News Column

SEC to tighten rules for securities firms

July 14, 2014

By Nuntawun Polkuamdee, Bangkok Post, Thailand

July 14--The Securities and Exchange Commission (SEC) is set to tighten the net capital rule governing securities firms with the aim of upgrading the brokerage industry to meet international standards.

Revised regulations will include shortening the contingency period from 120 to 90 days to prevent risks from spreading to stakeholders and the market overall. Securities firms will also be prohibited from expanding business or providing guarantees during the contingency period.

The SEC will also not allow securities firms that fail to meet the standard requirements to clear futures and options contracts, except those that have protection against risks from price volatility, assets, liability or obligations for 90 days from the day that the company fails to meet the capital rule.

The watchdog plans to conduct a hearing on the revised regulations.

Thawatchai Pittayasophon, director of the SEC's corporate affairs department, said the hearing result will be returned to the SEC on Friday, then the SEC will review and pass it to its board for approval.

The SEC requires securities firms to have a capital reserve relating to its prudential risk, including operation risk, IT risk, market risk and others, and have a minimum net capital rule at 7% of total liabilities and liquid assets of around 25 million baht. Presently, all firms have a capital reserve well above the requirement.

"The rules will be adjusted to fit with other markets and be more stringent for companies that are involved with high-risk business such as derivatives and underwriting, and those with large-margin loan extensions and investment portfolios," said Mr Thawatchai.

Pattera Dilokrungthirapop, chairwoman of the Association of Securities Companies, said all 36 members have a strong financial position and many recapitalised last year to prepare for expansion to serve regional trade and Asean economic growth.

The securities industry remains prudent after suffering previous economic crises, she said, adding that firms that run futures, derivatives trading, margin loans or underwriting have a higher risk exposure than stockbrokers.

Ms Pattera said securities business prospects in the second half will improve from the first half as the average daily turnover has risen to more than 40 billion baht since the military's seizure of power on May 22.

Amid the bullish market, securities companies should have enough capital to serve a fast clip of expansion and an increase in trading value, she said, adding that companies with high-risk exposure must carefully check their financial status.


(c)2014 the Bangkok Post (Bangkok, Thailand)

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Source: Bangkok Post (Thailand)

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