Thai Finance Ministry pledges market confidence amid scandal

Thailand’s Finance Ministry vows to restore confidence in the Thai capital market following allegations of fraud involving former executives of Energy Absolute (EA), a company listed on the Stock Exchange of Thailand (SET).

Finance Permanent Secretary Lavaron Sangsnit expressed optimism that actions by the Securities and Exchange Commission (SEC), in collaboration with the Department of Special Investigation (DSI) and the Anti-Money Laundering Office (AMLO), would help rebuild trust in the market.

Late last week, the SEC accused EA’s founder and chief executive Somphote Ahunai and Chief Financial Officer Amorn Sapthaweekul of engaging in fraudulent activities related to the company’s purchase of equipment and software for a solar power plant between 2013 and 2015.

A third individual, Phornlert Techarattanopas, was also implicated in the fraudulent procurement process, which reportedly involved two subsidiaries and resulted in benefits totalling approximately 3.5 billion baht for the three individuals, according to the SEC.

The regulator has referred the case to the DSI and the AMLO for further legal action.

“It is time to bring everything hidden under the rug out into the open, regardless of when it was hidden. If we find it, we need to address these issues decisively to build confidence in the [Thai] capital market.”

Addressing concerns about the pace of the investigation, Lavaron noted that the speed is contingent on the evidence available but reassured that progress has been faster than expected. The SEC was the entity that uncovered the issue and subsequently filed the complaint, indicating the severity of the accusations and the necessity for clear evidence.

Restore market confidence

Lavaron emphasised that the SEC has already implemented measures to restore confidence in the SET, including stringent controls on short selling and programme trading. Further measures are expected, though details remain undisclosed due to the sensitivity of the situation.

“The key is that law enforcement must be clear, swift and decisive. Each securities-related allegation case has its loopholes. Stark [Corporation] had one, More [Return] had another, and EA had another. These issues often involve large stocks or strange and hefty [initial public offering] prices, which affect confidence. Therefore, restoring confidence requires multiple approaches.”

Lavaron also pointed out the necessity for thorough audits by accounting firms, particularly those overseeing listed companies, questioning why major audit firms had failed to detect irregularities in the companies now facing scrutiny.

Lavaron mentioned that the Finance Ministry is preparing to introduce new products to the capital market, contingent on restoring confidence. One such product is the Thai ESG Fund, which, if approved by the Cabinet, would increase the tax deduction limit from 100,000 to 300,000 baht per year and reduce the required holding period from eight years to five years.

Trading could commence as early as September, potentially bringing an estimated market inflow of 50 to 60 billion baht.

Another initiative involves expanding the Vayupak Fund. Currently, the fund has two types of unit holders: Type A for the general public with a value of 150 billion baht, and Type B held by state agencies and the Finance Ministry with a value of approximately 350 billion baht.

Vayupak Fund

Lavaron explained that expanding the Vayupak Fund would involve Type B, which allows for swift action as it does not require a new filing. Type B serves as a guarantee to ensure returns for public investors holding Type A units, promising a minimum return rate of 3%. Should the return on Type A units fall below 3%, the return from Type B units will supplement it to meet the full 3%.

According to Lavaron, the Type B fund, which guarantees a minimum return for public investors purchasing Vayupak Fund units, has seen a significant increase in value recently.

Consequently, the government plans to allocate 100 to 150 billion baht from this fund to establish a new fund and sell investment units to the public. Combined with funds from the Thai ESG and Vayupak funds, an estimated 200 billion baht is expected to flow into the market, reported Bangkok Post.

“Domestic investors still want to invest in the SET, but they have lacked confidence or perceive unfairness in the market.”