The Securities and Exchange Commission (SEC) is advancing toward broader regulatory and enforcement authority over audit firms, representing a significant move to enhance market oversight and safeguard investors.
Currently, the SEC possesses the authority to discipline individual auditors but lacks the power to regulate the audit firms they represent. This gap has raised concerns, particularly in instances where auditors and their firms were involved in misconduct that led to widespread market damage.
Pornanong Budsaratragoon, SEC Secretary-General, explained that the Securities and Exchange Act does not assign accountability to audit firms, limiting the SEC’s supervisory capacity.
“In some cases, auditors have been complicit in misconduct, yet the SEC could only impose penalties on individuals, not on their firms,” she stated.
To address this, the SEC has proposed amendments to various laws under the Securities and Exchange Act, including enhanced oversight powers over audit firms—a key issue submitted to the Finance Ministry. The goal is to bolster enforcement and ensure that the regulatory framework remains effective and aligned with evolving market conditions, said Mrs. Pornanong.
A pivotal change involves requiring audit firms to obtain authorization from the SEC, allowing the regulator to directly oversee firms and impose penalties for misconduct.
“This measure should strengthen regulatory enforcement and bring Thailand’s market governance in line with international standards,” she added.
The amendments also stipulate that listed companies’ auditors must be registered with the SEC and be affiliated with audit firms that meet the regulator’s standards.
“The proposed reforms aim to elevate accountability by holding audit firms directly responsible, thereby ensuring greater integrity in financial reporting and maintaining market stability,” Mrs. Pornanong explained.
The proposed changes are currently under review by the Council of State and may proceed to the cabinet for approval. In some cases, the measures could be expedited through royal decree.
Alongside these legislative initiatives, the SEC is also considering easing rules on margin loans. The regulator is conducting a public hearing on a proposal that would permit securities companies to extend margin lending using shares from large IPOs—those raising over 10 billion baht—as collateral.
Because IPO shares are highly volatile and lack a trading history, they are presently excluded from collateral eligibility. However, under the new framework, large IPO shares could qualify as collateral under strict exposure limits and specific haircut policies.
“This adjustment aims to offer investors greater flexibility and purchasing power, while ensuring securities firms maintain robust risk management to prevent excessive borrowing and reduce the risk of forced sales in volatile markets,” Mrs. Pornanong said.
These comprehensive reforms targeting both audit firms and margin lending reflect the SEC’s broader efforts to reinforce market integrity, boost investor confidence, and enhance Thailand’s competitiveness in capital markets, she concluded.