Bangkok: Pichai, Minister of Finance, revealed that the Cabinet approved the principle of the Emergency Decree to increase the SEC's power to prevent stock manipulation, prevent the sale of shares without actually holding them, and impose severe fines and criminal penalties.
According to Thai News Agency, Deputy Prime Minister and Finance Minister Pichai Chunhavajira announced that the Cabinet has endorsed the draft royal decree amending the Securities and Exchange Act. The decision stems from the Stock Exchange of Thailand's recent instability, with index points dropping from 1,600-1,700 to 1,400-1,500. This decline has shaken investor confidence, primarily due to inadequate legal supervision over securities in the market. A significant concern has been the high volume of Naked Short Selling, where transactions occur without the actual possession of shares, a practice currently beyond the SEC's jurisdiction when involving foreign trades.
Mr. Pichai clarified that while Short Selling is a legal and common practice worldwide, Naked Short Selling remains prohibited. The present challenge lies in enhancing inspection and supervision capabilities to address short selling more effectively. The newly enacted law will impose stringent penalties on violators, particularly those engaging in unauthorized international transactions, aiming for prompt suppression of such activities.
The Cabinet was also briefed on major cases resulting in significant financial damages due to delayed interventions. Consequently, the decree aims to fortify the responsibilities of capital market professionals and tighten regulations for companies issuing and listing securities. The draft also outlines the rights of bondholder representatives, ensuring fair treatment during business rehabilitation and bankruptcy processes.
Mr. Pichai emphasized that the decree will address cases where stock values plummet despite strong fundamentals, often due to major shareholders' undisclosed financial maneuvers. The SEC will be empowered to investigate these instances, potentially preventing market manipulation from the outset. Additionally, the SEC will act as an investigator for major cases, in collaboration with other agencies, to ensure comprehensive oversight.
The decree is part of broader efforts to restore economic confidence, aligning with regulatory practices in countries like the United States and South Korea. Mr. Pichai anticipates the Council of State will finalize the details within two weeks, after which the decree will be officially enacted.
Feedback from foreign investors has been positive, indicating increased confidence in the Thai stock market. The SEC plans to enhance transparency by mandating disclosure of specific stock trading activities, aiming to prevent exploitation of regulatory loopholes and ensuring a robust inspection process.