Stock market fraud: SEC intensifies efforts to restore investor trust

The Securities and Exchange Commission (SEC) is set to fortify its efforts in battling stock market fraud and intensifying its monitoring of publicly traded firms, in a bid to re-establish investor trust. The Commission acknowledged the proliferation of fraud incidents has led to a considerable erosion of confidence among stock investors.

Regular offences include insider trading and stock price manipulation. The regulator’s mission to bolster public assurance centres around enforcing stricter laws under the Securities and Exchange Act, ensuring all participants in the capital market are dealt with equitably, as per the SEC’s statement.

The Commission issued a warning to potential fraudsters.

“Directors or executives of listed companies or businesses in the capital market who commit crimes, carry out unfair trading or fraudulent acts will face strict law enforcement, as such crimes usually affect a wide group of investors.”

Securities trading offences under the Securities and Exchange Act fall into three categories: the disclosure of information that could potentially harm investors or the capital market; using false or distorted information for analysis or forecasts; and using known information to exploit investors.

In all these cases, the actions influence the price of securities and manipulate investor decisions, according to the SEC.

“In the event of an offence involving unfair securities trading practices, failure to fulfil directorial or executive duties, or using someone else’s account for securities trading, the SEC may opt to impose civil penalties.”

The decision on punitive measures is at the discretion of the committee. If the accused refuses to adhere to the civil punishment measures, the SEC is authorised to initiate a lawsuit with the civil court against the offender, highlighted the statement.

Challenges & Development

The SEC also acknowledged the challenges in evidence collection and prosecution, especially in cases related to financial crimes, where most evidence is typically in the hands of the culprits trying to hide their wrongdoings. The SEC further noted that these types of cases usually have a significant impact on investors and the capital market.

The SEC collaborates with the Department of Special Investigation, the Central Investigation Bureau, the Economic Crime Suppression Division, the Anti-Money Laundering Office, and the Stock Exchange of Thailand (SET) to enforce the law effectively and boost confidence in the capital market, reported Bangkok Post.

The SEC is also implementing measures to reinforce investor protection, involving the screening and monitoring of SET-listed companies to ensure adherence to good governance principles. The SEC plans to tighten the criteria for indirect registration or backdoor listing, mitigating the chances of stock market fraud.

Moreover, relevant capital market personnel, such as auditors, financial advisors and securities insurance companies, should be expected to perform their duties fairly for the benefit of shareholders and investors, added the regulator.

The SEC is also aiming to develop a mechanism that enhances investor knowledge and the capacity to protect their rights, as well as refining the securities financing process in the capital market.

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