Executives' share trades under scrutiny

STOCK MARKET

Executives' share trades under scrutiny

NUNTAWUN POLKUAMDEE
Investors should monitor closely disclosures by listed companies about share trades by company executives and directors, according to the Stock Exchange of Thailand.

Supakit Jirapraditkul, a SET senior vice-president, said it had found that in some cases, executives were using loopholes in the law by transferring shares to related parties to avoid disclosure requirements.

The Securities and Exchange Commission requires directors and senior executives to report changes in their shareholdings of listed firms.

By transferring shares to other parties, an executive can execute a trade while avoiding disclosure. Share transactions must be reported by general investors only if one's holdings in a company change every 5% of total outstanding shares.

''Some executives spoke publicly about their commitment to a company as a long-term investment, but later sold out their shares or transferred their holdings to other parties,'' Mr Supakit said.

One example of such a strategy was in the case of Power-P, a firm now under a regulatory spotlight. The SET in January said Ratchasak Susewi, the former chairman and chief executive of Power-P, may have violated market rules by selling off his shareholdings in a private placement late last year. He sold off the majority of his 22.04% stake, or 46.25 million shares, to 31 private investors on Dec 13.

The transaction came after the Securities and Exchange Commission on Nov 8 ordered the construction company to undertake a special audit of its 2004 financial statements.

Mr Supakit acknowledged that share transfers by company executives did not violate SEC regulations, but did violate the spirit of the rules which called for public disclosure of share movements.

''The SET will, however, keep a close eye on executives who have shown behaviour not necessarily benefiting retail investors,'' he said.

The SET was also trying to be more proactive in protecting investors by requiring listed companies to issue clarifications in case of unusual movements in share prices.

Mr Supakit defended the actions of the regulators, noting that in many cases, confidentiality was required during the investigation process.

Companies under rehabilitation are among the most favoured stocks for speculators on expectations of heavy price gains after trading resumes in the company.

Asia Hotel, for instance, resumed trade on the SET on Jan 22. The stock currently is trading at over 45 baht each, compared with a last trading price of 4.6 baht before its five-year suspension was removed.
The SET has asked the firm about factors behind the price rise, and has also sought information from local brokers about possible share manipulation.

If anyone needs an excuse to adopt an anti-capitalist stance, all you have to do is consider the 'little boy' games that execs get up to on stock exchanges around the world.