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Supervision and inspection of intermediaries
To enhance the SEC supervision and market confidence in intermediaries’ business conduct, the SEC continues to improve the supervisory and monitoring framework, placing a greater emphasis on risk factors. Routine inspection implements a risk-based approach which focuses on three areas as follows:    
 
1. Prudential risk 
 
Financial soundness prevents damage to securities clearing and settlement. The inspection covers such factors as the net capital rule, loss tolerance, financial ratios, work systems and operational procedures. The SEC also assesses the criteria, procedures and methods for credit approval as well as risk management and control over transactions that may affect intermediaries’ financial condition.  
 
2. Operational and management risk
 
The assessment focuses on three areas as follows:
 
2.1 Attitude and ethics of executives toward promotion of compliance culture 
 
2.2 Checks and balances and management structure should support prevention of operational disruption, conflicts of interest and misuse of inside information;  
 
2.3 Compliance unit must maintain independence and have competent and sufficient staff for systematic monitoring and inspection of the company’s core operations.
 
3.Customer relationship risk
 
The assessment focuses on three areas as follows:
 
3.1 Loss and damage prevention by, for example, segregating client assets from proprietary portfolios and conducting client due diligence;
 
3.2 Fair treatment and quality services by, for example, providing reliable research papers and client-focused advice, installing Chinese Wall ethical barrier to prevent exploitation of client information for the benefit of the intermediary or others’;   
 
3.3 Effective complaint handling that ensures fair and prompt action.
 
In addition to risk factors, the SEC takes into account impact factors on clients and intermediaries. Indicators of severity include market shares in trading orders, the amounts of client assets in custody and the number of active accounts.  
 
As risk factors and impact factors are constantly exposed to change, the SEC reviews its assessment on a regular basis and upon occurrence of any incident that may impose a significant impact on such risk and impact factors. 
 
The assessment of risks factors and impact factors on the overall securities industry has facilitated supervisory approach that is suitable and more efficient for individual intermediaries. This means less risks on investors and more confidence in the industry at large.   
 
The SEC’s initial steps for intermediaries exposed to high-risk and/or high-impact factors are:  
 
1. Calling a meeting with company executives to emphasize the importance of efficient work system;
 
2. Conducting stricter and more frequent inspection to urge operational improvement;
 
3. Instructing the company to take specified improvement measures;
 
4. Limiting service offering to prevent additional risks;
 
5. Prohibiting additional business undertaking, as applicable. 
 
The SEC orders are publicly disclosed.   
Last updated on 28 October 2013
The Securities and Exchange Commission, Thailand
333/3 Vibhavadi-Rangsit Road, Chomphon , Chatuchak Bangkok 10900, Thailand
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