SEC Strategic Plan 2009-2011 highlights global linkage, market competitiveness
Bangkok, December 8, 2008 – SEC Secretary-General Thirachai Phuvanatnaranubala today announced the SEC’s key achievements during the year and the strategic plan for the next three years, as summarized below:
Key Achievements in 2008:
1.Market development and global linkage
In preparing the Thai capital market for global linkage, the SEC has taken further steps to implement the earlier announced plan for liberalization of securities businesses and brokerage fees. These include encouraging market operators to upgrade their licenses to the full-service category and streamlining certain regulations, e.g. permission for cross directorship of securities companies, to enable enhancement of their flexibility in business operation in support of structural adjustments.
The SEC has also facilitated demutualization process of the Stock Exchange of Thailand (SET) by approving the principles of law amendments for such propose. It is expected that demutualization would eventually bring about a more efficient management structure of the SET and an open access for more market players which in turn would contribute to the Exchange’s readiness for further regional and global linkages.
To enhance offshore investment experience of local investors and securities firms, the SEC, in coordination with the Bank of Thailand, has allowed them more channels to access foreign markets, e.g., via private funds and securities companies.
For the forthcoming regional linkages, the SEC, together with ASEAN Capital Market Forum or ACMF members, have arranged for the implementation plan for ASEAN capital markets integration under the AEC Blueprint, to be proposed for consideration of the ASEAN Finance Ministers’ Meeting.
2.Development of financial products and transactions
To provide investors with more investment alternatives, the SEC has supported the launch of single stock futures, which commenced trading on Thailand Future Exchange (TFEX) on November 24, 2008. Trading of another new derivative product, gold futures, is expected to start in February 2009. Qualified gold traders are eligible to apply for a derivative business license in the category of restricted brokers for gold futures.
In 2008, the Trust for Transactions in Capital Market Act B.E. 2550 (2007) was put into effect on January 14, to enable further development of innovative products in the capital market. In addition, the SEC has revised rules regarding securities borrowing and lending (SBL) as well as short selling to enhance flexibility in investment risk management.
3.Raising market standards and credibility
The SEC has arranged for amendments to the Securities and Exchange Act B.E. 2535 (1992) to address legal shortcomings in such areas as protection of shareholder rights, protection of client assets and securities clearing and settlement system and prevention of fraud and shareholder exploitation by listed companies. The SEC has also imposed a more rigorous supervision to ensure listed companies’ compliance with the accounting standards.
In promoting good corporate governance of listed firms, the SEC continued its support for the Annual General Meeting (AGM) Assessment Project for the third consecutive year. Besides, as an incentive for market operators with good compliance records and ethical conducts, a fast track scheme for granting approval on application to open new branches or issue new products has been used. Moreover, securities companies are encouraged to disclose, in their securities research, the results of corporate governance assessment of listed companies and to provide a research report on the securities on turnover list or have a warning statement on such securities trading.
In May 2008, the SEC became a full signatory to the IOSCO Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information (IOSCO MMoU), enabling an enhanced effectiveness of cross-border enforcement.
4. Emergency measures to alleviate impacts of global financial crisis
With the global financial crisis affecting capital markets around the world, including Thailand’s, over the past year, the SEC has closely monitored the situation and taken necessary measures to help alleviate the impacts on the Thai market, lessen market volatility and encourage trading activities, as follows:
(a) The requirement for minimum tender offer amount of 10 percent of the total voting rights is waived for partial tender offer;
(b) In cases where a company’s share buyback results in any shareholder’s voting rights reaching or passing the trigger points of 25, 50 or 75 percent of the total voting rights, such shareholders are allowed to purchase additional shares, in the amount permissible up to those trigger points before the launch of the treasury stock program;
(c) The procedures for fund mobilization of listed companies, through issuance of equity
and debt securities, are streamlined.
In addition, the SEC has been closely monitoring the financial position of securities companies and the redemption of investment units so that corresponding measures can be timely implemented when necessary.
Strategic Plan 2009-2011
In carrying out its mission, the SEC generally has the following four strategic goals:
1. Maintaining orderly market
2. Ensuring investor protection
3. Fostering business innovation
4. Promoting competition
Over the past several years, the SEC has concentrated on laying a strong foundation for the Thai capital market. As such, maintaining orderly market and ensuring investor protection have been the SEC’s priorities, in which a significant progress has been accomplished. For the next three years (2009-2011), the SEC aims to shift priorities to another two areas, i.e., fostering business innovation and promoting competition.
1. Fostering business innovation
The SEC plans to accommodate the introduction of new products and new asset classes into the market to respond to the needs of different groups of investors with different risk profiles. In doing so, the high net worth investors will be classified apart from general retail investors due to their readiness to assess and accept more complicated risks. It is anticipated that, a more variety of investment products made available to the high net worth groups, who have greater investment power and higher risk tolerance, would help contribute to market growth, in terms of breadth and depth, and greater fund raising opportunities for the projects or businesses with higher risks.
2. Promoting competition
With an aim to enhance efficiency of market operation, so that investors can receive good services with lower costs, the SEC has proposed for the issuance of a Finance Ministry’s Ministerial Regulation to liberalize securities business licensing from January 1, 2012 onwards. Such regulation was promulgated and came into force on January 25, 2008. To prepare securities industry for the upcoming full liberalization and urge that market operators reduce their reliance on brokerage fees as their only source of revenue, the SEC will have the SET announce the liberalization of brokerage fees, in which the fees charged on larger transactions will be negotiable from 2010 and those on all transactions from 2012 onward.
To be ready for global market integration, the SEC has planned to make further move on market liberalization with the demutualization plan of the SET to break the monopoly in the securities market as well as clearing and settlement businesses and allow an open trading access for persons other than the Exchange’s existing members to enable linkages with other markets eventually.
3. Adjustment in the SEC roles and duties
To enhance competitiveness of the business sector as mentioned above, the SEC will also have to adjust its role as a regulator, in terms of regulatory regime and work procedures. On the market supervision front, the private sector and market practitioners will be urged to play a more active role through adoption of self-regulation approach, so that rules and regulations to be imposed on them will be of principle-based type rather than prescriptive rule-based type. Moreover, the SEC will gradually phased down the merit-based supervisory framework, where the SEC exercises discretion on behalf of investors regarding the appropriateness of investment products, and shift to a more disclosure-based regime, where investors will make their own investment decisions based on the information provided. Concurrently, the SEC will put in place a mechanism or necessary tools to strengthen investor power in the exercise of their rights, probably through law amendments, and educate and encourage them to be aware and protect their own rights.
“Looking forward, we will try to maintain a balanced weight of regulation among three areas, i.e., rules and regulations to be issued by the SEC, self-regulation adopted by market practitioners and shareholders’ self-protection through the exercise of their rights. Achievements on those tasks will have to be contributed by a number of factors including well-informed and knowledgeable investors, efficiency in investor’s own rights protection, effective enforcement, ethical conduct of market practitioners and good corporate governance. But most of all, we need a collective effort through cooperation and contribution from all parties concerned in order to reach the set goals,” said Thirachai.