Improvement in the SET’s surveillance system will both be on the technological and human resource sides. The surveillance technology will become more in line with other exchanges in Asia as well as Australia. With regards to human resources, the number and capability of the SET’s surveillance staff will be enhanced to better cope with future innovative products and services as well as an increased number of added listed companies that the SET and mai (Market for Alternative Investment) target at 90 for 2005.
Moreover, the SET is also striving for a more effective preventive approach by cooperating closely with the listed companies, securities companies and investors who are most likely to be involved in irregular trading. Furthermore, the SET will scrutinize each case and send any cases deemed questionable to the Securities and Exchange Commission (SEC) for further legal enforcement.
“In addition to monitoring and analyzing information likely to affect stock trading, the SET will watch closely the trading conditions that tend to be associated with irregular price changes, high concentrations in specific stocks, price supports or manipulations. We will make inquiries to securities companies and ask them to appropriately handle any such behavior so as to prevent any violations against Thai law or the SET’s rules.
“Whenever we determine that an unusual upward adjustment of a share price has occurred without any reasonable explanation and this activity tends to continue, we’ll impose measures as stipulated by the irregular trading rules. For example, we may prohibit net settlement, or trading on margin, for that particular stock,” Mr. Suthichai said.
He continued, “In 2004, the SET examined securities trading and identified 11 irregular trading cases that were subsequently deemed unfair trading. Upon primary investigation, we found these 11 cases likely to violate the Securities and Exchange Act B.E.2535, so we then proceeded to transfer them to the SEC for further consideration. The cases can be classified as 1 case of unfair news distribution, 3 cases of price manipulation, and 7 cases of insider trading.
“The suspect cases in the market identified by SET surveillance in 2004 increased by 6 cases over those identified in 2003. We identified a rise in insider trading cases,” the SET EVP said.
In addition to trading surveillance, the SET also investigates any violations of SET rules by member companies and licensed traders. In 2004, there was a total of 95 cases: 91 of which were primarily concerned with sending inappropriate orders, i.e., fake orders or those sent with the intention to drive up or manipulate prices, with the remaining 4 concerned with disclosing the trader’s ID number, abusing a customer’s account, sending orders in excess of the account’s credit line, and distributing research papers on companies they’d been involved with.
Concerning the above violations, the SET had put on probation 2 member companies for a period of one year each and fined an additional two firms THB40,000 in total. As for the licensed traders involved, 83 were put on probation for a period of one year, 7 were fined a total of THB135,000 and another one was barred from performing any duty in the securities industry for one month.
As Mr. Suthichai went on: “The SET also imposed the Rules and Procedures for Charging Brokerage or Agent’s Fees for the Buying or Selling of Listed Securities and Members’ Good Corporate Governance. Five member companies were fined a total of THB6.68 million. Four marketing representatives were put on probation for a 1-year period each, while five were prohibited from performing any duty in the securities industry for 60 days each.”
To assure quick, timely, and effective surveillance to prevent any large-scale damages, the SET examined numerous cases likely to be subject to the Measures in Cases of Abnormality in the Trading of Securities on the Exchange, 2001.
As a result, the SET has twice prohibited securities companies from providing trading margins to customers, and once prohibited a securities company from granting credits and providing net settlement services when the trading conditions of a security was found likely to cause serious damages to the market. These activities include irregular price patterns, concentrations in specific stocks and price supports or manipulations.
Other actions the SET undertook included the sending out of letters to order member companies to reduce their approved line to customers, or to prohibit net settlement and/or margin trading services. These actions were taken whenever there was reasonable evidence indicating that a person or a group of persons had caused drastic price changes or a concentration of trades in a suspicious pattern.
