According to the referral from the Stock Exchange of Thailand (SET) and the SEC’s further investigation, Warot and Jeeranan, former EY assistant auditors, were involved in irregular securities and derivatives trading activities after having accessed the EY information system which contained clients’ audited, but yet to be disclosed, draft financial statements under responsibility of the audit group under which Warot and Jeeraporn were working. They used such inside information to trade securities or derivatives of 12 listed company clients during 2015-2017. Most of such draft financial statements contained significant improvements in the clients’ operating results – the information likely to increase the securities price of the clients’ companies. Such insider trading of securities and derivatives was partly due to the fact that Jeeraporn, former assistant auditor, had disclosed the draft financial statements of the clients under responsibility of her audit group to her sister Jeeranan when she knew or should have known that Jeeranan would use such information to seek benefits. Details of the offenses are as follows: 

1. During 16 February 2015 – 29 July 2016, Warot, then assistant auditor holding the manager position, used inside information on the operating results from the fourth quarter of 2014 to the second quarter of 2016 of five EY clients which were listed companies to purchase securities of such companies while the clients’ draft financial statements were being recorded into the EY information system, and sold them out after the companies disclosed their financial statements through the SET Information Transmission System. Such misconduct was in violation of Section 241 and liable to the penalties under Section 296 of the Securities and Exchange Act B.E. 2535 (1992), which was effective at the time of the offenses (before the Securities and Exchange Act (No. 5) B.E. 2559 (2016) took effect), which was deemed an offense under Section 242 and liable to the penalties under Section 296 and Section 296/2 of the Securities and Exchange Act B.E. 2535 (1992), as amended by the Securities and Exchange Act (No. 5) B.E. 2559, on five counts; 

2. During 16 February 2017 – 10 November 2017, Warot and Jeeranan obtained or possessed inside information related to the operating results from the fourth quarter of 2016 to the third quarter of 2017 of seven listed company clients by taking advantage of Warot’s authorized access to the draft financial statements in the EY information system and the inside information given to him by Jeeraporn, who was assistant auditor holding the senior manager position of another audit group. Warot and Jeeranan jointly purchased securities and entered into derivatives contracts whose underlyings were the securities price of such companies while the companies’ draft financial statements were being recorded in the EY information system. They sold the securities and settled all of the derivatives contracts after the companies disclosed their financial statements through the SET Information Transmission System. Such misconduct was in violation of Section 242(1) and liable to the penalties under Section 296 and Section 296/2 of the Securities and Exchange Act B.E. 2535 (1992), as amended by the Securities and Exchange Act (No. 5) B.E. 2559 (2016), on seven counts;

3. During 16 February 2017 – 12 July 2017, Jeeraporn obtained or possessed inside information related to the operating results of three companies under the audit and review responsibility of her audit group. She had the authorized access to view the draft financial statements in the EY information system and disclosed the inside information of the three companies to Jeeranan when she knew or should have known that Jeeranan would use such information to trade securities or enter into derivatives contracts. Her misconduct was in violation of Section 242(2) and liable to the penalties under Section 296 and Section 296/2 of the Securities and Exchange Act B.E. 2535 (1992), as amended by the Securities and Exchange Act (No. 5) B.E. 2559 (2016), on three counts.

The Civil Sanction Committee has resolved to instruct the SEC to impose civil sanction on the three offenders, as follows:
(1) Warot was subject to pay a civil penalty, compensate for the benefits received from committing the offenses and reimburse for the investigative offenses, at the total amount of 7,660,441 baht;
(2) Jeeranan was subject to a civil penalty, compensate for the benefits received from committing the offenses and reimburse for the investigative expenses, at the total amount of 4,645,951 baht; and
(3) Jeeraporn was subject to a civil penalty and reimburse for the investigative expenses, at the total amount of 1,530,485 baht.

In addition, the offenders were prohibited from holding the positions of director and executive of any securities issuing company or securities company, for five years for each offense; however, considering the maximum period of prohibiting the holding of director or executive position under Section 317/4(4) of the Securities and Exchange Act (No. 5) B.E. 2559 (2016), the Civil Sanction Committee imposed the prohibition period of 10 years on each of the three offenders. 

In case any of the offenders refuses to comply with the civil sanction imposed by the Civil Sanction Committee, the SEC will submit the cases for the public attorney to file a lawsuit with the Civil Court. The objectives of the lawsuit are to (1) impose a civil penalty, (2) prohibit the offenders from trading securities on the SET or entering into derivatives contracts on the Derivatives Exchange, (3) ban the holding of director or executive position at any issuing company or securities company – all at the maximum penalties as allowed by law –, (4) impose a compensation for the benefits received from their commission of offenses, and (5) impose a reimbursement of the investigative expenses.

Regarding auditor oversight, the SEC will keep the record of the misconduct of Warot, Jeeranan and Jeeraporn for 10 years for future consideration if the three offenders apply for approval as an auditor in the capital market with the SEC. In addition, the misconduct of these persons has been submitted to the Ethics Committee of the Thailand Federation of Accounting Professions under Royal Patronage of His Majesty the King for further consideration of professional ethics of accounting professionals. 

The misconduct of the three persons was partially due to EY’s audit quality control system in safeguarding clients’ confidentiality. The SEC therefore urged EY to rectify the system to be more stringent and the company has already done so. 
In addition, the SEC has sent a circular to all audit firms in the capital market, requesting their cooperation in giving more importance to a strict audit quality control system with regard to protection of clients’ confidentiality. The SEC will continue to monitor such system of all audit firms closely to maintain credibility and fairness in the capital market.    
 
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