"Self-regulation" for Thailand's capital markets?
1.36 billion baht in luxury cars disappear along with company chairman,
stock plunges 90%
By Jon Fernquest
The idea of self-regulating
securities exchanges pioneered
by London's AIM and Singapore's Catalist
has been suggested recently for Thailand's capital markets.(Read article on self-regulation and another recent article on stock price manipulation).
The events that have transpired over the last couple of weeks at auto importer SEC Auto Sales and Service (SECC) may well prove that this idea is still premature for Thailand's capital markets.
The company's business is importing luxury cars and 476 of those cars are missing from their warehouse.
The chairman of the company (Sompong Witthayaraksan above) allegedly gave the company's cars to people he personally owed money to, to settle personal debts.
Then after the cars disappeared, Mr. Sompong disappeared, allegedly fleeing the country with large amounts of cash.
The initial estimate for losses is 1.36 billion baht (60% of total company assets).
The value of the SET-listed company dropped 90% in one month.
(See photo on right of Mr. Sompong offering a toast of champagne at the 2006 ceremony that marked the listing of his company on SET).
self-regulating securities
exchanges - a less formal and
lower cost form of regulation for the trading of stocks,
bonds, futures and other securities, follows the SRO
(self-regulating organisation) model
SRO (self-regulating organisation) - a non-government organization (NGO) with legal authority to regulate its own members through rules for fair, ethical and efficient practices, in the US the NASDAQ stock exchange is a self-regulating organisation (Source: Investorwords)
pioneered by - were the first to do
London's AIM, London's Alternative Investment Market (AIM) - a sub-market of the London Stock Exchange, allowing smaller companies to float shares with a more flexible regulatory system than is applicable to the main market (See Wikipedia)
Singapore's Catalist - new securities exchange in Singapore using the self-regulation model pioneered by AIM (See website)
capital markets - a market where medium and long-term investments such as stocks and bonds are traded (See Wikipedia)
events transpired - events happened
premature - too early
allegedly - claimed but not yet proven
offering a toast - while alcoholic beverages such as wine or champagne when everyone raises their glasses together to wish someone good luck
a listed company (on SET) - when a company's stock is publicly traded on the SET stock exchange (when this happens the company is required to make a lot of information public and follow special regulations)
SRO (self-regulating organisation) - a non-government organization (NGO) with legal authority to regulate its own members through rules for fair, ethical and efficient practices, in the US the NASDAQ stock exchange is a self-regulating organisation (Source: Investorwords)
pioneered by - were the first to do
London's AIM, London's Alternative Investment Market (AIM) - a sub-market of the London Stock Exchange, allowing smaller companies to float shares with a more flexible regulatory system than is applicable to the main market (See Wikipedia)
Singapore's Catalist - new securities exchange in Singapore using the self-regulation model pioneered by AIM (See website)
capital markets - a market where medium and long-term investments such as stocks and bonds are traded (See Wikipedia)
events transpired - events happened
premature - too early
allegedly - claimed but not yet proven
offering a toast - while alcoholic beverages such as wine or champagne when everyone raises their glasses together to wish someone good luck
a listed company (on SET) - when a company's stock is publicly traded on the SET stock exchange (when this happens the company is required to make a lot of information public and follow special regulations)
Fake share certificates were also allegedly used to cheat investors.
Shares of SECC were suspended from trade on Dec 4 after the SEC directed the company to undergo a special independent audit of its assets, liabilities and auto inventory. The SEC ordered the company to disclose the results of the audit by Dec 30.
At least one mysterious rumour is circulating: "Mr Sompong...might have spent a lot of money contesting the government's NGV bus tender but suffered a heavy loss. The project has been postponed indefinitely amid allegations of poor transparency and corruption."
share certificates - the
official document that proves ownership of stock shares
fake share certificates - share certificates that are not real (the holder has been cheated and does not really own shares)
an audit - an official examination of the the financial records of a company to make sure they are accurate
an independent audit - when an unrelated firm audits a company (being unrelated they have no incentive or reason to not tell the truth)
a rumour is circulating - people are talking about some unofficial information that may or may not be true
a tender - a formal offer to supply goods or a service at a given price (See glossary)
contesting - two or more people are competing to get something that not everyone can have, competing for a scarce thing
contesting the government's NGV bus tender - a scheme under the administration of Prime Minister Samak in which the city of Bangkok would lease new buses for a period of time
postponed indefinitely - delayed until a future time not known yet (will do it in the future but don't know when)
X amid Y - event X happened while Y was happening
transparency - details are made public (no secrets or hidden private aspects)
allegations of poor transparency - people have claimed there are hidden aspects and secrets that the public doesn't know about
fake share certificates - share certificates that are not real (the holder has been cheated and does not really own shares)
an audit - an official examination of the the financial records of a company to make sure they are accurate
an independent audit - when an unrelated firm audits a company (being unrelated they have no incentive or reason to not tell the truth)
a rumour is circulating - people are talking about some unofficial information that may or may not be true
a tender - a formal offer to supply goods or a service at a given price (See glossary)
contesting - two or more people are competing to get something that not everyone can have, competing for a scarce thing
contesting the government's NGV bus tender - a scheme under the administration of Prime Minister Samak in which the city of Bangkok would lease new buses for a period of time
postponed indefinitely - delayed until a future time not known yet (will do it in the future but don't know when)
X amid Y - event X happened while Y was happening
transparency - details are made public (no secrets or hidden private aspects)
allegations of poor transparency - people have claimed there are hidden aspects and secrets that the public doesn't know about
SEC statement
The director of the Security and Exchange Commission (SEC), responsible for oversight and regulation of firms listed on the Stock Exchange of Thailand, made the following comments this week:SEC secretary-general
Thirachai Phuvanatnaranubala said the audit had made "significant
progress", and that the results would be announced soon.
Criminal prosecutions of responsible parties would also be taken, he said.
He added that the company's directors and audit committee members also had a fiduciary duty to protect the interests of the company and its stakeholders.
"On Dec 15, the SEC submitted a letter to all SECC directors and audit committee members stressing the importance of having to comply with the SEC's directives," Mr Thirachai said, adding that failure to do so was a criminal offence under the SEC Act.
Allegations that fake SECC share certificates were used to cheat investors are also being reviewed.
Mr Thirachai said the law did not require listed companies to use a scripless system for registering share ownership, and that fake shares could only be discovered when investors tried to register the shares with the Thailand Securities Depository.
"The SEC and the TSD are considering ways of addressing the problem, including possibly requiring shares of listed companies to enter the scripless system," Mr Thirachai said.
Criminal prosecutions of responsible parties would also be taken, he said.
Securities
and Exchange Commission (SEC) - the government agency that
protects the public from malpractice in securities and financial markets
oversight - ensuring that something works well (See glossary)
progress - the process of developing and improving
made significant progress - have improved and developed a lot
criminal prosecutions - officially accusing someone of a crime and asking a court to determine whether they are guilty
responsible parties - the people who did (were responsible for) the illegal activities
oversight - ensuring that something works well (See glossary)
progress - the process of developing and improving
made significant progress - have improved and developed a lot
criminal prosecutions - officially accusing someone of a crime and asking a court to determine whether they are guilty
responsible parties - the people who did (were responsible for) the illegal activities
He added that the company's directors and audit committee members also had a fiduciary duty to protect the interests of the company and its stakeholders.
"On Dec 15, the SEC submitted a letter to all SECC directors and audit committee members stressing the importance of having to comply with the SEC's directives," Mr Thirachai said, adding that failure to do so was a criminal offence under the SEC Act.
company's directors - the
board of directors of a company, the small group of people who create
the high level policy and strategy for a company and also make
appointments of high level managers,
the people who do "corporate
governance" (See
Wikipedia)
fiduciary duty - a relationship based on trust in which one person manages money or property for another (See glossary)
stakeholders - a person who gains or loses according to whether what the business does and whether it succeeds, owners and shareholders are only one stakeholder, employees and the public in general are considered stakeholders under modern ideas of corporate governance (See Wikipedia)
comply - follow and obey rules and regulations
directives - official orders
comply with directives - follow and obey official orders
fiduciary duty - a relationship based on trust in which one person manages money or property for another (See glossary)
stakeholders - a person who gains or loses according to whether what the business does and whether it succeeds, owners and shareholders are only one stakeholder, employees and the public in general are considered stakeholders under modern ideas of corporate governance (See Wikipedia)
comply - follow and obey rules and regulations
directives - official orders
comply with directives - follow and obey official orders
Allegations that fake SECC share certificates were used to cheat investors are also being reviewed.
Mr Thirachai said the law did not require listed companies to use a scripless system for registering share ownership, and that fake shares could only be discovered when investors tried to register the shares with the Thailand Securities Depository.
"The SEC and the TSD are considering ways of addressing the problem, including possibly requiring shares of listed companies to enter the scripless system," Mr Thirachai said.
share certificates -
the official document that proves ownership of stock shares
a scripless system for registering share ownership - securities trading where only book entries represent the security holding and settlement, and no physical certificate is issued or exchanged
fake shares - share certificates that are not real (the holder has been cheated and does not really own shares)
Thailand Securities Depository (TSD) - a company owned by SET that clears and settles stock market buy and sell transactions, also in charge of registering shares (See website and description at SET)
register the shares with the Thailand Securities Depository - when shares are officially registered with TSD then ownership becomes official
a scripless system for registering share ownership - securities trading where only book entries represent the security holding and settlement, and no physical certificate is issued or exchanged
fake shares - share certificates that are not real (the holder has been cheated and does not really own shares)
Thailand Securities Depository (TSD) - a company owned by SET that clears and settles stock market buy and sell transactions, also in charge of registering shares (See website and description at SET)
register the shares with the Thailand Securities Depository - when shares are officially registered with TSD then ownership becomes official
(Source # 1: Bangkok Post, business, MARKETS & GOVERNANCE: SECC fraud lawsuits looming, NUNTAWUN POLKUAMDEE, link)
(Source # 2: Bangkok Post, business, 02-12-08, SECC gauges damage after founder flees, Shareholder meeting to appoint new board, SANTAN SANTIVIMOLNAT, link)
(Source # 3: Bangkok Post, business, 09-12-08, SECC loses B1.36bn, 476 cars missing, DARANA CHUDASRI, link)
