Since irregularities involving the Shin Corp empire came to light earlier this year, the SEC has been in the hot seat. It has faced criticism about neglecting to follow up on possible violations of the Securities and Exchange Act of 1992.

The SEC launched investigations only after receiving complaints from civil-action groups, which made it look as if the securities regulator must be under political domination.

For instance, the investigation into ousted prime minister Thaksin Shinawatra's sister Yingluck was launched months after she sold her Advanced Info Service shares on the market, possibly on insider knowledge that Temasek Holdings of Singapore would offer a below-market price to take over AIS.

The SEC has also faced complaints of dragging its feet in going after close aides of politicians who were said to have been involved in stock manipulation.

Apparently, Pridiyathorn did not blame anybody at the SEC for that. He pointed his finger at the SEC Act, which invites political interference.

Under the law, the SEC board is made up of 11 members, with the finance minister as ex-officio chairman. The Bank of Thailand governor, finance permanent secretary and commerce permanent secretary are the key members, while the other directors come from the legal, finance and accounting fields. All of them are appointed by the finance minister.

That does not bode well for the independence of the regulatory body, which is mandated to regulate and punish all wrongdoing occurring in the billions-of-baht industry.

Revamping the SEC director appointment process is a smart move by the finance minister if he wants to shore up confidence among local and global investors who perceive the SEC, like securities watchdogs in several emerging markets, as a paper tiger easily intimidated by politicians.

Shielding the SEC from political pressure could promote aggressive action of the kind that its counterpart in the US is known for. In the early 1990s, the SEC there launched a probe into insider trading by George Bush Jr involving Harken Energy, even though George Bush Sr was still serving as the president.

Notably, the SEC board plan unveiled by Pridiyathorn on Friday - which marked his first and last board meeting with the SEC as its chairman - comes close after a similar plan for the Bank of Thailand.

At the central bank, he does not go very far in overhauling the board-selection process, but it is clear that future governors will no longer be appointed by the finance minister.

And full independence from political meddling is assured at the SEC if its chairman and other board members are selected by an independent search committee and if the board can vote to sack an inefficient secretary-general, something that has never occurred in the SEC's 14-year history.

The central bank and the SEC could then combine their strengths in scrutinising any dubious transactions and ensuring fairness to all parties, who would be subject to a single set of rules.

"Once the structure of the SEC is safe from politics, it should do its job properly. What's right is right, what's wrong is wrong. I understand that in the past the SEC had constraints on it because its chairmen were politicians," said Pridiyathorn on Friday. He apparently witnessed such limits while serving as the central banker.

What he did not say but what will happen is that this revamp will pave the way for greater efforts in ensuring better governance in the securities industry. This could not happen if the regulator itself were not protected from outside pressure.

Achara Deboonme

The Nation