SEC hopes to push for Stock Exchange of Thailand board reform

Rage Comment : Recently, the US Securities and Exchange Commission submitted an application to change the members of the board of directors of the Stock Exchange of Thailand as a reform measure, increasing the seats of the SEC and reducing the seats nominated by other institutions. Last year, the SEC fined several corporate executives for illegal trading activities, which made the commission hope to strengthen its work in this area through internal reorganization. And SEC Secretary-General Rapee Sucharitakul pointed out that this is also to prepare for the emerging blockchain technology.

Translation: Annie_Xu

In order to promote stock exchange reforms, the Securities and Exchange Commission (SEC) has applied to the Ministry of Finance to increase the number of seats on the Stock Exchange of Thailand (SET) board of directors from five to six.

If the board reform plan is approved, the number of SET board members nominated by brokers will drop from five to four.

SEC Secretary General Rapee Sucharitakul said stock market participants - the Association of Investment Management Companies and the Government Pension Fund, as well as other institutional and retail investors - nominate board members within the limits set by the regulator; the SEC board is responsible for selecting "public directors."

"The board's operating model will not change. This time, only the way of appointing board members and the ratio between public directors and broker-nominated directors will be modified."

The SET board of directors has 11 directors, five of whom are currently appointed by the SEC, five are selected by brokers, and one is the SET chairman. The directors elect the SET chairman from among themselves.

The Board of Directors is responsible for electing the Chairman of the SET and is also involved in decision-making on the development direction of the SET and determining the implementation steps for the formulation of stock exchange policies and operational supervision.

The SEC will then push for capital reform. Since taking office in May last year, Rapee has been committed to addressing the SEC's to-do list, including allegations of unfair securities trading by executives and board members of listed companies, and strengthening law enforcement efforts.

At the end of 2015, the SEC imposed a combined fine of 33.3 million baht on three executives of 7-Eleven convenience store operator CP All Plc and one executive of True Corporation Plc for using insider information for personal gain. Before CP All Plc announced its acquisition of Siam Makro Plc at above-market prices, CP All Plc Executive Chairman Korsak Chairasmisak, Deputy Executive Chairman Piyawat Titasattavorakul, Deputy Chairman Pittaya Jearavisitkul and True's Deputy Chairman Athueck Asvanund used this insider information to buy the company's shares in advance.

After the incident, people called for severe punishment of executives and board members of listed companies who participated in unfair transactions.

Rapee said that as per SEC's suggestion, SET will still not hold shares nor implement demutualization.

"This reform is just to clarify the regulatory approach and SET's responsibilities."

The SEC's proposal is one of three options being discussed by the Federation of Thai Capital Market Organizations and the Finance Ministry's Capital Market Development Committee after Finance Minister Apisak Tantivorawong proposed increasing transparency in the stock exchange's ownership structure to make it more competitive, including government holdings.

The SEC's proposal is one of the draft bills governing the SET, which has been deferring to Thailand's Fiscal Policy Office for its opinion. If the finance minister agrees to the amendments, the bill will be submitted to the cabinet and then reviewed by the National Legislative Assembly.

Rapee Sucharitakul

The SEC also proposed allocating 8 billion baht from the SET Capital Market Development Fund to improve people's financial literacy and increase the efficiency of the capital market workforce, Rapee said.

The draft also requires the SEC to execute securities trading orders from outsiders of the SET in preparation for emerging blockchain technology development; this would allow stock exchanges to distribute trading orders among brokers without going through an intermediary.

Although Rapee insisted that the reform was intended to embrace blockchain technology, it would inevitably bring risks to the SET because it would lose its monopoly advantage. He said the SET realized that blockchain would change its business operations and had to make adjustments.

"The reform is to prevent any obstruction. How the parties adjust and deal with the technology is up to them."

The SEC retains its responsibility to monitor and investigate unusual stock transactions.