Legal loopholes letting investors - either as individuals or acting in concert - stage takeover coups on listed companies need plugging in order to expand the oversight powers of the Securities and Exchange Commission, its secretary-general said last week.

"Now the SEC is considering which investors should come under our control and the appropriate penalties," Thirachai Phuvanatnaranubala said.

The SEC is drafting legal revisions to give the regulator teeth to force individual investors with significant stakes in listed firms to reveal their true intentions to the public once they are rumoured to be involved in stock dealings with listed companies.

Chalee Chanthanaying, senior assistant secretary-general, said the concept of "acting in concert" needed to be clarified to identify those acting as a group to take control of a listed company, as their bid could lead to unexpected changes in the listed company's management and its stock price.

"It's stated in the law but there are no guidelines on how to define the action [or who are acting as a group]," he said.

Under current law, counted as a single group are only an individual investor, his spouse and minor children.

However, many investors not related by blood or marriage are speculated to have formed loose syndicates to buy into a listed company for the purpose of wresting management control or manipulating the company's stock price.

The SEC also needs to bring individual investors under its oversight so it can handle situations like the Temasek Holdings-Shin Corp deal.

Under the present law, if news leaks that a shareholder of Company A is about to take over listed Company B, the SEC can only ask the Stock Exchange of Thailand to seek information from the target company. The SEC cannot make the investors confirm or deny the reports.

Thirachai said that was why the SEC could not go after the Shinawatra or Damapong families to confirm if they were involved with the reported takeover attempts by Temasek Holdings or Singapore Telecommunications, or other foreign companies for that matter.

The SEC's authority extends only to listed companies and their executives.

"We have no power over any shareholders who leak takeover attempts unless their action tends to influence stock prices," he said.

Under the current law, Bhanapot Damapong could not be punished, even though he was Shin's chairman. "If he gradually sold his shares before the deal was wrapped up but denied the action, that could mean he used inside information. But he did not do that."

Under the law, if Company A's plan to take over Company B gets under way, Company A can't publicly deny the move or it would be penalised.

Thirachai said the SEC recently notified the Stock Exchange of Thailand that if Company A's target is actually Company C, not B as reported, Company A could still face punishment if it denied the reported takeover plan, as the plan was in place no matter which company was the real target.

The SEC is now considering which investors should come under its control regarding their holdings in a listed company. The investors must have a significant stake, probably at least 25 per cent.

Then, the SEC would work out the appropriate penalties.

"There is a set of punitive measures for listed companies failing to honour the rules. But these investors do not need any business licence from the securities authorities, so how can we punish them?" Thirachai asked.

In Hong Kong and Singapore, investors can be sanctioned. Brokerage houses can be barred from executing trading orders for the individuals. But no criminal lawsuits can be brought.

The SEC also needs to consider how to deal with major shareholders who have already sold their shares in a company without trying to swing the company's stock price, Thirachai said.

Achara Deboonme

The Nation