The SEC Office is a regulatory body that carries a mission to develop and supervise the Thai capital market to ensure efficiency, fairness, transparency, and integrity. The SEC Office also oversees regulatory compliance and enforces the governing laws to ensure that the capital market will be developed toward sustainable growth and generate positive impacts on the national economy.
At present, there are five legislations administered by the SEC Office, namely:
(1) the Securities and Exchange Act of 1992;
(2) the Derivatives Act of 2003;
(3) the Trust for Transactions in Capital Market Act of 2007;
(4) the Provident Fund Act of 1987, and
(5) the Royal Enactment on Special Purpose Juristic Persons for Securitization of 1997.
With regard to supervision and enforcement, the SEC Office is responsible for monitoring compliance with the five administered laws, and taking legal action on offenders (both natural and juristic persons) in case of violation or failure to comply with the laws or the rules and regulations issued by virtue of such laws.
To determine a violation and take an action on any individual or firm, the SEC Office would investigate and gather information, facts and evidence concerning the violation. Generally, an alleged offender may clarify or make an argument with evidence against the allegation before the SEC Office commences the consideration of the case except when it is necessary and appropriate for the SEC Office to take a prompt action to prevent severe damage or a negative impact on public interest, or when a chance to clarify cannot be given to the alleged offender per se.
If the gathered evidence presents a sufficient ground for enforcement, the SEC Office is empowered to take any of the following actions, as the case maybe:
(1) Administrative actions,
(2) Criminal actions, and
(3) Civil actions.
Administrative action is a type of law enforcement that involves the issuance of administrative orders on individuals or juristic persons under the SEC Office’s supervision, in other words, persons licensed, approved, or registered in accordance with the laws administered by the SEC Office. For example, securities business operator, derivatives business operator, financial advisor, auditor, appraisal company, credit rating agency, representative of bond holders, and personnel in the capital market business, etc.
There are two types of administrative actions taken by the SEC Office, namely:
(a) Administrative order issued in accordance with the governing laws when a regulated person fails to maintain qualifications, has a prohibited characteristic, performs duties defectively, or fails to comply with the rules, standards or work ethics specified for the regulated person. The SEC Office or other regulators may impose the following orders: rectification of non-compliance operation, restriction of defective business operation, disclosure of improper behaviors, and suspension or revocation of approval, etc.;
(b) Administrative sanction is a type of penalty prescribed in the Derivatives Act and the Trust for Transactions in Capital Market Act. It may be imposed on derivatives business operators, futures exchange, derivatives clearing house, the association of derivatives business operators, persons who fail to pay the fees specified under the Derivatives Act, directors and executives of the juristic persons above (under Section 114 – Section 119 of the Derivatives Act) and the trustee and directors and executives thereof (under Section 70-71 of the Trust for Transactions in Capital Market Act).
There are several levels of administrative order issuers, i.e., the SEC Office, the Administrative Sanction Committee and the Securities and Exchange Commission. Likewise, the orders can be imposed in many ways, for example, probation, public reprimand, administrative fine, restriction of business operation, business suspension and license revocation, etc. In this regard, the scope of power of the order issuers varies depending on the level of penalty to be imposed on the offender.
Any person who is affected by, and disagrees with, an administrative order has the right to appeal such order. The appeal procedure is provided by the SEC Regulation concerning Filing, Considering and Making a Decision on the Appeal of the Administrative Orders of the SEC Office B.E. 2542 (1999), and the SEC Notification No. Gor Kor. 12/2551 Re: Administrative Procedures under the Derivatives Act B.E. 2546 (2003), and the Trust for Transactions in Capital Market Act B.E. 2550 (2007). More details are available in the following flowchart:
Criminal action is a type of law enforcement against any person who acts or omits to act in violation of the laws administered by the SEC Office. Criminal actions are divided into two groups, namely: (a) criminal fining by the Criminal Fining Committee, and (b) criminal prosecution per the process of judgment.
Most of the violations against the SEC administrated laws are processed by criminal action.
(A) Criminal Fining
All the five administered laws stipulate that certain offences could be settled by a criminal fine. The Criminal Fining Committee appointed by virtue of such laws determines the fine. After the offender agrees to enter the fining process and pays for the fine in full as ordered by the Committee. The right to pursue a criminal case is terminated.
Offences that could be settled by a criminal fine are prescribed under Section 317 of the Securities and Exchange Act of 1992, Section 155 of the Derivatives Act of 2003, Section 94 of the Trust for Transactions in Capital Market Act of 2007, Section 42 of the Provident Fund Act of 1987, and Section 43 of the Royal Enactment on Special Purpose Juristic Persons for Securitization of 1997.
The Criminal Fining Committee comprises three independent third-parties appointed by the Ministry of Finance, namely:
(1) representative of the Royal Thai Police;
(2) representative of the Bank of Thailand; and
(3) representative of the Fiscal Policy Office, the Ministry of Finance.
(B) Criminal prosecution per the process of judgment
Other offences that are not subject to a criminal fine, or whose offender refuses to enter the fining process, or does but fails to pay the fine, in whole or in part, as ordered by the Criminal Fining Committee, the SEC Office shall file a criminal complaint with an inquiry official (under the Royal Thai Police or the Department of Special Investigation) for further investigation in accordance with the Criminal Procedure Code.
After that, the inquiry official will conduct a further investigation and pass the file of the case, including his decision whether to prosecute the offender or not, to a public prosecutor. Thereafter, the case will be under consideration by the public prosecutor. In case of where the file of the case is satisfied a perfection and completeness, the public prosecutor will bring a case to the court that has a jurisdiction. Consequently, the court will consider the case and make a judgement eventually.
Due to the Thai legal system, the Courts of Justice are classified into three levels, namely: the Courts of First Instance, the Courts of Appeal, and the Supreme Court. Moreover, the right to appeal to the Courts of Appeal or the Supreme Court is subject to the conditions prescribed in the Criminal Procedure Code. That means where any party in a lawsuit can satisfy the conditions, such party has the right to appeal.
Moreover, the Securities and Exchange Act (No. 5) B.E. 2559 (2016), which has become effective since 12 December 2016, specifies that the court may impose any of the following measures, along with imprisonment and fine, on whom committed any offense under Section 278, Section 281/2 paragraph 1, Section 281/10, Section 296, Section 296/1, or Section 297:
(1) a compensation at an equal amount to the benefit received or should have been received from committing an offence;
(2) a suspension of securities or derivatives trading for up to five years;
(3) a bar from serving as a director or executive in a listed company or a securities company for up to 10 years; and
(4) a reimbursement of investigative expenses incurred by the SEC Office.
Civil penalty is a recent enforcement power added by the Securities and Exchange Act (No. 5) B.E. 2559 (2016) in order to improve efficiency of law enforcement.
Section 317/1 of the amended SEA allows the following offences to be prosecuted by a civil penalty:
(1) committing unfair securities trading practice;
(2) presenting a false statement or concealing material facts that should have been stated;
(3) failing to perform duties as director or executive under Section 89/7;
(4) allowing any person to use one’s own securities trading account or banking account for payment of securities trading, or using any person’s securities trading account or banking account.
Civil penalty can be imposed when the SEC Office is granted an approval of the Civil Penalty Committee, which comprises five members, namely:
(1) the Attorney-General;
(2) the Permanent Secretary of the Ministry of Finance;
(3) the Director-General of the Department of Special Investigation;
(4) the Governor of the Bank of Thailand; and
(5) the Secretary-General of the SEC Office.
In addition to the approval for the imposition of civil penalty, the Civil Penalty Committee has the duty to consider and determine an appropriate civil penalty to be imposed on the offender. There are five types of civil penalties, namely:
(1) a civil monetary penalty;
(2) a compensation at an equal amount to the benefit received or should have been received from committing an offence;
(3) a suspension of securities or derivatives trading for a period not exceeding five years;
(4) a bar from serving as a director or executive in a listed company or a securities company for a period not exceeding 10 years;
(5) a reimbursement of investigative expenses incurred by the SEC Office.
In any case, the Civil Penalty Committee shall determine a penalty appropriate for the presented facts of each case, and the imposition of all five penalties in all cases is not required.
In the case where the offender agrees to comply with the civil penalty specified by the Civil Penalty Committee, such offender must sign a letter of consent. After the offender has made a payment of pecuniary sanction in full, the right to institute a criminal prosecution shall extinguish. In contrast, in case of the failure to make the payment in full, the SEC Office shall file a petition with a civil court for enforcement in accordance with the letter of consent, in which case the right to institute a criminal prosecution shall not extinguish.
On the other hand, where the offender refuses to comply with the specified civil penalty, the SEC Office shall bring an action against the offender in a civil court for consideration and imposition of civil penalty. The proceedings and enforcement steps in such case are subject to the Civil Procedure Code.
Under the terms of the letter of consent or the court’s decision that specify a suspension of trading or a bar from serving as a director or executive in a listed company or a securities company, the failure to comply with such terms or decision shall be considered commission of another criminal offence.