The 6th International Conference
on Financial Criminology
“Economic Crimes in the 21st Century”
Supa Thamthitivat
Director, Enforcement Department
Securities and Exchange Commission, Thailand
5th September 2014
Rangsit University, Thailand
The views expressed in this presentation are those of the presenter and do not necessarily
represent the opinion of the Securities and Exchange Commission, Thailand
Agenda
• Regulatory Structure in Thai Capital Market
• Facts about Listed Company in Thailand
• Enforcement Program: Today and Future
• Recent Court Decision
2
SEC’s Roles in Capital Market
Balancing Role
Market Development
to Meet Economic
Needs
Market Integrity
& Long-Term
Sustainability
Competitiveness
Investor Protection
Inclusive Growth
Fair & Orderly Market
Accessibility
& Efficiency
Reducing
Systemic Risk
3
Regulatory Structure in Thai Capital Market
Company Law
(MoC)
General Welfare
of Company
• Company’s set up
• Shareholder’s rights
• Director’s duties
• Company’s book &
record
Securities &
Exchange Law
(SEC)
Raising Fund
from Public
• Merit approval
• On-going disclosure
• Enhance good
corporate governance
• Investor protection
Exchange Rule
(SET)
Listing on the
Exchange
• Full, accurate and
timely disclosure
• Fair, transparent and
orderly market
4
Three Wheels of Discipline in Capital Market
Self
Discipline
 Prevention
 Monitoring
Market
Discipline
Regulatory
Discipline
 Enforcement
5
Mechanism Available
Self
Market
Regulation
Shareholder’s Meeting
(Ordinary/Extraordinary)
 exercise voting rights
 ask director to
answer or explain
Company Disclosure Obligation
 Financial statement (quarterly/annually)
 Non-financial statement (annually)
 Others (upon major event)
Right to Vote in Corporate
Action which affects
Company Fundamental
Structure
Related Party Transaction Procedures
Auditor’s Report
Public Notice Issued by Exchange or Regulator
Opinion of Independent
Director / Audit Committee
Investing in company
with good CG, AntiCorruption Practice, etc.
Shareholder’s Action
 Derivatives action
 Direct action
Deterring Measures
 Trading
Suspension
 Delist
 CG Awards
Enforcement Tools
 Administrative
 Criminal
6
Facts about Shareholder’s Structure
in Thai Listed Company
Family businesses in Asia, 2011
India
67%
Phillippines
66%
Thailand
66%
Singapore
63%
Malaysia
62%
Indonesia
61%
Hong Kong, China
62%
South Korea
58%
o Top 50 companies account for
76.5% of total market capitalization
o Majority of companies listed on the
Exchange are small/medium size
o Average free float on the market is
47% (Only 139 companies have
free float > 50%)
o 66% of companies are familycontrolled business
Chinese Taipei
35%
Sources: Stock Exchange of Thailand
China
13%
Source: Credit Suisse, 2011 “Asian Family
Businesses Report”
7
Thailand Has Been Improved
in Corporate Governance
CG Watch Market Scores: 2007 to 2012
2007
2010
2012
1. Hong Kong (67)
1. Hong Kong (67)
1. Singapore (69)
2. Singapore (65)
2. Singapore (65)
2. Hong Kong (66)
3. India (56)
3. Japan (57)
3. Thailand (58)
4. Taiwan (54)
4. Thailand (55)
4. Japan (55)
5. Japan (52)
5. Taiwan (55)
4. Malaysia (55)
6. Korea (49)
6. Malaysia (52)
6. Taiwan (53)
7. Malaysia (49)
7. India (49)
7. India (51)
8. Thailand (47)
8. China (49)
8. Korea (49)
9. China (45)
9. Korea (45)
9. China (45)
10. Philippines (41)
10. Indonesia (40)
10. Philippines (41)
11. Indonesia (37)
11. Philippines (37)
11. Indonesia (37)
CG ROSC Assessment: Thailand’s
scores are above average in all area
ASEAN CG Scorecard: Top 100 Thai listed
company has the highest average score
Sources: 1. ACGA, September 2012
2. World Bank – “Report on the Observance of Standards and
Codes (ROSC): Corporate Governance Country Assessment –
Thailand, January 2013
3. Thai Institution of Directors (Thai IOD)
8
Enforcement Is the Area that Thailand
Got the Lowest Score
CG Watch Report 2012
• Judicial process is
inefficient, only a small
percentage of criminal
cases has filed in court
when compare with
the total number of
complaints filed by the
SEC to criminal authority
• No progress in the Civil
Sanction Bill
• Concern on corruption
issue
9
Economic Crime in Capital Market
Accounting Fraud
False Disclosure
Corporate Fraud
Insider Trading
• Making false entry into books / records of company
:- Hide bad debt; Create fake revenue; Manipulate the
recognition of revenue/expense etc.
• Making materially false statement or omission of the
material information
:- Besides accounting figures, do not disclose ultimate
beneficial owner of major shareholder or significant
liability etc.
• Using the company’s asset for personal benefit
:- Create fake investment; Create sham transaction;
Overpay in related party transaction etc.
• Trading in securities based on non-public, material
information
:- Information regarding company’s financial status,
dividend payment, M&A transaction etc.
10
Current Public Enforcement Program
Administrative Sanction
o Exchange’s surveillance
o Auditor’s report
o Public’s complaints
o Whistle blowers
Referral/Complaint
 Disqualify from serving as director/executive
of listed company
 Suspend/Revoke its privilege to do business
in capital market:- B-D; IA; FA; Auditor etc.)
SEC’s Investigation
Enforcement Action
Criminal Action
 Sufficiency of power for info
gathering
 Competency of officer
 Temporary freeze of asset
 Out-of-Court Settlement  Monetary
penalty
 In-Court Action
• Rely on other criminal authorities
• Time consuming, in part, because of
redundancy in info gathering
• Independence of opinion
11
• Level of expertise
Deterring Transgressions Through Alternatives
o Using CG awards as incentives for
companies to practice CG best
practices such as AGM award,
CG ranking and CG Scorecard
o Revise CG best practices,
guidelines, self assessment tools
to raise standards
Positive
Reinforcement
Supervision of
major
transactions
o Closely supervise related party
transaction and other major
transaction
o Revising RPT rules for more practical
“related party”, role of audit
committee and individual director,
quality of professional opinion, quality
of information for voting, etc.
o Warning on possible abusive RPT and
encourage Shareholder’s voting
o Support roles of Thai Investor Assoc.
o Urge for passage of Class Action Law
Private
Enforcement
Public
Enforcement
o Push forward for enactment of
Civil Sanction Law
o Study the use of share
repurchase as redress
mechanism
12
Recent Court Decision in A Criminal Case
Held 44.82% shares
Parent Company
CEO of Media Co.
Held 0.98% shares
Held 50.83% shares
Media Company
(Listed on SET)
Borrow 1,078 million Baht
Guarantor
Guarantor
Commercial Bank
Falsify documents of
Media Co. submitting to
bank
No disclosure of
guarantee liability
13
Recent Court Decision in A Criminal Case
(Continue)
 In March 2009, CEO was charged with 17 counts of corporate fraud.
 CEO pleaded guilty during the midst of the trial.
 In February 2012, the Criminal Court sentenced CEO for 85 years in
prison.
 Because of the guilty plead, the period of imprisonment was
reduced in half to 42 ½ years.
 However, under the Thai Criminal Code the maximum term for
imprisonment is 20 years. So the final imprisonment term for CEO is
20 years.
 Defendant appealed.
 August 2014, the Appeal Court upheld the Criminal Court’s decision.
 Late last month, Defendant filed a motion for Supreme Court’s
review.
14
Thank You
15