INTENDING to keep the Securities and Exchange Commission an independent body free from political meddling, Finance Minister Amnuay Viravan has announced his decision not to assume the chairmanship of its board.

This has led to two possible scenarios at the exchange watchdog when its board members meet on Jan 9 for the first time during the Chavalit administration.

First, the board may elect to pick one of its members to act as an ad hoc chairman and preside over the deliberations of the SEC's affairs. The chairmanship would be rotated among the members until the SEC legislation is amended to give the exchange watchdog a more independent structure, free from bureaucratic dominance or political intervention. Or, the board may go ahead and elect one of its members as permanent chairman until the passage of the amended SEC legislation so that it does not have to bother with the awkward business of choosing a chairman every time it meets.

Either way, the chances are high that Suthee Singhasaneh, former finance minister and architect of the SEC legislation, stands out as the strongest candidate by virtue of his seniority. At this Thursday's meeting the board will also entertain the task of searching for a new member to replace Narongchai Akrasanee, now commerce minister in his own right.

With the absence of Amnuay ­ the ultimate political representative in one of Thailand's most prestigious institutions ­ the make-up, if not the spirit, of the SEC board will never be the same.

The authors of the Securities and Exchange Commission Act of BE 2535 tilted toward bureaucratic control of the SEC board when they drafted the legislation that would encompass the regulation and development of the Thai capital market. The finance minister automatically becomes chairman of the SEC, three of whose board members are also reserved for top career bureaucrats at the Finance Ministry, the Commerce Ministry and the Bank of Thailand.

The architects of the SEC legislation believed that the capital market needed guidance from the authorities during its formative period. The chairmanship of the SEC was reserved for the finance minister so that he could form a link between the exchange watchdog and Cabinet and Parliament when regulatory approval beyond its jurisdiction is needed.

It did work. Then Finance Minister Tarrin Nimmanahaeminda had to answer to Parliament twice in 1993 over his decision to crack down on stock market manipulations. By doing so,

Tarrin showed accountability in his role as chairman of the exchange watchdog, equipped with a system answerable to the public. The SEC enjoyed its heyday during Tarrin's chairmanship because he was intelligent and demanding, a quality that grew out of his skepticism about the nature of the capital market.

Then came the chairmanship of Surakiart Sathirathai, who cut a sharply different personality and style from his predecessor. A lawyer by profession, Surakiart lacked the depth of understanding of the capital market, nor did he attempt to give it a renewed impetus as a regulatory body of the capital market. It will go down in history that a former dean of Chulalongkorn University's School of Law sought the removal of a secretary-general of the exchange watchdog without due process.

On Christmas Day 1995 the respected Ekamol Khiriwat, the exchange watchdog's chief and now adviser to Amnuay, was asked by Surakiart to resign from his position, only to be further sacked as deputy governor of the central bank the following day.

Surakiart's motive was political, yet the SEC board sought to become a passive witness to an act of pure injustice. The board did not fathom the consequences of that ugly Christmas ­ it should have saved the institution by simply asking Surakiart to set up a committee to investigate allegations that he leaked ''state secrets". The board members were overwhelmingly swayed by their own emotions.

That episode has irreparably destroyed the credibility and integrity of the SEC.

Now there is a bipartisan call from both sides of the aisle to restructure the SEC. The politicians, particularly the Democrats, want changes to the rules or the framework upon which the SEC is founded. From the outset, Amnuay hoped to regain some public confidence by announcing he would spearhead a move to amend the SEC legislation to turn the SEC into a genuinely independent regulatory body. As a gesture of his seriousness, he declined to take up the SEC's chairmanship.

By law, however, Amnuay is the nominal chairman of the SEC. The law must be changed to remove the finance minister's automatic chairmanship. There are three models worth pursuing for the SEC.

First, it may follow the structure of the Stock Exchange of Thailand's board, which is a corporate type widely practised by Thai organisations. The SET board oversees the broad policy guidelines and entrusts the president or CEO and his staff to implement them. If this structure is adopted by the SEC, only minimal efforts will be needed to amend the legislation, which would do away with the political appointee (the finance minister) and the bureaucrats (the permanent-secretaries for finance and commerce and the Bank of Thailand governor) on the SEC's board.

Second, the SEC may look for inspiration in the US Securities and Exchange Commission. During the Banharn Administration, Piraphand Salirathaviphak, now a Democrat Party Bangkok MP, chaired a commission to study a more viable framework for the Thai SEC.

The commission remodelled the Thai SEC after its US counterpart, which is professionally run by a handful of board members. The office of the SEC, including its secretary-general, sees its role being reduced to supporting staff for the board. The third model is based on the Securities Investment Board of the UK, which is run by part-time professionals. The chairman of the board is powerful because he is also concurrently the CEO.