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​SEC Strategic Plan 2019 – 2021


Backgrounds

SEC Strategic Plan 2019 – 2021

A.Democratized access to wealth advice

B.Funding opportunities for growth and sustainability

C.Digitalization of the capital market

D.Future of supervision

E.Reform of regulations and regulators


Backgrounds

In light of the changing market landscape and emerging challenges, the SEC has revised its strategic plan taking into account the opinions and suggestions of stakeholders such as securities companies, asset management companies and the Stock Exchange of Thailand (SET). The consultation results confirmed the justification and necessity to pursue mutual strategic direction for the Thai capital market to accommodate the national agenda and enhance its own competitiveness on the international forum. The SEC strategic plan is in line with the 20-year National Strategy (2018 – 2037), especially in the areas of competitiveness enhancement by facilitating financial opportunities for SMEs, innovations and nationwide infrastructures, and promoting linkage for mutual growth with neighboring countries. On social opportunity and equality, long-term investment will be promoted as a channel for building social security and self-reliance. In addition, the public sector's administrative system will be adjusted and improved, effective outcome-focused culture enhanced, and technologies applied to meet public demands conveniently, rapidly and transparently.

SEC Strategic Plan 2019 – 2021

      The SEC has proposed five strategic directions as follows:
      A. Democratized access to wealth advice
      B. Funding opportunities for growth and sustainability
      C. Digitalization of the capital market
      D. Future of supervision
      E. Reform of regulations and regulators to promote effective implementation of Plan A to               

          Plan D

      Relevant details are described below:


A.Democratized access to wealth advice

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Where are we now?

Accumulating wealth to ensure adequate income for retirement is an important issue for Thailand in order to ensure that Thai people will have long-term financial well-being and reduce governmental expenditure on provision of welfare for senior citizens. The capital market is considered an important investment vehicle to accumulate long-term wealth.

However, the majority of Thai citizens either have no access to the capital market or are in a position of captive investor, i.e., having limited investment options and thus being unable to make an investment decision that is suitable for their financial goals. Moreover, fixed-income funds that are deposit-like products remain the largest component of investment through asset management industry. For direct investment, individual investors are unable to access high-quality bonds suitable for long-term wealth accumulation. Instead, they have become the main buyers of non-investment grade bonds with the misperception that these bonds are less risky than equity products. Regarding saving for retirement through provident funds (PVD), over 80% are still investing in deposits and debts instruments which may not generate adequate returns for post-retirement financial needs. This is partly because employers do not realize the importance of providing a good choice for their employees' PVD savings.

With respect to business operators, most are conglomerate banks who have a tendency to adopt a product-push policy (focusing more on selling financial products produced or underwritten by the companies in the same group) instead of the policy of putting investors first (selling or introducing products by considering the benefits of investors first). However, the technological development and the use of innovative technologies by new comers have led to both an opportunity for the industry to enhance efficiency and a challenge spurring the industry to adjust and create value-added services for their customers. Some businesses have already shifted their focus from transaction-based to advisory-based services. Such adjustments will bring about an opportunity for a wider public to access personalized portfolio management services, enabling them to receive the benefits from utilizing data and technologies to generate the tools that help them make a better investment decision.


What if we do nothing?

If such circumstances continue, the public may be unable to access and utilize the capital market to create long-term financial well-being while the industry may be unable to utilize technology. As a result, the capital market would not be attractive or grow sustainably in the long run.


How do we get there and where do we want to be?

The SEC deems it necessary to promote quality wealth advice services for the public especially the middle-income earners. Initially, the focus will be high net worth (HNW) investors. Upon receiving appropriate advice, the public will have more opportunities to access investment services (democratized financial access) and can use the capital market to build their long-term financial well-being.


Wealth advice

  • To eliminate barrier to industry entry of new business operators and to issue regulations for facilitating the use of innovations and financial technology to enhance service efficiency:

    • Adjusting the licensing regime regarding issues such as collection of license fees and other related fees, while maintaining standards and quality for the best interest of customers (putting investors first); and

    • ​Revising operating systems and other regulatory requirements to ensure compatibility with the changing landscape or innovations.

  • To promote information flow and tools to help investors make meaningful comparison & analyses:

    • Ensuring that useful information is available on a timely basis in the machine readable and open API formats to enable the industry to access and process the information in a meaningful comparison & analyses;

    • Supporting the use of a fair benchmark to enable investors to compare fund performances and select suitable products that maximize their benefits;

    • Promoting financial literacy for the public to better understand the benefits of investment, have basic information for making investment decisions, and be able to identify and avoid frauds; and

    • Utilizing the internet to build market force and educate investors through crowd wisdom.

  • To facilitate ease of investment switching

    • ​Eliminating legal obstacles to accommodate e-KYC and national ID.


PVD

  • To ensure that employers realize the importance of helping employees to have adequate savings after retirement and take action to:

    • Encourage employees to increase their contributions; and

    • ​Provide employees with investment plans that have a tendency to generate adequate returns to meet quality retirement targets. A life-path provident fund should be one of the options for the retirement savings.

  • To require the asset management companies in charge of PVDs to offer appropriate investment options and advice to employers.

 

B.Funding opportunities for growth and sustainability

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Where are we now?

Currently, the Thai capital market is worth Baht 22 trillion, or 180% of GDP (the equity market value is Baht 18 trillion and the debt market value is Baht 4 trillion). The capital market has  become a more important funding source for business sectors and a channel for wealth accumulation to promote financial well-being for all. This will benefit the overall development of the financial system and the national economy.

However, there are some issues relating to the ecosystem of the Thai capital market. One example is the multi-tier of the quality and corporate governance of listed companies as some businesses overlook the importance of corporate governance or are not ready to implement.  Moreover, there are gaps in the scope of duties of financial advisors (FA) who act as the gatekeeper to equity. Meanwhile, the SEC has limited tools for supervising FAs and the market mechanism is not working efficiently. In addition, investors have inadequate knowledge or lack interest in exercising their rights or view it inconvenient, and thus be unable to claim for fairness and justice. Given such circumstances, investors have not yet become a driving force of market balance.


What if we do nothing?

If such circumstances continue, the public may lack confidence in the capital market and may not utilize it to create wealth. In addition, the Thai capital market is facing tougher competition with the increasingly connected global financial markets. To avoid being marginalized, it must offer services that meet users' requirements, build market credibility to attract global investors, and contribute to the growth of national and regional economies.  


How do we get there and where do we want to be?

The SEC intends to see the capital market growing sustainably, be a funding source of business sectors that adopt good corporate governance, as well as support businesses and innovations that create value-added to the economy and society domestically and regionally . This is to push forward sustainable development, increase competitiveness, and support regional growth. To achieve such objectives, the SEC has laid out operational directions and key action plans as summarized below:


Improving quality of Thai listed companies

  • Creating a driving force for better CG standards and providing tools to accommodate listed companies with different quality tiers so that investors may have clear information for their decisions by:

    • Urging listed companies to apply the CG Code to create sustainable value of their business;

    • Establishing co-development targets between related agencies, preparing ESG roadmap of the capital market based on the readiness of listed companies and requiring a responsible agency to act as a CG center of excellence to reduce redundancy in the compliance with different standards;

    • Exploring benchmark information for ESG or responsible investment in ASEAN (e.g. metric or index) to attract investors worldwide. This also aims to allow listed companies with ESG implementation, regardless of their size, to benefit from the ASEAN sustainability initiatives.

  • Creating market force from investors by:

    • Encouraging institutional investors to play a role in monitoring and motivating listed companies to comply with the CG Code;

    • ​Encouraging provision of tools / facilities for investors to exercise their rights more conveniently such as having an organization or platform providing remarks and observations to shareholders before the annual general meeting (AGM) or the extraordinary general meeting (EGM) and having an option for investors to exercise their rights through e-proxy or e-voting.

  • Providing one-stop funding services to facilitate the private sector in contacting relevant agencies and reduce redundancy;

  • Improving professional standards of financial advisors (FA) by increasing varieties and efficiency of tools for FA oversight including license-based supervision.

 Supporting regional growth   

  • Supporting regional or sub-regional initiatives through various forums such as the Ayeyawady – Chao Phraya – Mekong Economic Cooperation Strategy (ACMECS), Mekong Capital Markets Cooperation (MCMC) as well as bilateral cooperation;

  • Encouraging the Thai Institute of Directors (IOD) to have a role in preparing the readiness of company directors in the CG internal control and the information disclosure in neighboring countries; and

  • Building capacity for neighboring countries on a continuous basis in response to their needs and interests, to promote mutual sustainable growth in the region.

     

C.Digitalization of the capital market

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Where are we now?

Fundraising: The process for issuance and offering of securities is complicated and cost-ineffective. For example, the participation of several service providers, from underwriters and dealers to brokers and custodians, leads to higher fee expenses for offering of equity and debt instruments. For bond issuance and offering, the clearing and settlement process can take as long as 15 days, and the system of debt instrument registrar is still manual and not centralized, and thus error-sensitive and time consuming for data reconciliation.


SEC Strategic Plan 2019 – 2021

1.   Backgrounds

      In light of the changing market landscape and emerging challenges, the SEC has revised its strategic plan taking into account the opinions and suggestions of stakeholders such as securities companies, asset management companies and the Stock Exchange of Thailand (SET). The consultation results confirmed the justification and necessity to pursue mutual strategic direction for the Thai capital market to accommodate the national agenda and enhance its own competitiveness on the international forum. The SEC strategic plan is in line with the 20-year National Strategy (2018 – 2037), especially in the areas of competitiveness enhancement by facilitating financial opportunities for SMEs, innovations and nationwide infrastructures, and promoting linkage for mutual growth with neighboring countries. On social opportunity and equality, long-term investment will be promoted as a channel for building social security and self-reliance. In addition, the public sector’s administrative system will be adjusted and improved, effective outcome-focused culture enhanced, and technologies applied to meet public demands conveniently, rapidly and transparently.

2.   SEC Strategic Plan 2019 – 2021

      The SEC has proposed five strategic directions as follows:
      A. Democratized access to wealth advice
      B. Funding opportunities for growth and sustainability
      C. Digitalization of the capital market
      D. Future of supervision
      E. Reform of regulations and regulators to promote effective implementation of Plan A to               

          Plan D

      Relevant details are described below:

A. Democratized access to wealth advice



      Where are we now?

      Accumulating wealth to ensure adequate income for retirement is an important issue for Thailand in order to ensure that Thai people will have long-term financial well-being and reduce governmental expenditure on provision of welfare for senior citizens. The capital market is considered an important investment vehicle to accumulate long-term wealth.

      However, the majority of Thai citizens either have no access to the capital market or are in a position of captive investor, i.e., having limited investment options and thus being unable to make an investment decision that is suitable for their financial goals. Moreover, fixed-income funds that are deposit-like products remain the largest component of investment through asset management industry. For direct investment, individual investors are unable to access high-quality bonds suitable for long-term wealth accumulation. Instead, they have become the main buyers of non-investment grade bonds with the misperception that these bonds are less risky than equity products. Regarding saving for retirement through provident funds (PVD), over 80% are still investing in deposits and debts instruments which may not generate adequate returns for post-retirement financial needs. This is partly because employers do not realize the importance of providing a good choice for their employees’ PVD savings.

      With respect to business operators, most are conglomerate banks who have a tendency to adopt a product-push policy (focusing more on selling financial products produced or underwritten by the companies in the same group) instead of the policy of putting investors first (selling or introducing products by considering the benefits of investors first). However, the technological development and the use of innovative technologies by new comers have led to both an opportunity for the industry to enhance efficiency and a challenge spurring the industry to adjust and create value-added services for their customers. Some businesses have already shifted their focus from transaction-based to advisory-based services. Such adjustments will bring about an opportunity for a wider public to access personalized portfolio management services, enabling them to receive the benefits from utilizing data and technologies to generate the tools that help them make a better investment decision.

      What if we do nothing?

      If such circumstances continue, the public may be unable to access and utilize the capital market to create long-term financial well-being while the industry may be unable to utilize technology. As a result, the capital market would not be attractive or grow sustainably in the long run.

      How do we get there and where do we want to be?

      The SEC deems it necessary to promote quality wealth advice services for the public especially the middle-income earners. Initially, the focus will be high net worth (HNW) investors. Upon receiving appropriate advice, the public will have more opportunities to access investment services (democratized financial access) and can use the capital market to build their long-term financial well-being.

      Wealth advice

  • To eliminate barrier to industry entry of new business operators and to issue regulations for facilitating the use of innovations and financial technology to enhance service efficiency:
  • Adjusting the licensing regime regarding issues such as collection of license fees and other related fees, while maintaining standards and quality for the best interest of customers (putting investors first); and
  • Revising operating systems and other regulatory requirements to ensure compatibility with the changing landscape or innovations.
  • To promote information flow and tools to help investors make meaningful comparison & analyses:
  • Ensuring that useful information is available on a timely basis in the machine readable and open API formats to enable the industry to access and process the information in a meaningful comparison & analyses;
  • Supporting the use of a fair benchmark to enable investors to compare fund performances and select suitable products that maximize their benefits;
  • Promoting financial literacy for the public to better understand the benefits of investment, have basic information for making investment decisions, and be able to identify and avoid frauds; and
  • Utilizing the internet to build market force and educate investors through crowd wisdom.
  • To facilitate ease of investment switching
  • Eliminating legal obstacles to accommodate e-KYC and national ID.

      PVD

  • To ensure that employers realize the importance of helping employees to have adequate savings after retirement and take action to:
  • Encourage employees to increase their contributions; and
  • Provide employees with investment plans that have a tendency to generate adequate returns to meet quality retirement targets. A life-path provident fund should be one of the options for the retirement savings.
  • To require the asset management companies in charge of PVDs to offer appropriate investment options and advice to employers.

 

B. Funding opportunities for growth and sustainability

 Where are we now?

Currently, the Thai capital market is worth Baht 22 trillion, or 180% of GDP (the equity market value is Baht 18 trillion and the debt market value is Baht 4 trillion). The capital market has  become a more important funding source for business sectors and a channel for wealth accumulation to promote financial well-being for all. This will benefit the overall development of the financial system and the national economy.

      However, there are some issues relating to the ecosystem of the Thai capital market. One example is the multi-tier of the quality and corporate governance of listed companies as some businesses overlook the importance of corporate governance or are not ready to implement.  Moreover, there are gaps in the scope of duties of financial advisors (FA) who act as the gatekeeper to equity. Meanwhile, the SEC has limited tools for supervising FAs and the market mechanism is not working efficiently. In addition, investors have inadequate knowledge or lack interest in exercising their rights or view it inconvenient, and thus be unable to claim for fairness and justice. Given such circumstances, investors have not yet become a driving force of market balance.

       What if we do nothing?

      If such circumstances continue, the public may lack confidence in the capital market and may not utilize it to create wealth. In addition, the Thai capital market is facing tougher competition with the increasingly connected global financial markets. To avoid being marginalized, it must offer services that meet users’ requirements, build market credibility to attract global investors, and contribute to the growth of national and regional economies.  

        How do we get there and where do we want to be?

      The SEC intends to see the capital market growing sustainably, be a funding source of business sectors that adopt good corporate governance, as well as support businesses and innovations that create value-added to the economy and society domestically and regionally . This is to push forward sustainable development, increase competitiveness, and support regional growth. To achieve such objectives, the SEC has laid out operational directions and key action plans as summarized below:

      Improving quality of Thai listed companies

  • Creating a driving force for better CG standards and providing tools to accommodate listed companies with different quality tiers so that investors may have clear information for their decisions by:
  • Urging listed companies to apply the CG Code to create sustainable value of their business;
  • Establishing co-development targets between related agencies, preparing ESG roadmap of the capital market based on the readiness of listed companies and requiring a responsible agency to act as a CG center of excellence to reduce redundancy in the compliance with different standards;
  • Exploring benchmark information for ESG or responsible investment in ASEAN (e.g. metric or index) to attract investors worldwide. This also aims to allow listed companies with ESG implementation, regardless of their size, to benefit from the ASEAN sustainability initiatives.

 

  • Creating market force from investors by:
  • Encouraging institutional investors to play a role in monitoring and motivating listed companies to comply with the CG Code;
  • Encouraging provision of tools / facilities for investors to exercise their rights more conveniently such as having an organization or platform providing remarks and observations to shareholders before the annual general meeting (AGM) or the extraordinary general meeting (EGM) and having an option for investors to exercise their rights through e-proxy or e-voting.
  • Providing one-stop funding services to facilitate the private sector in contacting relevant agencies and reduce redundancy;
  • Improving professional standards of financial advisors (FA) by increasing varieties and efficiency of tools for FA oversight including license-based supervision.

      Supporting regional growth   

 

C.  Digitalization of the capital market

      Where are we now?

      Fundraising: The process for issuance and offering of securities is complicated and cost-ineffective. For example, the participation of several service providers, from underwriters and dealers to brokers and custodians, leads to higher fee expenses for offering of equity and debt instruments. For bond issuance and offering, the clearing and settlement process can take as long as 15 days, and the system of debt instrument registrar is still manual and not centralized, and thus error-sensitive and time consuming for data reconciliation.

      The application of the blockchain technology for the issuance or offering of securities by converting securities to the digital token format (securities token offering: STO) will enhance the efficiency and reduce the existing pain point. For example: 

  • Reducing the use of intermediaries where technology can replace them, which will help reduce cost;
  • The automated record process will help reduce the chance of errors from the use of manual systems;
  • The system can verify the ownership data in a real-time manner which will reduce the time required by the clearing and settlement system. This will help decrease the counterparty and settlement risks for investors;
  • The personal data record system on the blockchain that can limit the data access right will help make the identification process easier and faster, thereby making investment easier; and
  • Proactive supervision and auditing may be conducted more efficiently due to real-time data access.

      Investment aspect:  The current ecosystem limits the public to access investment in assets, especially illiquid assets, such as property, gold, and commodities. This is because it requires a large amount of money invested per unit and the service fees are high. One of the reasons may be due to the fact that the process accommodating investment in such assets is still inefficient, complicated, consisting of various procedures, and must be conducted through several intermediaries. Moreover, most of the processes are manually operated.

      The application of the blockchain technology for converting assets to the digital token format (asset-backed token/ tokenization) will enhance the efficiency of the operating or transaction processes and decrease the long-term cost in the same way as the benefits of STO. In addition, the asset-backed tokens that can be divided into smaller units will give investors an opportunity to have fractional ownership.

      What if we do nothing?

      If the regulation for using blockchain technology is still, it would be difficult to optimize the benefits of blockchain technology while other capital markets worldwide, maybe far more advanced in the application of blockchain. In such situation, the Thai capital market may be less efficient, lack product varieties, fail to connect with its peers and become less attractive. As a result, the real sector will face a higher funding cost in the Thai capital market. This will also reduce the opportunity for the public to access investment in varieties of assets. Moreover, it will cause regulatory arbitrage if the tokens whose substance is defined as securities under the Securities and Exchange Act cannot be regulated.

      How do we get there and where do we want to be?

      The SEC sees the necessity for supporting the application of technology to enhance efficiency and develop infrastructure and relevant processes to accommodate market digitalization. This will lead to better and more convenient services and enhancement of competitiveness of the capital market and the real sector. Necessary efforts include regulatory amendment to support conversion of assets to securities

 

 

      Key action plans

  • To eliminate regulatory obstacles that hinder the application of the Distributed Ledger Technology (DLT) to enhance the efficiency of the process of issuance and offering of existing securities such as equity instruments, debt instruments and investment units, and the process to accommodate asset-backed token transactions by:
  • Creating buy-in from the board/ management/ divisions/ agencies concerned to ensure that they are ready to welcome innovations while considering appropriate risks; and
  • Eliminating regulatory restrictions and establishing clear supervision criteria.
  • To establish cybersecurity
  • Enhancing intermediaries’ capacity to ensure they have appropriate cybersecurity operating systems in line with international standards, and be able to handle cyber-attacks efficiently. By cooperating with co-source, the SEC will inspect and assess risks and provide advice to prevent risks in accordance with the criteria for cybersecurity operating systems of the SEC; and
  • Increasing awareness and ensuring readiness of regulated entities through capacity building, especially at the board level and testing the handling of attacks in conjunction with market participants and other regulatory agencies, both at the sectoral and national levels.

 

 

 

 

 

 

 

D. Future of supervision

      Where are we now?

      The technological advancement creates an opportunity to maximize the benefit from the automatic data collection process and data analytics. Business operators may have the potential to tailor their service for various requirements of investors and the ability to expand services to a wider public with the reduced cost. Moreover, the behavior of general public has changed as they use online channels more frequently than ever to receive news faster. As a result, this information flow will force the intermediaries to act in the best interest for clients, otherwise the clients will switch to other players with better services. In addition, this helps the SEC to clearly understand the situations, and can forecast the trend of changes and risks accurately and in a timely manner, thereby facilitating better and more precise decisions. However, the key challenge is to understand new technologies such as AI, blockchain and smart contract, including the ability to manage and utilize data to fully manage risks that come with those technologies.

      Meanwhile, the law and regulations have been established based on the norms before technology became highly influential. As a result, the regulations cannot accommodate the circumstances that have changed. Moreover, the regulation amendment entails complex procedures and is time-consuming, which may be an obstacle to the private sector’s innovations. In addition, the features of FinTech are cross-border (foreign players can provide services to Thai people easily through mobile applications) and cross-industry (areas of services of each players in the financial sector may be under the supervision of several regulatory bodies). Therefore, there may be loopholes or overlapping supervision.

      What if we do nothing?

      If the SEC is unaware of technological advancement that has changed and cannot quickly adjust its regulations, the business operators may lose the opportunity to operate business and offer innovations, and as a result Thailand may lose an advantage. In addition, it may be unable to utilize technology in its supervision to be compatible with changes and manage risks that investors and financial systems may encounter in a timely manner.

      How do we get there and where do we want to be?

      The SEC aims to become a regulator that can quickly adapt to changes (adaptive regulator) and to use flexible and outcome-focused methods, as described below:

  • To be data-driven and utilize technology to increase efficiency of supervision (SupTech) such as conducing off-site monitoring based on analyzed and forecast data to detect fragility of systems and to encourage business operators to apply technology to increase efficiency and reduce compliance cost (RegTech);
  • To establish a framework for monitoring and managing risks related to FinTech, such as designing and preparing an automatic report submission system for business operators which are related to digital assets to ensure the availability of real-time data for detecting and preventing risks in a timely manner;
  • To comply with the capital market risk management framework that covers further risk management for traditional securities such as an automated risk monitoring system regarding debt instruments. In addition, risks related to digital assets and those outside the regulatory purview will be addressed to ensure that the capital market will be well equipped to respond promptly with appropriate measures to manage market risks including systemic risk;
  • To prepare the business continuity management (BCM) plan that connects the SEC internal preparation with those of external parties to ensure that the capital market will be ready for drills at the financial sector level;
  • To implement the regulatory reform by reviewing and revising the existing regulations to be more suitable for current circumstances and remove unnecessary burdens to reduce compliance cost for all related parties (regulatory guillotine);
  • To apply the mixed use of regulatory tools and utilize market force to drive for best practices such as communicating with business operators to adopt the “tone from the top” ethical leadership approach in the practice of putting investors first, and disclosing the SEC’s action (such as inspection results) to allow asset owners and influencers to utilize such information as an input for analyzing the business operators; and
  • To build a mechanism for rights protection and enforcement by supporting the use of class action for losses of retail investors.

 

E. Reform of regulations and regulators

      Where are we now?

      Currently, disruptive technology has an important role in changing the context of business operation of regulated bodies. With faster technological advancements come higher uncertainties and potential new forms of risks. In addition, technology has changed investors’ behaviors in many ways, for example, the choices of channel for receiving news and information and the preferred forms of data for decision making, as seen from the widespread and extensive use of social media. The SEC’s key challenge is to understand the effects of technological application on the regulatory objectives to meet higher expectations of different groups of stakeholders more efficiently without causing excessive burdens.

      What if we do nothing?

      The changes brought into the capital market by technology will inevitably affect the regulatory objectives. If traditional regulatory approaches continue, the SEC will not only face the risk of becoming non-adaptive but also the challenge of not achieving the intended outcome in a timely manner. Moreover, the regulatory inflexibility may lead to excessive burdens and obstacles to enhancement of market competitiveness, and eventually cause the public’s and the stakeholders’ confidence in the SEC and the capital market at large.   

      How do we get there and where do we want to be?

      The SEC realizes the necessity to develop its organizational foundation to support efficient supervision in the new context. Key focuses are the thinking process, the working methods and the mixed use of regulatory tools to create an appropriate balance between promotion of innovations and management of risks. This includes human resources development to ensure the SEC workforce proceed in accordance with corporate directions. In addition, the SEC plans to apply technology to increase operational efficiency and reduce costs for the organization and the business sector. However, the changing behaviors and expectations of stakeholders make it more important to establish a good communication with and engagement of stakeholders to better understand their behaviors and demands before appropriate policies and supervisory guidelines can be introduced. Key action plans are described below.

 

      Adaptive regulator

  • To push for a corporate culture with adaptive mindset, starting with redefining the core values to reflect the agility and becoming an adaptive regulator to create mutual understanding and push forward the “tone from the top” approach, and organizing various activities.
  • To apply the regulatory impact assessment (RIA) and design thinking to the issuance of measures. Three pilot projects have been conducted, namely (1) guidelines for protection of each category of investors; (2) encouragement of REIT governance; and (3) behavior of use of data to analyze securities of retail investors. A consultant from Thailand Development Research Institute (TDRI) was engaged to provide advice on analyses for 2019. The SEC will publicize the analysis method based on the RIA and design thinking process internally and apply them to the issuance of every key measure.


      Foundation for a digital organization

  • To develop digital infrastructure as the foundation for digital transformation by implementing the initiatives co-developed with the consultant (PwC) in the Enterprise Architecture (EA) project, which are divided into (1) strengthening business capabilities; (2) updating applications; and (3) IT infrastructure, including developing paperless, online services, machine readable and open data to provide convenience to and reduce the burden for users, both inside and outside the organization; and
  • To make data readily available to support data-driven supervision. The SEC has already created a data warehouse regarding mutual funds and debt instruments. In 2019, further development will be given to intermediaries and preparation of digital asset ecosystem database, including analysis on work processes suitable for data analytics to develop supporting tools;
  • To upgrade cybersecurity by hiring a specialist to assess the gap and provide recommendations for the preparation of a cybersecurity upgrade plan to meet the third level of cyber resilience standard, including identifying the sets of key data of the SEC to plan security for each level of significance.

      Engaged talent

  • Proactive recruitment and development of new staff members from the onboard stage. As the new generation needs new opportunities and challenges, the SEC is required to adjust its selection approach to be able to attract the new generation. For example, the adjustment of job description to further clarify the SEC’s roles and responsibilities, the adaptation of the selection method and public relations channels to be more in line with the behavior of the target groups and to make faster responses. This includes the preparation of an onboarding package for new staff members by assigning a direct supervisor as mentor to a new employee in the 1:1 ratio in the first year of service and requiring new staff members to complete a compulsory course through the learning management system (LMS) within three months. In addition, the manpower will be revised to be more flexible and the project-based manpower will be studied to ensure agility, to meet the targets and accommodate the corporate directions that can be adjusted.
  • To continue developing the skills of staff to accommodate the organization’s directions and retain talents to develop them into successors. For this, the regulatory school project has been continuously running to transfer and instill principles and concept of being a regulator. The training on regulatory school levels 1 and 2 was held and positive feedback was received from attending staff members. In 2019, the regulatory school level 3 course will be developed; the digital personnel development plan will be made; and training under the plan will be held. Moreover, the intranet will be redeveloped into a center for operational data and knowledge for employees. In addition, the performance management system (PMS) will be developed to have clearer targets and be consistent with the organization’s directions, allowing all levels of evaluation and creating positive feedback culture, for further development. With respect to succession planning, there is adequate information for the preparation of successors to accommodate 100% of strategic positions and a successor pool will be prepared.




      Strengthened organizational foundation

  • To proactively engage the stakeholders. The SEC has been adjusting the methods and channels for communication with investors and stakeholders. For example, using social media and making video clips and infographics to be compatible with the lifestyle of recipients of information and to be easily understood. In 2019, the SEC will upgrade its website to be more consistent with user experience (UX) and will build a good relationship with influencers on various issues to help communicate significant issues. With respect to the handling of complaints, FAQs will be made, an automated system will be used and trends will be analyzed for the distribution of warning signs. It will also study additional tools or channels to ensure that complaints will be addressed more efficiently.
  • To develop corporate governance and risk management. The SEC gave approval for an external assessor to evaluate the duty performance of the SEC and the Audit Committee (on an overall committee basis). The evaluation results and Guide to Action were reported and will be used by the SEC as guidelines for preparing the development plan for the SEC Board. In addition, the SEC participated in the Integrity and Transparency Assessment (ITA) of government agencies under the project of the Office of the National Anti-Corruption Commission (NACC). Regarding management of corporate risks, the risk management framework will be upgraded to be in line with the COSO ERM 2017 standards to ensure that risk management will be more efficient and meet international standards.

 

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The application of the blockchain technology for the issuance or offering of securities by converting securities to the digital token format (securities token offering: STO) will enhance the efficiency and reduce the existing pain point. For example: 

  • Reducing the use of intermediaries where technology can replace them, which will help reduce cost;

  • The automated record process will help reduce the chance of errors from the use of manual systems;

  • The system can verify the ownership data in a real-time manner which will reduce the time required by the clearing and settlement system. This will help decrease the counterparty and settlement risks for investors;

  • The personal data record system on the blockchain that can limit the data access right will help make the identification process easier and faster, thereby making investment easier; and

  • Proactive supervision and auditing may be conducted more efficiently due to real-time data access.

Investment aspect:  The current ecosystem limits the public to access investment in assets, especially illiquid assets, such as property, gold, and commodities. This is because it requires a large amount of money invested per unit and the service fees are high. One of the reasons may be due to the fact that the process accommodating investment in such assets is still inefficient, complicated, consisting of various procedures, and must be conducted through several intermediaries. Moreover, most of the processes are manually operated.

The application of the blockchain technology for converting assets to the digital token format (asset-backed token/ tokenization) will enhance the efficiency of the operating or transaction processes and decrease the long-term cost in the same way as the benefits of STO. In addition, the asset-backed tokens that can be divided into smaller units will give investors an opportunity to have fractional ownership.


What if we do nothing?

If the regulation for using blockchain technology is still, it would be difficult to optimize the benefits of blockchain technology while other capital markets worldwide, maybe far more advanced in the application of blockchain. In such situation, the Thai capital market may be less efficient, lack product varieties, fail to connect with its peers and become less attractive. As a result, the real sector will face a higher funding cost in the Thai capital market. This will also reduce the opportunity for the public to access investment in varieties of assets. Moreover, it will cause regulatory arbitrage if the tokens whose substance is defined as securities under the Securities and Exchange Act cannot be regulated.


How do we get there and where do we want to be?

The SEC sees the necessity for supporting the application of technology to enhance efficiency and develop infrastructure and relevant processes to accommodate market digitalization. This will lead to better and more convenient services and enhancement of competitiveness of the capital market and the real sector. Necessary efforts include regulatory amendment to support conversion of assets to securities

 

Key action plans

  • To eliminate regulatory obstacles that hinder the application of the Distributed Ledger Technology (DLT) to enhance the efficiency of the process of issuance and offering of existing securities such as equity instruments, debt instruments and investment units, and the process to accommodate asset-backed token transactions by:

    • Creating buy-in from the board/ management/ divisions/ agencies concerned to ensure that they are ready to welcome innovations while considering appropriate risks; and

    • Eliminating regulatory restrictions and establishing clear supervision criteria.

  • To establish cybersecurity

    • Enhancing intermediaries' capacity to ensure they have appropriate cybersecurity operating systems in line with international standards, and be able to handle cyber-attacks efficiently. By cooperating with co-source, the SEC will inspect and assess risks and provide advice to prevent risks in accordance with the criteria for cybersecurity operating systems of the SEC; and

    • ​Increasing awareness and ensuring readiness of regulated entities through capacity building, especially at the board level and testing the handling of attacks in conjunction with market participants and other regulatory agencies, both at the sectoral and national levels. 

 

D.Future of supervision

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Where are we now?

The technological advancement creates an opportunity to maximize the benefit from the automatic data collection process and data analytics. Business operators may have the potential to tailor their service for various requirements of investors and the ability to expand services to a wider public with the reduced cost. Moreover, the behavior of general public has changed as they use online channels more frequently than ever to receive news faster. As a result, this information flow will force the intermediaries to act in the best interest for clients, otherwise the clients will switch to other players with better services. In addition, this helps the SEC to clearly understand the situations, and can forecast the trend of changes and risks accurately and in a timely manner, thereby facilitating better and more precise decisions. However, the key challenge is to understand new technologies such as AI, blockchain and smart contract, including the ability to manage and utilize data to fully manage risks that come with those technologies.

Meanwhile, the law and regulations have been established based on the norms before technology became highly influential. As a result, the regulations cannot accommodate the circumstances that have changed. Moreover, the regulation amendment entails complex procedures and is time-consuming, which may be an obstacle to the private sector's innovations. In addition, the features of FinTech are cross-border (foreign players can provide services to Thai people easily through mobile applications) and cross-industry (areas of services of each players in the financial sector may be under the supervision of several regulatory bodies). Therefore, there may be loopholes or overlapping supervision.


What if we do nothing?

If the SEC is unaware of technological advancement that has changed and cannot quickly adjust its regulations, the business operators may lose the opportunity to operate business and offer innovations, and as a result Thailand may lose an advantage. In addition, it may be unable to utilize technology in its supervision to be compatible with changes and manage risks that investors and financial systems may encounter in a timely manner.


How do we get there and where do we want to be?

The SEC aims to become a regulator that can quickly adapt to changes (adaptive regulator) and to use flexible and outcome-focused methods, as described below:

  • To be data-driven and utilize technology to increase efficiency of supervision (SupTech) such as conducing off-site monitoring based on analyzed and forecast data to detect fragility of systems and to encourage business operators to apply technology to increase efficiency and reduce compliance cost (RegTech);

  • To establish a framework for monitoring and managing risks related to FinTech, such as designing and preparing an automatic report submission system for business operators which are related to digital assets to ensure the availability of real-time data for detecting and preventing risks in a timely manner;

  • To comply with the capital market risk management framework that covers further risk management for traditional securities such as an automated risk monitoring system regarding debt instruments. In addition, risks related to digital assets and those outside the regulatory purview will be addressed to ensure that the capital market will be well equipped to respond promptly with appropriate measures to manage market risks including systemic risk;

  • To prepare the business continuity management (BCM) plan that connects the SEC internal preparation with those of external parties to ensure that the capital market will be ready for drills at the financial sector level;

  • To implement the regulatory reform by reviewing and revising the existing regulations to be more suitable for current circumstances and remove unnecessary burdens to reduce compliance cost for all related parties (regulatory guillotine);

  • To apply the mixed use of regulatory tools and utilize market force to drive for best practices such as communicating with business operators to adopt the “tone from the top" ethical leadership approach in the practice of putting investors first, and disclosing the SEC's action (such as inspection results) to allow asset owners and influencers to utilize such information as an input for analyzing the business operators; and

  • To build a mechanism for rights protection and enforcement by supporting the use of class action for losses of retail investors.

 

E.Reform of regulations and regulators​

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Where are we now?

Currently, disruptive technology has an important role in changing the context of business operation of regulated bodies. With faster technological advancements come higher uncertainties and potential new forms of risks. In addition, technology has changed investors' behaviors in many ways, for example, the choices of channel for receiving news and information and the preferred forms of data for decision making, as seen from the widespread and extensive use of social media. The SEC's key challenge is to understand the effects of technological application on the regulatory objectives to meet higher expectations of different groups of stakeholders more efficiently without causing excessive burdens.


What if we do nothing?

The changes brought into the capital market by technology will inevitably affect the regulatory objectives. If traditional regulatory approaches continue, the SEC will not only face the risk of becoming non-adaptive but also the challenge of not achieving the intended outcome in a timely manner. Moreover, the regulatory inflexibility may lead to excessive burdens and obstacles to enhancement of market competitiveness, and eventually cause the public's and the stakeholders' confidence in the SEC and the capital market at large.   


How do we get there and where do we want to be?

The SEC realizes the necessity to develop its organizational foundation to support efficient supervision in the new context. Key focuses are the thinking process, the working methods and the mixed use of regulatory tools to create an appropriate balance between promotion of innovations and management of risks. This includes human resources development to ensure the SEC workforce proceed in accordance with corporate directions. In addition, the SEC plans to apply technology to increase operational efficiency and reduce costs for the organization and the business sector. However, the changing behaviors and expectations of stakeholders make it more important to establish a good communication with and engagement of stakeholders to better understand their behaviors and demands before appropriate policies and supervisory guidelines can be introduced. Key action plans are described below.

 

Adaptive regulator

  • To push for a corporate culture with adaptive mindset, starting with redefining the core values to reflect the agility and becoming an adaptive regulator to create mutual understanding and push forward the “tone from the top" approach, and organizing various activities.

  • To apply the regulatory impact assessment (RIA) and design thinking to the issuance of measures. Three pilot projects have been conducted, namely (1) guidelines for protection of each category of investors; (2) encouragement of REIT governance; and (3) behavior of use of data to analyze securities of retail investors. A consultant from Thailand Development Research Institute (TDRI) was engaged to provide advice on analyses for 2019. The SEC will publicize the analysis method based on the RIA and design thinking process internally and apply them to the issuance of every key measure.


​Foundation for a digital organization

  • To develop digital infrastructure as the foundation for digital transformation by implementing the initiatives co-developed with the consultant (PwC) in the Enterprise Architecture (EA) project, which are divided into (1) strengthening business capabilities; (2) updating applications; and (3) IT infrastructure, including developing paperless, online services, machine readable and open data to provide convenience to and reduce the burden for users, both inside and outside the organization; and

  • To make data readily available to support data-driven supervision. The SEC has already created a data warehouse regarding mutual funds and debt instruments. In 2019, further development will be given to intermediaries and preparation of digital asset ecosystem database, including analysis on work processes suitable for data analytics to develop supporting tools;

  • To upgrade cybersecurity by hiring a specialist to assess the gap and provide recommendations for the preparation of a cybersecurity upgrade plan to meet the third level of cyber resilience standard, including identifying the sets of key data of the SEC to plan security for each level of significance.

Engaged talent

  • Proactive recruitment and development of new staff members from the onboard stage. As the new generation needs new opportunities and challenges, the SEC is required to adjust its selection approach to be able to attract the new generation. For example, the adjustment of job description to further clarify the SEC's roles and responsibilities, the adaptation of the selection method and public relations channels to be more in line with the behavior of the target groups and to make faster responses. This includes the preparation of an onboarding package for new staff members by assigning a direct supervisor as mentor to a new employee in the 1:1 ratio in the first year of service and requiring new staff members to complete a compulsory course through the learning management system (LMS) within three months. In addition, the manpower will be revised to be more flexible and the project-based manpower will be studied to ensure agility, to meet the targets and accommodate the corporate directions that can be adjusted.

  • To continue developing the skills of staff to accommodate the organization's directions and retain talents to develop them into successors. For this, the regulatory school project has been continuously running to transfer and instill principles and concept of being a regulator. The training on regulatory school levels 1 and 2 was held and positive feedback was received from attending staff members. In 2019, the regulatory school level 3 course will be developed; the digital personnel development plan will be made; and training under the plan will be held. Moreover, the intranet will be redeveloped into a center for operational data and knowledge for employees. In addition, the performance management system (PMS) will be developed to have clearer targets and be consistent with the organization's directions, allowing all levels of evaluation and creating positive feedback culture, for further development. With respect to succession planning, there is adequate information for the preparation of successors to accommodate 100% of strategic positions and a successor pool will be prepared.

      

Strengthened organizational foundation

  • To proactively engage the stakeholders. The SEC has been adjusting the methods and channels for communication with investors and stakeholders. For example, using social media and making video clips and infographics to be compatible with the lifestyle of recipients of information and to be easily understood. In 2019, the SEC will upgrade its website to be more consistent with user experience (UX) and will build a good relationship with influencers on various issues to help communicate significant issues. With respect to the handling of complaints, FAQs will be made, an automated system will be used and trends will be analyzed for the distribution of warning signs. It will also study additional tools or channels to ensure that complaints will be addressed more efficiently.

  • To develop corporate governance and risk management. The SEC gave approval for an external assessor to evaluate the duty performance of the SEC and the Audit Committee (on an overall committee basis). The evaluation results and Guide to Action were reported and will be used by the SEC as guidelines for preparing the development plan for the SEC Board. In addition, the SEC participated in the Integrity and Transparency Assessment (ITA) of government agencies under the project of the Office of the National Anti-Corruption Commission (NACC). Regarding management of corporate risks, the risk management framework will be upgraded to be in line with the COSO ERM 2017 standards to ensure that risk management will be more efficient and meet international standards.

 SEC Strategic Plan 2019 - 2021

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For More Information

Strategy and International Affairs Department

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