Thai-Lao Capital Market Cooperation

2012 Direction

The SEC is also playing a more aggressive role in developing the Thai capital market, supervising intermediaries and establishing effective communication with stakeholders under the 4P’s Principle which consists of the following attributes:

Proactive: progressive and forward-thinking in anticipation of possible challenges while being a firm and fair regulator and a friendly and visionary partner to all sectors; initiating interactive communication forums with market participants to encourage information/view sharing and team-based problem solving.

Preventive: setting a healthy balance between punitive and preventive approaches to ensure prompt actions against violations without imposing unnecessary and burdensome rules upon abiding entities.

Promotion: presenting the Thai capital market as a robust venue of choice for fund recruitment for businesses of all sizes while promoting financial and investment education for the public;

Premier: establishing the SEC brand as a world-class regulatory agency driven by experienced professionals, new generation teamwork and encouraging market participants to strive for internationally recognized self-regulatory status.

SEC Secretary-General Dr. Vorapol Socatiyanurak announced the SEC’s 2011 achievements and 2012 direction at a press conference.

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The SEC has laid out the 2012 strategies focusing on four key areas: (1) effective enforcement and investor protection, (2) financial stability, (3) market and regulatory positioning on the regional scale, and (4) investor education and financial literacy. In pursuing the strategic goals, the SEC is placing a greater importance on proactive communication, stakeholder relations and organizational efficiency, specifically in the areas of human resource development, information management and financial administration.

Dr. Vorapol Socatiyanurak, SEC Secretary-General, and Mr. Charamporn Jotikasthira, President of the Stock Exchange of Thailand, paid a courtesy call on Hon. Phouphet Khamphounvong, Lao PDR’s Finance Minister. On the occasion, both presented an overview of the Thai capital market and exchanged views with members of the Lao National Assembly and senior executives of the Securities and Exchange Commission Office and the Lao Securities Exchange. The trip was made in November 2011 to strengthen relationship and promote capital market cooperation between the two countries.

Securities and Exchange Commission, Thailand Quarterly Newsletter Issue No.31 (January 2012)

The key features are: (1) The fund must be a closed-end fund with no less than

2 billion baht registered capital; (2) The fund may invest directly in the assets of infrastructure

businesses or hold more than 75 percent of the total shares sold in businesses investing in or having major revenues from infrastructure businesses, e.g., rail system, express way, electricity, water supply, airport, seaport, telecommunications and alternative energy, with no less than 1 billion baht investment value for each project or no less than 500 million baht for a small-scale electricity project; (3) The fund may invest in a yet-to-be-complete (greenfield) project at an amount not exceeding 30 percent of the total asset value of the fund; otherwise, the investment units must be sold to investors with minimum subscription of 10 million baht only;

(4) An individual or a group of individuals may hold investment units not exceeding one third of the total units sold, except for those granted a waiver such as the Government Pension Fund and provident funds; and (5) The fund must have a clear policy on distribution of investment units with dividends not less than 90 percent and be listed on the Stock Exchange of Thailand.

Asset management companies can now apply for establishment and management of infrastructure funds as the governing regulations have already become effective. And thanks to the flood crisis late last year, the SEC is revising infrastructure fund regulations to allow the fund to invest in water management system and natural disaster protection systems.

Infrastructure funds can reduce state budgetary and public debt burdens in developing the country’s infrastructure, which in turn will support economic growth, enhance long-term business competitiveness as well as offer a fundraising alternative for the private sector and an investment channel for institutional and retail investors. In November 2011, the Cabinet resolved to waive withholding taxes on infrastructure funds' dividends for individual investors for a period of 10 years. It also waived the funds from value-added taxes, special business tax and stamp duty, incurred by the transfers of infrastructure investment to the funds. The waivers would encourage long-term funding for infrastructure projects, and the withholding tax waiver in particular would increase investors’ returns and attract more investment to the funds.

Organizational Updates In implementing the 4P’s Principle, the SEC also launched an organizational restructuring*, effective on January 1, 2012, with the objectives to: (1) create a proactive working environment and centralize international affairs to promote the Thai capital market’s regional connectivity and leadership; (2) expedite promotion of financial literacy in line with the government’s national savings promotion strategy; (3) classify corporate finance supervision based on types of securities to support strategic fund raising and accommodate new product launches; (4) divide intermediary supervisory units with separate focuses on development and inspection; (5) set out rulemaking guidelines that will not impose unnecessary burdens on business sectors and develop international standard regulations; and (6) expand interactive communication channels with stakeholders and promote their contribution to market development. This resulted in the formation of Financial Literacy Department, Securities Regulation Department, Stakeholder Relations Department, the Administrative Appeals Center and the Corporate Governance Center, along with appointments and positional rotations of executives and staff.

In this regard, Mrs. Supan Poshyananda and Mrs. Duangmon Chuengsatiansup were appointed as Assistant Secretary-General in charge of Law & Enforcement Division and Market Intermediaries Division, respectively.

Mrs. Supan obtained an LLB from Ramkamheang

University, Thailand. She had worked at the Stock

Exchange of Thailand for 13 years before joining

the SEC since its establishment in 1992 as one of

the founding members. Prior to the appointment,

she was Director of Legal Department.

Mrs. Duangmon has a doctorate in Public Administration from the National Institute of Development Administration (NIDA), Thailand. She had worked at the Bank of Thailand for 13 years before joining the SEC since its establishment in 1992 as one of the founding members. Prior to the appointment, she was Director of Broker- Dealer Supervision Department.

*See the SEC new organizational structure at http://www.sec.or.th/sec/executives/organization_en.pdf

Product Development: Infrastructure Fund

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Fact sheet for public offerings The CMSB approved a disclosure rule requiring securities issuers provide a clear and concise fact sheet to investors. As part of the prospectus, the fact sheet must contain information on the offered securities, particularly special characteristics and associated risks written in a plain language to allow investors to access and study the information before making investment decisions. The responsible securities companies must distribute the fact sheet and the subscription form at sale points and conduct the suitability test before letting clients make an investment.

The fact sheet requirement is one of many measures for supporting the launch of complex products and financial innovations without compromising investors’ right to accurate and timely information for investment decisions suitable to their profiles. The requirement has already been imposed on derivative warrants offerings to retail investors since September 1, 2011 and offerings of debt instruments since March 1, 2012.

Dialogues and Activities with Industry

Investor contact approval The Capital Market Supervisory Board (CMSB) approved the revision of rules on approval of capital market personnel in line with industry practices. This is not only to increase industry professionals to accommodate market growth but also to ensure proper services and advice for investors. Pursuant to the revised rules, starting from April 1, 2012, investor contacts are required to pass courses on basic knowledge, rules and regulations, and specific product knowledge. To upgrade their services, investor contacts must take additional courses and exams on any of the four products: equities, debt instruments, mutual funds and derivatives. The classifications have been changed from “Investor Contact Type A” to “Investment Analyst” and “Investor Contact Type B” to “Investment Consultant.” Additionally, effective from July 1, 2012, persons who solicit and provide advice on securities or derivatives investment to institutional investors must be approved by the SEC similar to those who provide services to retail investors except for plain securities products such as plain debts, money market funds and plain fixed income funds. CRA oversight The SEC Board approved the amendment to the rules governing credit rating agencies (CRA) in line with the International Organization of Securities Commissions (IOSCO)’s standards. This is to enhance CRA credibility, conflicts-of-interest management, and information disclosure and safekeeping. The revision allows investors to make use of rating to evaluate credit risk of targeted instruments more efficiently and confidently by requiring CRAs, for instance:

- Have efficient, reliable and systematic credit rating methodologies;

- Have systems in place to avoid conflicts of interest in rating procedures;

- Manage inputs efficiently while disclose sufficient information in a timely manner;

- Use different rating symbols for structured products and provide clear definitions of the symbols; - In case of unsolicited rating, disclose rating policy and procedures and sources of information used in credit rating, and indicate that the rating is unrequested by the issuer, and whether or not the issuer participates in the rating process. Foreign CRAs wishing to disseminate voluntary rating in Thailand must be approved and regulated by an IOSCO member regulator and must not have CRA business operation in Thailand, except through shareholding in a CRA established under Thai law. Such foreign CRAs must issue regional and international rating, or rating of certain debt instruments prescribed by the rules such as debt instruments issued by foreign juristic persons or their subsidiaries, foreign currency denominated debt instruments issued by juristic persons established under Thai law and simultaneous offerings in local and foreign markets.

The revisions become effective on March 1, except those on conduct which shall come into force on May 1, 2012.

Regulatory Updates

Promoting TIA roles The SEC has encouraged the Thai Investors Association (TIA) to assume the role of “financial literacy and advocacy center” to educate the public and cultivate investors’ knowledge and understanding of the financial systems, for example, providing investors with training, investment guidelines, risk assessment, and investment analysis and research. The TIA is advised to strengthen the role of its right protection volunteers and set up a working group to explore and propose better ways for the disclosure of listed companies’ financial statements and registration statements to benefit investors’ decision making. The upgrade of TIA’s roles is expected to enhance its recognition and cooperation with the industry stakeholders.

SEC’s flood relief measures During the flood crisis at the end of 2011, the SEC cooperated with related parties and considered relaxation of rules to lessen regulatory burdens. The key relief measures include: (1) Branches of securities companies affected by the flood and unable to provide services are allowed to temporarily close office without notifying the SEC in advance. The companies, however, must provide alternative service channels for clients, for example, submission of trading orders through the headquarters; (2) Listed companies and securities issuers having the duty to submit reports such as financial statements to the SEC, if unable to do so under such circumstances, the SEC would consider relaxing relevant requirements. In addition, listed companies may submit the reports through the Stock Exchange of Thailand (SET)’s electronic system while the original may be filed with the SEC later;

(3) Investor contacts, auditors, financial advisors, and fund managers whose approval has expired or would expire from October 26, 2011 to March 31, 2012 were allowed to perform their duties until March 31, 2012. Renewal applications can be filed by the said date.

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Enforcement

Misconduct Name Penalty

Failing to show

evidence of clients’

trading orders

1. Kajitsak Chalitaporn 2-month suspension,

starting Dec 31, 2011

2. Nonglak Gessup

3. Varaporn Butraploy

4. Wilawan Sarasup

5. Nopparat Suksannoppakul

6. Pimlada Pattanawararoj

7. Komgrit Kaewnoen

8. Nisarat Hanpimai

9. Aekbongkoch Manaphanniyom

10. Sompon Sajapitak

11. Wanna Attajarusit

12. Wirote Daychapon

13. Sansaya Choktaweerat

1-month suspension,

starting Dec 31, 2011

14. Kraisak Thunyanooraksa

15. Anongnart Srisook

16. Viroj Thonglerklit

17. Wolapojn Sili-ngam

18. Werapong Sirisamrit

19. Sumonrat Tripopphum

20. Pornpavee Jankham

21. Usanee Ngamjutsuksri

22. Kanok Rattanapaibunswad

23. Natinee Phannijphand

24. Neramit Soparporn

25. Kanungnit Artthayakul

26. Theppharit Thongolan

27. Sukontha Chatchawan

28. Jantharapa Wongpaiboon

29. Somchai Pichetsupakit

30. Wacharin Aroonsongsuree

31. Anusara Chuakam

Public reprimand

Using clients’

accounts to trade

securities for others

persons

32. Sanongpol Rungruangvorawat 6-month suspension,

starting Dec 31, 2011

Using clients’ accounts

to trade securities for

herself

33. Wikorn Thaicharoen 3-month suspension,

starting Dec 31, 2011

Making unauthorized

trading decisions

34. Loppadol Teerapong 2-month suspension,

starting Dec 31, 2011

35. Jariya Singharachai 1-month suspension,

starting Dec 31, 2011

Performing duty

beyond the scope of

permissible

businesses

36. Paphada Tatpornpan 3-month suspension,

starting Dec 31, 2011

37. Sirirut Lertsirirungson Public reprimand

Conducting unfair

securities practices

as a share price

manipulator

38. Sippakorn Kawsaart 10-year revocation of

approval, starting

Dec 31, 2011

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Administrative sanctions and others In Q4/2011, the SEC imposed administrative sanctions on 51 investor contacts for their misconduct as summarized below:

Misconduct Name Penalty

Conducting unfair

securities practices as

aiders or abettors of

a share price

manipulation

39. Jantharapa Wongpaiboon 2-year suspension,

starting Dec 31, 2011 40. Kajonchai Ngamvorarojsakul

41. Nongluck Sinprasertlert 3-year revocation of

approval, starting

Dec 31, 2011

42. Adirek Umbangralad

Facilitating share

price manipulation

and failing to

perform his duties as

a company executive

43. Prasarn Luekittisapt

2-year suspension,

starting Dec 31, 2011

Facilitating share

price manipulation

and sending

improper trading

orders

44. Surachai Theapsutt 3-month suspension,

starting Dec 31, 2011 45. Sirisak Nuntanart

Taking order from

person being neither

client nor client’s

appointee and

sending improper

trading orders

46. Sukontha Chatchawan

Facilitating share

price manipulation

47. Krongthong Cholsalanont

(Presently Thanaporn Wannapakasit)

6-month suspension,

starting Dec 31, 2011

Being dishonest

48. Aunyapat Aroonjarhuspong 10-year revocation of

approval, starting

Dec 31, 2011

49. Hathaya Yangyuen

50. Supachai Pengjan 2-year revocation of

approval, starting

Dec 31, 2011

Being dishonest and

failing to keep client

confidential

information

51. Chaiyadech Ovatanusorn 2-year suspension,

starting Dec 31, 2011

Note: More details in SEC releases No. 79, 91/2010 and 2, 4, 6, 7, 8 /2011.

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In addition, the SEC ordered Tongkah Harbour Plc. (THL) to rectify its financial statements for Q3/2010 and for the year 2010 and submit such revised financial statements to the SEC within November 26, 2011. THL was also ordered to arrange a special audit with regard to the company’s internal control, appropriateness of connected transactions and asset management and submit the result to the SEC within December 9, 2011. The company later requested a deadline extension but was rejected by the SEC.

Note: More details in SEC releases No. 96, 99, and 108/2011.

Securities Offerings (Jan 1- Dec 31, 2011)

Criminal sanctions Fine settlement Criminal complaint

No. of cases

No. of persons

Fine payment (baht)

No. of cases

No. of persons

121 81 115,063,475.87 19 42

Administrative sanctions and others

Category Probation/

Public reprimand

Suspension Revocation

Investor contacts 24 32 10 Auditors - 1 1

Financial advisor supervisors 2 - - Executives of securities companies

- 2* 2*

Total 24 35 13

Note: *Simultaneously revoked from serving as investor contact as well as executive of securities and derivative business operator for the same period of time.

Enforcement (cont’d)

Equities

Type of offerings No. of companies

Total Q1 Q2 Q3 Q4

Initial public offerings (IPO) – stocks 3 2 2 3 10

Public offerings (PO) – stocks 2 2 4 1 9

Public offerings (PO) – warrants - - - - -

Total 5 4 6 4 19

Note: Some have not started the offering process.

Debt Securities

Type of securities Offering value (million baht)

Q1 Q2 Q3 Q4

Short-term debt securities 310,462.64 243,104.35 182,856.36 208,545.04

Long-term debt securities 68,436.00 51,861.08 13,340.00 58,030.38

Other debt securities* 11,055.04 1,088.09 925.16 536.44

Total 389,953.68 296,053.52 197,121.52 267,111.86

Note: *Including convertible debentures, structured notes and securitization bonds.

Criminal sanctions Settlement The Settlement Committee imposed a separate fine of 500,000 baht on Annop Limprasert and Kamthorn Prueksrisakorn for manipulating the share price of RS Plc. (RS) during November 13-16, 2007.

More details in SEC Releases No. 104/2011.

Criminal complaint The SEC in November 2011 filed a criminal complaint against Intrend Consultant (Thailand) Ltd., Chawakorn Tiensawad, company director, and Supattra Sripaiboon (presently named Supthanis Sripaiboon), marketing officer, for operating unlicensed derivatives business.

In December 2011, the SEC filed a criminal complaint against Suriya Larbvisuthisin, Somphong Vitthayaraksan and Somchai Sripayak with the Department of Special Investigation (DSI) for manipulating the share price of S.E.C. Auto Sales and Services Plc. (SECC) during September 12 - November 24, 2008. The SEC also filed a separate complaint against Suriya for colluding with the said securities company executives for manipulating the share prices of Metrostar Property Plc. (METRO) and Thai Unique Coil Center Plc. (TUCC) during September 19 -November 30, 2006 and October 1 - 31, 2007, respectively.

More details in SEC Releases No. 105 and 110 /2011.

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The Office of the Secretary-General

Securities and Exchange Commission, Thailand

16th Floor, GPF Witthayu Tower, 93/1 Wireless Road,

Lumpini, Patumwan, Bangkok 10330, Thailand

Tel: (66) 2695 9503-5 Fax: (66) 2256 7755

Email: info@sec.or.th Website: http://www.sec.or.th

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Disclaimer: This newsletter is for information purposes only. The analysis, opinion or conclusion presented herein are those of the editorial team. There shall be no legal binding to the SEC Thailand.

Enforcement summary (Jan 31 – Dec 31, 2011)