SET and AIMC to use class action law to protect investors amid Stark fraud probe

The Association of Investment Management Companies (AIMC) and the Stock Exchange of Thailand (SET) are set to utilise class action law to safeguard investors’ interests as the Department of Special Investigation (DSI) examines potential fraud involving former executives of Stark Corporation. Stark’s shares plummeted by approximately 90% after the SET allowed trading to resume on June 1, causing significant harm to investors, including mutual fund holders.

To protect retail investors’ equity interests, the SET and AIMC are employing class action laws. As of August 30 last year, mutual funds holding Stark shares included Bualuang Asset Management, which was among the company’s top 10 shareholders with over 276 million shares. Other funds with a smaller percentage of Stark’s shares were Krungthai Asset Management, Kasikorn Asset Management, One Asset Management, and Aberdeen Asset Management. Most funds clarified that they had already sold Stark shares in February 2023, prior to the company’s issues becoming public knowledge.

Stark Corporation is currently conducting a special audit as directed by the Securities and Exchange Commission (SEC) and plans to disclose the findings publicly via the SET. If the company fails to meet the SEC’s reporting deadline, trading of the stock will be suspended once more. Authorities have stated that the company is highly likely to default on the payment of five series of corporate bonds worth almost 9.2 billion baht.

Stark recently informed the SET that it had referred three former executives to the DSI and the Economic Crime Suppression Division (ECD) of the police after its audit committee was notified by PricewaterhouseCoopers ABAS Ltd of suspicious behaviour by the managing director and two other executives.

In a recent filing to the SET, Stark’s acting chief executive Vonnarat Tangkaravakoon stated that the audit committee was informed by its auditor on February 24 of reasonably suspicious behaviour concerning the performance of the director, manager, or those responsible for the company’s operations. A working team was subsequently established to examine the facts, and an expert was appointed to conduct a special audit.

Stark Corporation filed a complaint with the DSI and the Central Investigation Bureau (CIB) under the ECD, requesting an investigation and identification of offenders for prosecution. Stark has also cooperated with the authorities in terms of legal action, reports Bangkok Post.

Vonnarat said, “As investigations by the DSI and ECD continue, the company cannot comment on any details, though the SEC requested information on such matters.” He added that comments could hinder the legal process and affect prosecution. However, the company will provide information about the progress of the investigation, to the extent that it can be disclosed.

In the filing, Vonnarat expressed confidence that the DSI and CIB would successfully execute legal action against the offender and recover assets lost to fraud in order to compensate for the damage suffered by the company.