
||appropriate services and advice;|
||financial security and checks and balances system; |
||reliable safekeeping of client’s assets and segregating client accounts from proprietary accounts in cases where custodian services are included. |
Professionals in the capital market such as financial advisors, auditors, credit rating agencies are key contact points who ensure that the disclosed securities information is accurate, complete and reliable. Capital market professionals must be approved by the SEC and comply with the SEC regulations to protect investors’ best interest.
Our Market Development
The SEC’s roles include four areas of development, as follows:
||Products and services introduction for appropriate fundraising channels and investment choices; |
||Competitive trading venues and systems;|
||Business diversification to enhance robustness of the securities business industry; |
||Investor education by providing knowledge and adequate information for investment decision making to build a capital market where investors can protect their own interest and exercise their rights appropriately. This includes building correct understanding of investment, setting a mechanism for investors to assess their risk tolerance. Meanwhile, intermediaries must get to know their clients before being allowed to offer products and services suitable for their clients (Know Your Client Suitability Test). In addition, the SEC Help Center is a channel for investors to make inquiries, file complaints, inform of wrongful leads and make suggestions for the SEC. |
Last updated on
20 January 2016