Bangkok, December 23, 2015 ? According to the highly publicized news coverage on share transfers of a person, the SEC after probing into the case has imposed administrative sanctions on three investment consultants: revoking approval of Auracha Vachirakulthon as securities investment consultant for 10 years, starting from December 22, 2015, and suspending approval of Nattapon Chalermpot and Patcharee Thuttumrongchai as capital market investment consultant for six months and one month, respectively, starting from December 25, 2015.
The SEC?s further inspection has revealed several defective core work systems of AEC, especially the Know-Your-Customer/Customer Due Diligence: KYC/CDD system, causing the company to be fined by the Settlement Committee at the amount of 1,101,000 baht. Moreover, the SEC has suspended approval of two AEC executives, namely Thada Chanprasit and Pisit Patumban, as capital market personnel for six months each starting from 29 December 2015 on the ground of being negligent with regard to supervision of the company?s core work systems.
Regarding the share transfer case, Auracha, then an investment consultant at AEC, was found transfering shares in the client?s trading account into her mother?s account for her own benefits. Such share transfer was prearranged, starting from Auracha?s opening a trading account for her mother without declaring their relationship to the company and arranging for the transfer even though it was not her duty to do so and she was not the investment consultant in charge of such client?s account. Auracha later arranged for AEC back office to confirm the share transfer with a person who was believed not to be the true owner of the trading account, and adding a new contact phone number to the client?s personal profile even though there was no evidence that the client had ordered the responsible investment consultant to do so.
Auracha?s actions were deemed as (1) failure to perform duties or provide services honestly, (2) misconduct upon the client?s asset, (3) use of the client?s trading account to trade securities for herself or others, (4) interferance with the client?s asset by withdrawing and transfering the client?s securities, and (5) breach of ethical and professional code of conduct prescribed by the Association of Thai Securities Companies (ASCO)1. The SEC therefore revoked the approval of Auracha as securities investment consultant and prohibited her re-entry as capital market personnel for 10 years, starting from December 22, 2015.
On other cases, Nattapon was found accepting orders to trade securities in a client?s account from a person who was not the owner of the account without any written authorization, and causing a misunderstanding that there had been a conversation with, and acceptance of trading orders from, the account owner. Meanwhile, Patcharee took trading orders from an unthorized person.
Nattapon?s misconduct was deemed as failure (1) to perform duties or provide services honestly and (2) to execute trading transactions according to the order of the account owner or the authorized person. Moreover, he made up evidence to camouflage that the person who ordered the trading transactions was the account owner to conceal such trading information from AEC and the regulator2. Patcharee?s case was deemed a failure to provide securities trading services according to the order of the account owner or the authorized person3. The SEC therefore suspened approval of Nattapon and Patcharee as capital market investment consultant for six months and one month, respectively starting from December 25, 2558.
The SEC?s further inspection also indicated deficiencies of AEC?s core work systems in three areas as summarized below:
(1) KYC/CDD: many clients entered into trading transactions significantly unsuitable for their financial position and investment knowledge. In addition, the company failed to take sufficient measures to identify the clients and the true beneficiaries and did not reconsider appropriate credit lines for the clients in accordance with the law. Such neligence exposed the company to risk whereby inappropriate transactions or illegal actions may be committed and evade detection. Such circumstances would consequently affect confidence in securities business and the capital market at large;
(2) Custody of clients? assets: deficiency of the verification process created risk of damaging client assets. It was found that during August 2014 to March 2015 many clients asked the company to add another contact phone number to their profiles and the company subsequenlty used only the new number to confirm trading transactions with such clients without calling the original number or pursuing any other means to verify the transactions. This raised doubt whether such transactions were executed as truly intended by the clients. In addition, a certain share transfer from a client account was found to be suspicious and defective in many aspects. For example, (a) the investment consultant who affixed the signature in the requisition form for share transfer from client account was not the investment consultant in charge of the account, (b) the back office and the investment consultant responsible for the client account could not contact the client via the phone number given by the client, and (c) the back office agreed to execute such transaction even though the contact phone number was not the one given by the client;
(3) surveillance system to prevent conflicts of interest: the system was found to be inefficient and failing to detect if its employees use their related persons to open a trading account and execute transactions. Even though the relationship between clients and employees was found out, the company did not use such information for the benefit of supervision to prevent misuse of inside information or commission of inappropriate and illegal actions by its employees.
The aforesaid defects of AEC work systems were in violation of Section 113 and the company was subject to the penalties under Section 282 of the SEA. As a result, the Settlement Committee imposed the fine of 1,101,000 baht on AEC.
The SEC findings also revealed that Thada, AEC co-chief executive officer in charge of back office, and Pisit, AEC co-chief executive officer in charge of front office, had generally neglected supervision and surveillance of AEC?s core work systems and failed to amend and rectify even though they had been informed of the company?s inspection results and reports from the back office regarding clients? suspicious information, which caused the company to be in violation of the SEA4. The SEC therefore suspended approval of Thada and Pisit as capital market personnel for six months each, starting from December 29, 2015. During such period, both executives are barred from performing duties as management and advisor to the company or working in any other capacity within the scope of duties of capital market personnel.
The said actions of both executives were in violation of Section 283 of the SEA, which was the result of the company committing an offence under Section 113 of the same Act. The SEC shall forward the case to the Settlement Committee to consider fine penalties, and if they refuse to enter the settlement process, the SEC shall file a criminal complaint for further legal proceedings.
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1 Clause 23(2) of the Notification of the Capital Market Supervisory Board No. Tor Lor Thor. 8/2557 Re: Rules on Personnel in the Capital Market Business dated 3 June 2014 and Clause 31(1) of the same notification concerning possesion of prohibited characteristics of capital market personnel.
2 Clause 23(1) of the Notification of the Capital Market Supervisory Board No. Tor Lor Thor. 8/2557 and Clause 31(1) of the same notification.
3 Clause 23(4) of the Notification of the Capital Market Supervisory Board No. Tor Lor Thor. 8/2557 and Clause 31(5) of the same notification.
4 Clause 31(4) of the Notification of the Capital Market Supervisory Board No. Tor Lor Thor. 8/2557. The case of Pisit was also subject to Clause 30(5) of the same notification.