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New SEC chief has global message

 

Prasarn Trairatvorakul is leading the Securities and Exchange Commission (SEC) into a new era of globalisation, Thanong Khanthong reports.

Just appointed head of the Securities and Exchange Commission, Prasarn Trairatvorakul is wasting no time.

Last week his team of regulators filed criminal charges for insider trading against three former executives of Onpa International Plc. This is the first time in Thai history that criminal charges for insider trading would be tried in court.

The case is far from a replay of the controversial crackdown on Song Watcharasriroj, a big-time stock trader, in November 1992. The case against Song involved stock market manipulation, not actual charges of insider trading, and many people thought it had political overtones.

As the Onpa case shows, from time to time, the SEC needs to remind participants in the capital market that it has teeth to deter them from ignoring the law , violating rules or committing securities fraud.

In SEC vs Song Watcharasriroj, the SEC, then just a few months old, tried to lay down the rule of law. In 1992 stock market manipulation was rampant. If nothing had been done, the credibility of the stock market could have been at risk. However, enforcing the law in Thailand has never been easy.

''We pretty much focused most of our energy on law enforcement in the first four years of our existence,'' says Prasarn. ''We emphasised the conventional practice (of law enforcement) for we did not want to see stock market manipulation go out of control.''

The SEC, then headed by Ekamol Khiriwat with Prasarn in the number two spot, went after Song, the legendary trader who could almost move the market at his will. It charged him and several associates of manipulating the stock price of the now defunct Bangkok Bank of Commerce.

Song and his associates fought the case all the way to the Supreme Court where they won, dealing a setback to the SEC. Still, the loss did not seem to have slowed down the SEC's drive to bring law and order to the capital market.

A former Bank of Thailand (BOT) official, Prasarn played an important role in drafting the legislation that brought the SEC into existence in 1992. A King's scholar, he was one of the country's top students. In his college days in the 1970s, he was a student leader at Chulalongkorn University during the democratic movements.

By training, he is an engineer. But he also studied economics and statistics and earned an MBA from Harvard. When he joined the BOT, he focused most of his time on financial institution development. Inside the central bank, there was a feeling that he was rather out of place because he was not a genuine macroeconomist.

When the authorities began to establish the SEC, Ekamol moved from the BOT to head the agency. He recognised Prasarn's talent and brought him, and other bright BOT officials, along.

Finance Minister Tarrin Nimmanahaeminda holds Prasarn in high regard. ''He has an exceptional mind,'' Tarrin has said.

Prasarn found the SEC environment appropriate for his ''exceptional mind.'' The formative years of the agency were a rough-and-tumble time but never boring.

When Ekamol was removed from his office by political intervention in late 1995, Pakorn Malakul Na Ayudhya, a BOT assistant governor, took on the leadership role. For the next four years, the SEC would focus on preventive measures, consolidation of rules, enforcing compliance and internal control and audit.

Incidentally, it was a period of downward adjustment for the Thai market before it suffered from a crash in 1997. The SEC lay quiet, taking time to fine tuning rules and making capital market transactions more transparent and in tune with international standards.

Under the leadership of Prasarn, who was appointed to a four-year term by the Cabinet in December 1999, the SEC is now moving into another phase of its evolution, departing from its seven-year focus on domestic issues and regulations to an emphasis on globalisation.

''It is a challenge to take on globalisation,'' Prasarn said. ''It comes with information technology and liberalisation.''

Recently, Philippe Securities (Thailand) Co introduced on-line trading. A growing number of Thai firms are entering the on-line business to catch up with technological advances. Some seek to create a Nasdaq-like market along side the stock exchange of Thailand (SET) for technology stocks.

Prasarn's task is to create a regulatory framework that will support this new financial environment. He admitted that he, like most other people, has little knowledge about dot-com companies and how they should be regulated.

''There are a lot of questions involved. How are we going to determine the share prices of the dot.com companies? They don't have any hard assets, equipment or factories,'' Prasarn noted.

''If there is a pattern we might know how to evaluate or supervise the Internet-related companies or on-line trading. But we don't have the record. On-line trading just began in the US in 1998. The US too has had a very short experience in on-line trading,'' Prasarn explained.

His further task is to strengthen the Thai capital market so that it is supportive of the nation's economic development. In the past, the underdeveloped capital market contributed to the crisis, for most companies relied on bank loans rather than equity to expand their business.

This resulted in an over leveraged Thai economy, the same problem faced by the Japanese economy. From now on, equity financing will be taking the lead, with bank lending taking a smaller role in the economy.

And in his capacity as secretary-general of the SEC, Prasarn has warmed up his seat on day one.

 

 

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