Get investigated by the SEC
then sue them, best strategy?
By Jon Fernquest |
Can government regulators really do their job if they face the risk of getting sued by powerful rich people who don't want to be investigated?
Today's Bangkok Post business section looks at how Thailand's Securities Exchange Commission gets sued and how this affects the job that they do on behalf of the public.
The SEC hasn't been able to carry out its mandate of protecting the public from malpractice in securities and financial markets.
(See photo on right of Thirachai Phuvanatnaranubala SEC Secretary General)
"Over its 15 year history, the SEC has had a dismal record in criminal enforcement of the securities law, with high-profile cases such as the 1994 alleged manipulation of Bangkok Bank of Commerce shares by speculator Song Vatcharasriroj or the 2005 accounting scandal at Picnic Corp both failing to reach guilty verdicts in the court."
(See photo on right below of Rakesh Saxena wanted in connection with the Bangkok Bank of Commerce scandal of 1996)
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However, the SEC powers to get their job done are very limited. They can only initiate complaints and pass them on to the police for investigation:
"SEC officials privately say it is unfair to accuse the organisation of being a "paper tiger", as it was empowered only to file complaints which must then be investigated by the Department of Special Investigation and prosecutors before even reaching the courts."
SEC staff have even had to defend themselves against criminal charges for cases they have initiated.
In one high profile case, after charges were dropped in a case initiated by the SEC, the accused felt they were then justified in sueing SEC staff members for even bringing the case against them in the first place.
The absurdity of this can seen by comparing it with normal law enforcement. When a person is arrested for a crime the police are not 100% certain the person is guilty. That is what the trial is for!
"In 2006, Thosapong Jaruthavee, a former managing director of Natural Park, filed criminal charges against Mr Thirachai [SEC secretary-general] and five other SEC officials for negligence.The case came after the Criminal Court dropped charges filed by the SEC that Natural Park executives had violated securities regulations by concealing the company's rights to buyback assets from the Thai Asset Management Corp.
The buyback rights were transferred to a third party, resulting in lost benefits for Natural Park. Company management had failed to notify the board of directors about the purchase rights. The SEC filed a criminal complaint against Mr Thosapong and other Natural Park executives in 2004."
Apparently, it's even possible to avoid an audit by sueing the SEC!
A related case has been brought by Power-P against Mr Thirachai at the Administrative Court. Power-P asked the court to withdraw an SEC order directing the firm to undergo a special audit and restate its financial statements.
IF SEC staff are to do their job effectively they need the same immunities granted to other government officials:
The Securities and Exchange Commission will ask Finance Minister Surapong Suebwonglee to offer legal protection to securities regulators in the conduct of their duties. Failure to offer protection would demoralise SEC staff and potentially affect its future performance, said Thirachai Phuvanatnaranubala, the SEC secretary-general..."It's a very uncomfortable situation for SEC staff. I and other officials must go to court during the hearing phase, and it's the first case that we have seen where charges have been filed in recrimination," Mr Thirachai said.
He noted that civil servants in other agencies enjoyed legal protection in the conduct of their duties. Charges are not brought directly against a state official, but must be made through independent organisations such as the National Counter Corruption Commission.
"I think that as the SEC is also a state organisation, it deserves legal protection when it conducts its duties," Mr Thirachai said.
(Source: Bangkok Post, business section, 29-02-08, page B2, Nuntawun Polkuamdee, temp-link)
Vocabulary:
Securities Exchange Commission (SEC) - the government agency that protects the public from malpractice in securities and financial markets
on behalf of Y - for Y, for the benefit of Y
malpractice - breakign the laws, rules, or standards of a profession for personal gain (for example, a stock broker violates securities regulations to cheat their customers)
a mandate - the authority to carry out a particular government task
carry out a mandate - carry out a particular government task with authority to do so
had a dismal record - performed very poorly
high-profile cases - very important legal cases that everyone knows about
Bangkok Bank of Commerce - a bank whose illegal activities allegedly contributed to the 1997 crisis, "in 1989 Saxena became advisor to Krirk-kiat Jalichandra, new senior vice-president of Bangkok Bank of Commerce. The bank tried hostile takeovers against many of the large Thai companies that traded publicly on the stock exchange. According to later investigation, it also gave cheap loans to various Thai public officials and politicians, Bangkok Bank of Commerce collapsed in 1996 and the Bank of Thailand took it over. The collapse contributed to the Asian financial recession, economic and political crisis and the 1997 devaluation of the baht" (See Wikipedia on Bangkok Bank of Commerce)
alleged - might be true but not yet proven
manipulation - skillfully and dishonestly force or persuade people to do what you want for your personal gain
a criminal complaint - a written statement of the facts alleging that a crime has been committed by someone
filed a criminal complaint - officially submitted to the government for evaluation and possible prosecution
initiate complaints - same as "file a criminal complaint" above
filed criminal charges - same as file a "criminal complaint above"
dropped charges - government decides to not prosecute the criminal case
prosecute a case, prosecution - when a trial is held to judge whether someone is guilty of a crime, the prosecutor presents evidence to show guilt
absurdity - something that is ridiculous and does not make sense (nonsense)
negligence - failed to do what was necessary, being incompetent (for example, hitting a person while watching TV while driving)
concealing - hiding, keeping secret
immunities - protected from, exempt from (for example, witnesses were granted immunities in exchange for information)
immunities granted - givign someone an exemption or protection
in the conduct of their duties - while they are doing their job
in recrimination - in retaliation, trying to punish someone for something they did to you
