Bangkok, November 19, 2014 - The SEC organized ?5th SEC Working Papers Forum?, presented two research papers addressing ?Behavioral Finance and Regulations Who won and Who lost?? The studies found that rationale is not the only factor influencing investment decision making while the regulator should put in place proper regulations to protect investors and provide appropriate investment alternatives.

Dr. Vorapol Socatiyanurak, SEC Secretary-General said that the 5th SEC Working Papers Forum, organized by SEC Research Department, presented the papers based on the Behavioral Finance theory. The researchers studied investors? attitudes and behaviors used by capital market intermediaries and business operators in the course of their businesses. The papers showed that investors do not always make rational investment decisions but their decisions are usually influenced by several factors and restrictions; emotion, beliefs and biases, for example. Those factors and restrictions cause investors to choose the easiest and most convenient option. Thus, often the decisions are made irrationally while several times biases are allowed to distort the decisions. Decision making usually involves with three aspects of biases comprising (1) emotional or preference biases: focusing on present rather than future incidents; (2) belief bias: making conclusion based on too small sample size while associated risks are underestimated and (3) familiarity bias: making decision based on familiarity such as investing in the firm for which the investor is working.

As the regulator, the SEC has put more weight on behavioral finance in issuing the regulations. For instance, the regulations governing investment consultants and investment planners making direct contact to the customers have been strengthened by requiring that those personnel must be equipped with knowledge, capability and approved by the SEC. The business operators must apply necessary assessment procedures to ensure that their investment consultants have strong financial product knowledge. Moreover, financial product advertisements are subject to the regulations so the advertisements must not distract or lure the customers and cause misleading about their investment objectives.

While suitability test has been introduced to help investors realize whether the investment suits them, an investment consultant will give investor the advice on asset allocation along with the service matching investment objective of each investor. Additionally, the SEC has recently raised the bar by requiring that the said advice and service must be provided by an approved investment planner, classified as a new category of regulated capital market personnel.