Effective from 1 August 2016, Thailand’s Securities and Exchange Commission (the “SEC“) issued a notification on Determination of Untrustworthy Characteristics of Directors and Executives of Companies (i.e. issuing companies or listed companies)1 which will now cover an immediate ban for directors and executives who are fined by the Criminal Fining Committee based upon certain restricted offences including unfair trading offences such as insider trading.
Under these new rules, the persons who are fined on or after 1 August 2016 will now be considered lacking trustworthy characteristics and immediately banned from being directors or executives in issuing or listed companies for 3 years unless it is determined that the conduct was not a serious offence.
Directors and executives of issuing or listed companies who were fined by the Criminal Fining Committee before 1 August 2016 were not immediately considered persons lacking trustworthy characteristics and thus were still considered qualified to hold their positions as directors or executives in their respective companies unless a committee appointed by Office of the Securities and Exchange Commission (the “Office of the SEC“) determines that the person possesses the untrustworthy characteristic.
Under such previous rules, in order for a director/executive to be immediately banned, the person must be named in any criminal complaint filed by the Office of the SEC or subjected to any legal proceeding following the criminal complaint initiated by the Office of the SEC, not just fined.
What are restricted offences?
– Unfair trading practices in securities or derivatives (including insider trading and market manipulation)
– Dishonest undertaking or causing damage to properties, creditors or the public
– Failing to perform fiduciary duty with responsibility, due care and loyalty
– Knowingly making false statements or concealing material facts which should have been stated
– Operating securities business or derivatives business without license in a manner to defraud public
How long is the ban?
The ban will be for the maximum period of 3 years from the date the Criminal Fining Committee has ordered the fines. The actual ban period will depend on the view of the committee appointed by the Office of the SEC based on the seriousness of the offence.
What is happening next?
On 31 May 2016, the Cabinet has approved the draft bill of the amendment to the Securities and Exchange Act and the draft is under further review and enactment process. The proposed amendments include the imposition of criminal punishments and civil sanctions for unfair trading offences.
For criminal punishments, the proposed amendments impose more severe punishments to directors, managers and persons responsible for the operation of the company than other persons (e.g. non-executives or advisors).
For civil sanctions, the proposed amendments include payment of monetary compensations, ban from securities trading and ban from holding positions as directors or executives for a maximum period of 10 years.
Therefore, harsher sanctions are to be expected for directors and executives for unfair trading practice.
1 Notification of the Securities and Exchange Commission No. KorJor. 3/2559 Re: Determination of Untrustworthy Characteristics of Company Directors and Executives (No. 2), dated 12 July 2016.