SEC, securities firms strike deal on risk management

By THE NATION Published on September 24, 2010
The Securities and Exchange Commission and securities companies have reached a deal on measures to enhance risk-management involving proprietary trading, which includes a cap on day-trade transactions at 75 per cent of shareholders' equity starting on January 1.


According to the arrangement with the Association of Securities Companies, firms will have to come up with investment strategies and plans, including investment budgets and allocation. They need to come forward with a policy to handle investment losses, as well as analytical research on net liquidity. The policy must win the board of directors' approval and the board must report on investment progress.


Securities houses' investment handlers must also win the SEC's approval.

The SEC also highlighted measures to prevent securities-house employees from supporting stock-price manipulation.

In many cases, it has been found that marketing officers and/or executives acted in a way that could have helped clients in share trading, which could violate the law. Companies must thoroughly check the trading records from time to time to see if the transactions from a particular team are concentrated on a particular stock. If any irregularity is found, they must notify the SEC.

Securities firms also agreed to monitor closely Internet-based orders for a particular stock whose price moves irregularly or stocks that are under the Stock Exchange of Thailand's watch.


Securities firms were also split into three groups - those affiliated with commercial banks, those that are local business arms of foreign companies, and others - to discuss obstacles to formulating the Asean linkage and will present their proposals to the SEC for discussion at the Asean Capital Markets Forum.

"The agreed measures will lift the standards of securities on several fronts and create confidence among investors," said SEC secretary-general Thirachai Phuvanartnaranubala. "Securities firms play an important role in driving the capital market on the right path with standard operations and consideration of investors and the market as a whole."

The SEC yesterday also signed a memorandum of understanding with the Anti-Money Laundering Office (AMLO) to increase collaboration in preventing laundering practices among financial institutions.

Pravej Ongartsittigul, SEC senior assistant secretary-general, said this was line with global practice under the Financial Action Task Force's guidelines. Though the SEC and AMLO have joined hands before in attacking money-laundering, this is the official confirmation of such cooperation, he said.

The strengthened ties will ensure that financial institutions are not acting as tools for money-laundering. Preventive measures will be set, with sufficient surveillance measures, he said.