The obligation of listed companies to follow corporate-governance laws might have an adverse impact on small and medium-sized listed firms due to higher costs.

The Securities and Exchange Commission (SEC), however, allows listed companies and brokerage houses to propose the amendment of some issues in the draft SEC Act.

A source in the brokerage community said that small and medium-sized listed companies would see higher costs following laws

governing corporate governance and might no longer want to be listed.

More importantly, executives of these listed companies might be under greater risk from penalties if their companies broke the law, he said.

His comments came after the securities watchdog announced that it would enforce corporate-governance law.

The source added that listed companies, could at present practice corporate governance on a voluntary basis and received awards as an incentive though those which chose not to did not break the law.

He said executives of companies, under the new law, would have to seek documents to clear allegations made by the SEC.

If they failed to make their case, executives would face either criminal or civil penalties depending on the allegation, the source said.

At the moment they face penalties only if a court so rules.

"It is too stringent in the opinion of operators," he said. "Their anxiety would increase. Executives and directors would be under higher risk of possibly breaking the law governing corporate governance."

Meanwhile, SEC secretary-general Thirachai Phuvanatna-ranubala argued that putting corporate governance on a legal basis would raise the confidence of both local and foreign investors in listed companies.

The corporate-governance law in the draft would not make operators awkward or anxious, he said.

He said all parties who wanted to make suggestions about the act could do so to the SEC.

"We have to accelerate the legal amendment, which is a time-consuming process," he said. "The private sector can bring up what they see as obstacles, because we want the draft to be really practical. Although the draft has already been forwarded to the Finance Ministry, we can still amend it at any stage," said Thirachai.

The SEC has played a role in improving governance in listed companies by seriously checking their balance sheets and giving auditors a greater role, he said.

Siriporn Chanjindamanee

The Nation