## 1. Detailed Assessment of Implementation of the International Organization of Securities Commissions (IOSCO) Principles ## Source details **Canonical URL:** [1. Detailed Assessment of Implementation of the International Organization of Securities Commissions (IOSCO) Principles](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr09148.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr09148.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr09148.pdf.json) --- ### Overview and selected glossary - Document: Detailed Assessment of Implementation of the International Organization of Securities Commissions (IOSCO) Principles. - Selected glossary entries (as provided): - AIMC Association of Investment Management Companies - BOT Bank of Thailand - CIS Collective Investment Scheme - CLOB Central Limit Order Book - CPSS Comité on Payment and Settlement Systems - DA Thailand Derivatives Law - DOI Department of Insurance - DSI Department of Special Investigations - FAP Federation of Accounting Profession - IAS International Accounting Standards - IFRS International Financial Reporting Standards - IOD Institute of Directors Association - IOSCO International Organization of Securities Commissions - IPOs Initial Public Offerings - ISA International Standards of Auditing - LBDU Limited Broker Dealer Underwriter License - MAI Market for Alternative Investment - MOC Ministry of Commerce - MOF Ministry of Finance - MOU Memorandum of Understanding - NAV Net Asset Value - OAG Office of the Auditor General - OECD Organization for Economic Co-operation and Development - OTC Over-the-Counter - ROSC Report of Observance of Standards and Codes - RTGS Real Time Gross Settlement System - RTP Royal Thai Police - SEA Securities and Exchange Act - SEC Securities and Exchange Comisión - SET Stock Exchange of Thailand - SETTRADE SET Internet Trading System - SG Secretary General of the Securities and Exchange Commission - SRO Self-Regulatory Organizations - TBMA Thailand Bond Market Association - TFEX Thailand Futures Exchange - TIA Thailand Investors Association - TSC Thailand Settlement Committee - TSD Thailand Securities Depository - TSI Thailand Securities Institute ### Principles Relating to the Regulator (Principles 1–5) - Principle 1 — Responsibilities of the regulator - Findings: - SEC responsibilities specified in the SEA and the DA of 2003. - Sections 14, 15 of the SEA provide the SEC Board authority to issue orders, rules, regulations, notifications and directions under the SEA. - Section 9 authorizes the Office of the SEC (staff under SG supervision) to perform acts necessary under law or to implement Board resolutions and to provide interpretative guidance. - Implementation assessment: Broadly Implemented - Key operational practices: - Internal committees review nonroutine interpretative decisions. - Policy/regulatory interpretations published in SEC Notification circulars and occasionally as FAQs on the SEC website. - Oral interpretations provided for routine items by telephone. - Licensing limitations: - SEC must submit broker-dealer and mutual fund operator license applications to the Minister of Finance for approval. - MOF long-standing policy of not granting new broker-dealer licenses; new entrants historically required to buy existing firms and licenses. - Public agreement to change MOF policy beginning in 2012. - Mutual fund operator license approvals have included MOF-imposed requirements (e.g., creation of private pension programs) unrelated to regulatory licensing standards. - Principle 2 — Organizational responsibilities, Board composition and independence - Findings: - SEC created in 1992; Board comprised of 11 members: six ex officio (including Minister of Finance as Board Chair, BOT Governor, permanent Secretaries of MOF and MOC, SG of SEC) and 4–6 Cabinet-appointed members on Minister recommendation. - Appointed members serve staggered fixed 6 year terms and must include at least one legal expert, one accounting expert and one financial expert; appointed experts may not be political officials. - Section 262 of the SEA empowers the Minister of Finance with overall supervision and control for implementation and harmonization with government policies. - Proposed amendments would replace the Minister as chairman with an expert appointed by Cabinet on Minister recommendation; other expert members nominated by a panel of former senior government officials. - Board meets typically once a month and generally confines itself to rules/regulations and fee-setting. - Implementation assessment: Partly Implemented - Key concerns and recommendation: - Minister of Finance’s statutory role potentially jeopardizes operational independence. - SEC should consider publishing the actual text of proposed rules in addition to summaries. - Principle 3 — Adequacy of powers, resources and capacity - Findings: - SEC has broad legal authority; self-funded from fees; permanent endowment for temporary shortfalls. - Board sets salaries; SEC staffing: 421 employees; over 50 percent have advanced degrees. - SEC lacks final legal authority to approve broker-dealer and mutual fund operator licenses; has licensing authority over other intermediaries. - Implementation assessment: Partly Implemented - Comment: - MOF policy restricting new brokerage licenses and conditioning mutual fund approvals on non-regulatory requirements undermine regulatory independence. - Principle 4 — Regulatory processes and disclosure - Findings: - Official Information Act Section 7 requires state agencies to publish by-laws, regulations, orders, circulars, rules, work patterns, policies or interpretations in the Government Gazette. - SEC publishes actions, disciplinary actions, current and former regulations on its website. - SEC publishes summaries of inspection reports and an evaluation grade. - Investor education: seminars, published materials; assisted in creation of TIA and IOD. - Implementation assessment: Fully Implemented - Comment: Public release of inspection report summaries and grades noted as positive innovation. - Principle 5 — Professional standards and staff conduct - Findings: - Employee code of conduct covers confidentiality, personal stock trading, negotiations for future employment and conflicts of interest. - Employees cannot purchase individual company stocks but may invest in mutual funds and government debt. - All investments must be reported to the SEC within 3 days; no routine practice of monitoring compliance. - Spouses and minor children not prohibited from purchasing stocks but transactions must be reported by the employee. - Internal auditor can investigate employee misconduct. - SEC staff immune from personal civil liability for lawful official actions; SEC as entity subject to civil liability; staff can face criminal action by private person. - Implementation assessment: Broadly Implemented - Recommendations: - Consider expanding investment restrictions to spouses and minor children and to accounts over which an SEC employee has decisional authority. - Consider periodic reviews of employees’ brokerage accounts. - Staff should be legally immune from prosecution for lawful exercise of official duties. ### Use and oversight of Self-Regulatory Organizations (SROs) (Principles 6–7) - Findings: - Main SROs: SET and TFEX (TFEX wholly owned by SET); other SRO roles: FAP, TBMA, TSD. - SEC authority to review and approve SET rules other than trading and clearing operations; SET typically submits draft regulations to SEC for prior approval unless urgent. - SEC appoints 5 members of SET Board and conducts periodic inspections; SET submits electronic audit trails daily on 24 hour delivery basis. - TFEX oversight: Derivatives Law provides SEC oversight; TFEX must report member positions, large open positions, daily trading and market irregularities; SEC Board can impose sanctions up to license revocation. - TSD rulemaking authority over membership subject to SEC review via SET authority. - FAP created in 2005 with authority to create Thailand accounting standards, license accountants and impose disciplinary sanctions; currently small budget and staff and formally adopts (not yet formulates) standards. - TBMA oversees OTC bond market; SEC regulations require all bond dealers be members; TBMA provides price reporting and fair value prices; authority to discipline or expel members (not yet applied). - Implementation assessment: Partly Implemented - Key recommendations: - SEC should have discretionary authority to review all SET rules and direct amendment of rules inconsistent with SEA policies and fair markets (including circuit breakers and “net trading” rules). - Consider additional funding for FAP to enable effective interpretive and disciplinary functions. - Address legal/jurisdictional issues that inhibit SEC review of SET disciplinary actions. ### Inspection, investigation, surveillance powers (Principle 8) - Findings: - SEC has powers to conduct surveillance, inspections and investigations; may demand relevant information from regulated entities without formal process (Sections 264 of SEA and 103 of DA). - Limited authority to compel testimony or documents; remedy for refusal is referral to criminal authorities for obstruction of justice (fine only); courts cannot order compliance. - Recordkeeping typical retention: 5 years (2 years for investment advisors). - Requirement to tape record all phone calls with customers; SEC conducted thematic inspection of tape recording systems. - SET conducts primary market surveillance and performs preliminary inquiries before referring matters to SEC; SEC receives daily trading activity on a T+1 basis and analyzes against insider transaction reports. - Authorization to initiate SEC investigation must be obtained from SEC SG; Board has no role at authorization stage. - Implementation assessment: Fully Implemented - Comments and recommendations: - Examine whether bond market surveillance is sufficient given low TBMA trading volumes. - Amend SEA to enable courts to order compliance with testimony/document production. ### Enforcement powers and process (Principle 9) - Findings: - SEC staff can investigate violations by any person; administrative sanctions can be imposed only against registered entities or persons: reprimand, suspension, license revocation, business limitation. - Administrative process: internal enforcement committee → SEC SG; defendants may submit written statement to SG; appeal to SEC Board within 30 days or to Appellate Committee (5–7 experts appointed by Cabinet). - Criminal sanctions require referral to RTP or DSI and then Public Prosecutor; criminal referral process often lengthy (~one year or longer); ~20 percent of SEC criminal referrals dropped at preliminary stage. - SEC cannot impose civil enforcement sanctions under the SEA (money fine allowed in DA but not SEA); no authority to order restitution to injured investors; money fines go to government. - SEC can suspend market trading but not trading in an individual equity or debt security (SET may suspend trading in a listed stock). - Private actions: generally breaches of contract or fiduciary duty; shareholder suits and IPO prospectus suits limited by one year statute of limitations; class actions not authorized though SEC has recommended allowing them. - Implementation assessment: Partly Implemented - Key recommendations: - Amend SEA to permit SEC to bring civil enforcement actions on its own behalf and to apply an appropriate civil standard of proof where imprisonment is not sought. - Provide authority to disgorge ill-gotten gains or losses avoided and to order restitution/compensation to injured parties. - Authorize SEC (or TSC/civil court) to bar persons from serving as a Director of a listed company if found to have violated securities laws. ### Enforcement effectiveness, inspections and compliance programs (Principle 10) - Findings and resourcing: - SEC inspection staff: 25 for securities firms and comparable number for mutual funds and investment advisers. - Typical inspection workload annually: 12–15 routine inspections, 3–4 “for cause” inspections and 1–2 “thematic” inspections. - Routine exam staffing: estimated 3–4 staff onsite for 2 weeks. - Inspection cycle: all securities firms inspected on a 4 year cycle (SEC estimate). - Firms graded after inspection; grades made public on SEC website. - Inspection referrals: past 3 years inspection staff referred 64 inspection reports to the TSC for imposition of a fine. - Market surveillance: - SET conducts real-time market surveillance using commercial oversight software; TFEX installed commercial surveillance package. - SEC receives T+1 daily trading data for enforcement analysis. - Compliance and enforcement outcomes: - SEC accepts public complaints and staff expected to respond within 30 days. - Regulations require separation of sales/trading/analysis and sales/back office; firms must have compliance and internal audit functions. - SEC has authority to bring administrative actions for supervisory failures (two cases in 1999 and 2005). - Criminal referral statistics: in 15 years, 21 of 84 criminal referrals (5 of the most recent 7) were prosecuted; 16 convictions resulted, two cases dismissed and three pending. - Implementation assessment: Partly Implemented - Recommendations: - Review timeliness of SET referrals to SEC. - Further examine OTC debt trading surveillance capacity. - Address external legal and procedural impediments (criminal referral delays, limited remedies). ### Information sharing (Principles 11–13) - Findings: - Confidentiality provisions (SEA Section 316 and DA Section 153) permit SEC to share confidential information with foreign and domestic regulators. - SG delegated information sharing approval to Asst. SG for Enforcement; no formal approval required, no dual illegality requirement, and no specified type or purpose limitations. - SEC has formal bilateral MOUs with 13 countries; has applied to become signatory to IOSCO multilateral MOU and is listed in Appendix B pending resolution of one impediment in Principle 13. - SEC responded to 28 foreign requests in 2006 with no refusals; 23 requests involved “boiler room” sales frauds. - Limitations and impediments: - Under the Derivatives Act SEC may assist foreign regulators even if no Thai law violation suspected; similar authority absent in the Securities Act, preventing full IOSCO multilateral MOU signatory status. - SEC cannot file civil lawsuits on its own behalf and thus cannot assist foreign regulators seeking enforcement of injunctive or similar foreign court orders. - SEA asset seizure authority limited to instances where there are reasonable grounds to believe a wrongdoer will remove or dispose of assets for violations of Thai Law; cannot assist foreign regulators seeking asset freezes. - Foreign requests for information on financial conglomerates subject to same limitation; SEC can provide information only if it possesses it or can obtain it voluntarily. - Assessments: - Principle 11: Fully Implemented - Principle 12: Broadly Implemented - Principle 13: Not Implemented - Key recommendation: - Amend SEA to permit SEC to seek and provide information to foreign regulators even when SEC does not have its own enforcement interest; consider assisting foreign regulators in seeking legal remedies where appropriate. ### Issuer disclosure, shareholder rights and corporate governance (Principles 14–16) - Principle 14 — Issuer disclosure - Findings: - Thailand disclosure system moved from merit-based to disclosure-based; SEC no longer requires profitability or specified debt/equity ratios for listing. - Prohibits multiple classes of equities with different voting rights; companies selling equity to more than 35 investors must register with SEC. - Deviations from IOSCO disclosure standards include: 3 years financial statements (not 5 years); executive compensation for top 5 executives provided as aggregate amount; major shareholders defined as holding 10 percent; 12 months historical share price included. - IPO review includes examination of auditor work papers and onsite company visit; goal to complete within three months of filing. - Filing requirements: quarterly reports within 45 days of quarter-end (financial statements reviewed by auditor); annual report within 110 days with audited financial statements. - Shareholder meeting notices: at least 7 days prior and published in newspaper at least 3 days prior; 14 day notice for extraordinary business transactions; SET requires 14 days notice for delisting, acquisition/disposal of major assets or affiliated transactions equal to or exceeding 3 percent of net tangible assets. - Special event reports required immediately upon occurrence. - Implementation assessment: Fully Implemented - Comment: - SEC may consider procedures for advance notice to secondary market of large insider/major shareholder sales of stock issued in private transactions. - Principle 15 — Shareholder treatment and corporate governance - Findings: - Voting protections: Thai Law prohibits shares with more than 1 vote; 75 percent vote required to amend bylaws, issue new shares, waive preemptive rights, approve M&A or sell material assets. - Thresholds for calling special shareholder meetings: minimum 20 percent of total issued shares or 25 shareholders holding 10 percent of total if controlled by at least 25 shareholders. - Shareholder rights to submit matters: individual shareholders holding 33 percent may submit matters for inclusion; company not required to consider at annual meeting if time does not permit. - Request to appoint an examiner requires 20 percent of all issued shares or 33 percent of total number of shareholders. - Tender offers: disclosure at 5 percent holdings and updates within one business day for 5 percent increments; mandatory full tender offer at 25 percent of voting rights; tender offers open for 25–45 business days with 20 business day withdrawal window; tender price floor tied to any price paid during previous 90 days; both tender offer and company must retain separate financial advisers for fairness opinions. - SEC created a Tender Offer Committee of private experts appointed by the SG to review and grant waivers. - Major shareholder disclosure: holders of 5 percent or more must report changes within one business day of surpassing next 5 percent increment; prospectus and annual report must list 10 largest shareholders. - Corporate governance initiatives: director’s handbook; SEC and SET require audit committee of at least three independent directors (one with accounting expertise); creation of IOD and TIA; SET updated Principles of Good Corporate Governance in March 2006. - ROSC recommendations: proposals include cumulative voting, SEC authority on annual meeting timing and proxy solicitation, stronger fiduciary duty enforcement and director removal mechanisms. - SEC proposed amendments: reduce shareholder votes required to call meeting to 10 percent; give SEC authority to regulate meeting timing and required disclosure; entitlement for shareholders with 5 percent of votes to add agenda items prior to sending agenda (with Board able to exclude specified categories); proposal for private class action right. - SEC and SET considering requirement that IPOs and listed companies have independent directors equal to at least one-third of board size, but not less than 3. - Implementation assessment: Broadly Implemented - Recommendations: - Consider requiring timely changes in shareholdings of major beneficial shareholders. - Consider adopting independent director composition changes as being considered with SET. - Principle 16 — Accounting and auditing - Findings: - FAP created in 2004; FAP adopted IAS and ISA; 35 IAS standards formally adopted and 10 under review. - Transition to IAS scheduled for completion at end of 2007. - FAP is official interpreter of Thailand accounting and auditing standards. - Standards adoption process includes public hearings and committee reviews comprising representatives of major accounting firms, SEC, BOT, Department of Business Development, DOI, OAG and academia. - Oversight Committee heavily weighted with ex officio government members; Permanent Secretary of MOC is Committee Chair. - FAP has very limited full-time staff and relies on SEC and industry participants for interpretive decisions. - SEC/SET regulations require listed companies to have independent audit subcommittee; audit partner rotation after five years; mandatory disclosure of fees for audit and non-audit services. - Majority government-owned listed companies audited by OAG rather than private auditors; OAG applies same generally accepted auditing standards. - Implementation assessment: Broadly Implemented - Key statistics and reach: - There are 518 listed companies in Thailand. - There are a total of 285,711 registered companies and 831 public companies. - FAP has been in existence for slightly more than one year (at time of assessment). - Recommendation: - If FAP lacks sufficient full-time resources, SEC/MOC/MOF should identify additional funding to enable FAP to fulfill mandate. - Consider initiation of Accounting and Auditing ROSCs given FAP’s national authority and recent establishment. ### Principles for Collective Investment Schemes (CIS) (Principles 17–20) - Principle 17 — Eligibility and regulation of CIS operators - Assessment: Fully Implemented - Key rules and findings: - Operators must obtain Mutual Fund management license (special brokerage license); application reviewed by SEC which recommends approval/rejection to MOF. - Only financial institutions may obtain a license. - First 5 years of operation: CIS operator may not have majority foreign ownership; after 5 years foreign owner may apply to MOC for license to become majority owner. - Licensing implementing regulations prepared by SEC but ministerial regulations required by SEA; MOF has imposed requirements consistent with other government policies (e.g., mutual fund operator required to create provident funds for employees). - Fit and proper review of entity, management and 10 percent shareholders; onsite SEC assessment of operating capacity. - Ongoing minimum net worth: B 20 million; firms with B 30 million net worth must notify SEC and submit rectification plan. - Indemnity insurance required against fraudulent acts by operator officers and directors. - Operators with assets under management < B 25,000 million must have combined net worth and insurance totaling B 120 million; larger operators must have combination totaling B 220 million. - Licensed securities firms may sell mutual fund units; other financial institutions must obtain LBDU from MOF upon SEC recommendation. - Ongoing reporting includes monthly fund assets held, affiliate transactions, operator/affiliate investments; advertising material must be submitted 7 days prior to use. - Licensed and unlicensed CIS operators, employees and agents may be subject to criminal prosecution; licensed persons subject to administrative sanctions by SEC. - Comment: Minister of Finance’s final licensing authority and imposition of nonregulatory obligations noted but does not affect final assessment. - Principle 18 — Legal form, structure, and asset segregation - Assessment: Fully Implemented - Key rules: - Mutual fund assets must be deposited with a fund supervisor (approved by SEC) who must not be affiliated with the fund operator; supervisor monitors NAV process. - Material change in investor rights requires shareholder vote with majority of all shares; SEC approval possible if not significant. - Funds must be audited annually; audits examine appropriateness of fund expenses and adequacy of asset valuation. - Comment: - SEC should examine whether to waive shareholder vote requirement where changes are required solely to comply with governmental regulation to avoid costly/shareholder vote delays. - Principle 19 — Disclosure for CIS investors - Assessment: Fully Implemented - Key rules: - Prospectus requirements: summary in Q&A format, investment strategy, risk explanation and warning, all fees and expenses; prospectus updated annually and immediately upon material change. - Funds prepare semi-annual and annual reports every six months; annual report due within 3–4 months of year-end; semi-annual within two months. - Reports include portfolio holdings and performance; advertising submitted to SEC 7 days prior to usage. - False/misleading advertising subject to administrative sanctions and fines. - All mutual funds audited annually. - Principle 20 — Asset valuation, pricing, and redemptions - Assessment: Fully Implemented - Key rules: - Daily NAV calculation in accordance with AIMC guidelines approved by SEC; fair market value required. - Mutual fund supervisors must check NAV daily. - Illiquid debt priced using TBMA daily price tables; illiquid equity based on last executed trade or best bid if no recent trades. - Open-end funds publish NAV daily in the newspaper; closed-end weekly; interval funds monthly. - Funds may suspend redemption one business day under specified circumstances; longer suspensions require SEC approval or SEC may order suspension. - Pricing error remediation: if failure to apply AIMC guidelines results in error > 0.5 percent of true price, fund operator must compensate injured investors. - Comments: - Mutual funds permitted max 15 percent of fund assets in nonpublic companies and max 5 percent in securities of a single company. - Valuation challenges for nonpublic and thinly traded stocks; TBMA pricing standard for debt. - SEC inspection program randomly samples such securities to examine NAV pricing. ### Principles for Market Intermediaries and Prudential Framework (Principles 21–24) - Principle 21 — Market intermediaries - Assessment: Partly Implemented - Key rules and findings: - Securities firm license applications reviewed by SEC which recommends approval/rejection to MOF; SEC retains authority to approve derivatives operator and investment advisor licenses. - Fit and proper tests applied to management, directors and 10 percent shareholders; 1/4 of firm’s Board must be independent. - Prior SEC approval required for changes in firm control, Board, managing directors or major shareholders. - Sales personnel licensed after qualification exam prepared by SEC and administered by TSI. - SEC conducts risk-based examinations and publicly discloses inspection results and grades. - Observed restriction on new entry: - Final authority to grant a license rests with MOF; no new securities firm license granted for many years; new entrants required to purchase stock of existing securities firm to acquire license. - MOF and SEC publicly announced policy change and expiration of these restrictions (and minimum commission rate regulation) at end of 2012. - Comment: - The Partly Implemented assessment reflects fairness concerns due to requirement to purchase defunct entity’s license; public announcement of policy change noted. - Principle 22 — Initial and ongoing capital and prudential requirements - Assessment: Fully Implemented - Key figures and rules: - Securities firms: initial capital of B 100 million. - Derivatives firms: initial capital of B 25 million. - Private advisors/private fund managers (no custody): initial capital of B 20 million. - Net capital ratio: 7 percent. - Minimum liquid capital: B 15 million (B 25 million if joint securities firm and derivatives firm). - Reporting: monthly reports on financial adequacy (14 days after end of month), audited semi-annual and annual financial statements, monthly client asset statements and margin loan reports. - SEC permits approval to use alternative value at risk capital models; one Thailand subsidiary of a major foreign firm currently approved. - Comments: - SEA initial capital requirement B 100 million determined at initial license grant; SEC net capital regulations are the meaningful prudential standard. - SET “netting” accounts require minimum cash balance of 10 percent of open positions; may be insufficient in sharply declining markets. - Principle 23 — Internal organization and operational conduct - Assessment: Fully Implemented - Key rules and observations: - Regulations require internal compliance unit and internal independent audit unit; internal control and risk management systems approved by board. - Controls over access to nonpublic confidential information and separation of sales/analyst staff from trading staff; know your customer duty. - Firms must tape record all phone calls between customers and the firm and retain tapes for one month. - Investor complaint files retained for two years; complaint reports submitted quarterly. - Customer assets segregated at TSD and assets deposited within 24 hours. - Stock borrow/loan program requires investor authorization for each stock loan transaction. - Recommendation: - Consider longer tape recording retention than one month to enhance oversight utility. - Consider granting compliance unit authority to correct misconduct rather than only referring matters to board. - Principle 24 — Procedures for dealing with failure of a market intermediary - Assessment: Partly Implemented - Key rules and findings: - Early warning: firms below 1.5 times minimum net capital must notify SEC, submit corrective plan, may not expand business, provide daily reports until ratio exceeded for two consecutive business days. - Firms with capital equal to or below general liabilities for 5 consecutive business days or failing to settle with TSD or clients must cease operations. - TSD may order additional collateral if unsettled positions for three days combined reach or exceed 8 times net liquid capital. - SEC lacks authority to appoint a receiver or liquidator; may rely on Section 143 of SEA to order corrective action including transfer of customer accounts; MOF can revoke license. - Unclear bankruptcy protection for customer assets held in legal name of firm for beneficial ownership of customers. - TSD customer protection fund currently valued at B 500 million. - TSD member initial contribution: B 900,000. - TSD monthly contribution into clearing fund: rate between 0.008 percent and 0.016 percent of total monthly trades, reviewed quarterly, depending on firm’s risk level. - SET security fund: B 100 million; may borrow up to B 2 billion. - Key recommendations: - Amend SEA to empower SEC to appoint liquidator/receiver to protect customer accounts, preserve assets and transfer or deliver out customer assets in event of failed firm that misappropriated them. - Clarify bankruptcy law protection for customer assets held in street name and ensure settlement integrity for unsettled transactions. - Coordinate with BOT and DOI via MOU. ### Secondary market, exchanges, transparency, enforcement, exposures, clearing and settlement (Principles 25–30) - Principle 25 — Establishment and oversight of trading systems - Findings: - Two trading systems: SET (including MAI) and TFEX (wholly owned by SET); both authorized under Thai law and supervised by SEC. - SET minimum listing standards: B 300 million paid-up capital, minimum 1000 shareholders, minimum free float 30 percent with no more than 15 percent owned by control persons/entities, and 3 years audited financial statements indicating a profit in two of the years. MAI exempt from these minimums. - SET is automated direct order interaction system with strict price/time priority; firms not permitted to internalize and cross customer orders. - SET electronic trading platform for listed corporate debt: virtually no daily trading; corporate and government debt traded OTC in dealer market. - Assessment: Fully Implemented - Principle 26 — Ongoing regulatory supervision of exchanges - Findings: - SEC conducts onsite inspections of exchanges; inspected SETTRADE in 2005 and completed full inspection of SET in 2004 with another inspection scheduled in 2007. - Inspections review listing, trading, audit trail maintenance and surveillance. - SET operates dispute resolution for member-member disputes but not customer-member disputes. - Assessment: Partly Implemented - Key issue: - SEC inability to review SET rules pertaining to trading and operations is substantial; suggested amendment to law to provide SEC discretionary authority to review and direct changes in SET trading rules. - Principle 27 — Transparency of trading - Findings: - Equity trading must occur on SET; SET posts trades and the three best bids and offers and sizes. - Mandatory trading increments range B 0.10–6.00 and typically B 0.5. - Real-time access available to investors at low monthly rates; many firms provide free access to customers. - No CLOB disclosure beyond best bids/offers; large block trades may be negotiated outside BBO and crossed/disclosed at end of session. - TBMA debt reporting: SEC Reg 56/2548 requires dealers to report debt trades to TBMA within ½ hour; TBMA publishes government trades upon receipt and corporate trades twice daily; daily last sale reporting list and fair value pricing for nontraded issues. - Daily liquidity in TBMA (excluding bank repo) typically less than 300 transactions; total estimated value of corporate debt market approx. B 4 trillion; daily trading value less than 1 percent of total. - TFEX: SET50 future product; mid-2006 average 200 contracts daily, recently grown to 2000 contracts, occasionally 4000 contracts; full transparency in bid/offer and transaction reporting. - Assessment: Broadly Implemented - Recommendations: - Consider increased depth-of-book disclosure or creation/dissemination of a CLOB for equities. - Improve bond market transparency, require dealers to disclose bids/offers and size on electronic system and promote electronic trading. - Encourage electronic reporting to TBMA (reduce fax reporting). - Principle 28 — Detect and deter manipulation and unfair trading - Findings: - SEA prohibits insider trading, material misstatements or omissions, and market manipulation; SEC empowered to enforce. - Insider trading prohibition applies only to insiders, temporary insiders and tippees who act as nominees of insiders or were induced to trade for benefit of insider. - Market manipulation prohibition requires proof that conduct was intended to induce trading by others or to cause change in market price. - Assessment: Broadly Implemented - Key findings: - High evidentiary standards make prosecutions difficult, inhibiting criminal prosecutions and effective deterrence. - Need clearer definitions of misconduct and appropriate evidentiary standards. - Principle 29 — Management of large exposures, default risk and market disruption - Findings: - TSD monitors firm aggregate unsettled trading exposure; rule: in a 3 day period, unsettled positions with net settlement value must not exceed 8 times net liquid capital; TSD may direct increased capital deposit. - TSD may decline to act as settlement counterparty and direct firms to bilateral settlement. - SEC may demand identity of any firm customer. - Assessment: Not Implemented - Key findings and concerns: - IOSCO methodology requires NI when regulator lacks clear authority to isolate a failing firm’s risk to avoid systemic market disruption. - TSD discretion to substitute bilateral settlement for central settlement when a firm fails raises systemic risk and may undercut TSD’s claim to central counterparty preference under bankruptcy law. - SEC seeking legal action to remove impediment. - Principle 30 — Clearing and settlement oversight and design - Findings: - TSD operates central clearance and settlement for all equity and some debt; acts as registrar for listed companies. - Virtually all equity and most debt dematerialized and traded on book entry basis. - Settlement cycles: equity T+3, derivatives T+1, debt commonly T+2. - TSD utilizes multi-lateral netting and an RTGS. - TSD performs central counterparty functions but lacks legal designation and authority as a central counterparty. - Assessment: Addressed separately in CPSS/IOSCO Assessment of Securities Settlement ### Summary implementation gradings, key statistics and priority recommended actions - Selected implementation gradings and key issues: - Principle 1: Broadly Implemented — recommendation to transfer final licensing authority from MOF to SEC. - Principle 2: Partly Implemented — Minister of Finance involvement risks independence. - Principle 9: Partly Implemented — SEC lacks civil enforcement authority, cannot suspend trading in individual stocks, cannot order violators to compensate defrauded persons. - Principle 13: Not Implemented — inability to seek/provide information unless SEC has its own interest. - Principle 29: Not Implemented — lack of authority to isolate failing firm risks. - Priority recommended actions (selected): - Create formal coordination mechanism among governmental agencies with capital markets authority. - Amend the SEA to transfer final licensing authority over securities firms to the SEC. - Amend the SEA to expand SEC enforcement powers: authority to file civil enforcement actions, impose money sanctions, order restitution to investors, order corrective action, bar persons from serving as Directors, temporarily suspend trading in individual securities, and refer criminal actions directly to the Public Prosecutor. - Extend the one month record retention requirement for tape recorded customer calls. - Empower SEC to appoint a liquidator or receiver to protect customer accounts, preserve assets, and transfer or deliver out customer assets in event of a failed firm that misappropriated them; address bankruptcy law protection for customer assets held in street name and settlement integrity for unsettled transactions. - Amend SEA to permit SEC discretionary review/approval of all SET rules, including trading and operations rules. - Clarify legal definition and evidentiary standards for prohibited market misconduct (insider trading and market manipulation). - Grant TSD legal authority of a central counterparty and remove discretion to decline to settle trades; ensure member firm security deposits are legally under the TSD and not subject to creditor rights in bankruptcy. - Finalize formal MOU and coordinating body for information exchange and early warnings among SEC, BOT, DOI and other regulators. *IMF staff report content from the supplied PDF chapter/section.* ### 1. Detailed Assessment of Implementation of the International ### 1. Detailed Assessment of Implementation of the International Organization of Securities Commissions (IOSCO) Principles ### Overview - Table 1. Detailed Assessment of Implementation of the International Organization of Securities Commissions (IOSCO) Principles - Principles Relating to the Regulator ### Glossary (selected entries as provided) - AIMC Association of Investment Management Companies - BOT Bank of Thailand - CIS Collective Investment Scheme - CLOB Central Limit Order Book - CPSS Comité on Payment and Settlement Systems - DA Thailand Derivatives Law - DOI Department of Insurance - DSI Department of Special Investigations - FAP Federation of Accounting Profession - IAS International Accounting Standards - IFRS International Financial Reporting Standards - IOD Institute of Directors Association - IOSCO International Organization of Securities Commissions - IPOs Initial Public Offerings - ISA International Standards of Auditing - LBDU Limited Broker Dealer Underwriter License - MAI Market for Alternative Investment - MOC Ministry of Commerce - MOF Ministry of Finance - MOU Memorandum of Understanding - NAV Net Asset Value - OAG Office of the Auditor General - OECD Organization for Economic Co-operation and Development - OTC Over-the-Counter - ROSC Report of Observance of Standards and Codes - RTGS Real Time Gross Settlement System - RTP Royal Thai Police - SEA Securities and Exchange Act - SEC Securities and Exchange Comisión - SET Stock Exchange of Thailand - SETTRADE SET Internet Trading System - SG Secretary General of the Securities and Exchange Commission - SRO Self-Regulatory Organizations - TBMA Thailand Bond Market Association - TFEX Thailand Futures Exchange - TIA Thailand Investors Association - TSC Thailand Settlement Committee - TSD Thailand Securities Depository - TSI Thailand Securities Institute ### Principle 1. The responsibilities of the regulator should be clear and objectively stated. - Description: The responsibilities of the Securities and Exchange Commission (SEC) are specified in the SEA and in the Derivatives Act of 2003 (DA). - Description: Sections 14, 15 of the Securities and Exchange Act (SEA) provide the SEC Board with the authority to issue orders, rules, regulations, notifications and directions under the SEA. *Source: _cr09148 - 1. Detailed Assessment of Implementation of the International* ### Section 9 authorizes the Office of the SEC (the staff under the supervision of the ### _cr09148 - Section 9 authorizes the Office of the SEC (the staff under the supervision of the ### Section 9 authority and implementation practices - Section 9 authorizes the Office of the SEC (the staff under the supervision of the Secretary-General (SG)) to perform any act necessary under the law or to implement the Board’s resolutions. - The staff’s implementation authority is used to provide interpretative guidance on compliance with the two acts. - Internal governance of interpretative decisions: - Each operating unit of the SEC has created internal committees with representation from other SEC offices to review all nonroutine interpretative decisions. - Policy or regulatory interpretations are typically published in SEC Notification circulars and occasionally on the SEC website as Frequently Asked Questions (FAQ). - The staff provides oral interpretations of routine items by telephone. - Licensing limitations: - The SEC does not have full regulatory authority to grant broker-dealer or mutual fund operator licenses; it must review applications and submit them to the Minister of Finance for approval. - The Ministry of Finance (MOF) has had a long-standing policy of not granting new broker-dealer licenses; new entrants must buy an existing firm and its license at a substantial price. - The SEC publicly agreed to change this policy beginning in 2012. - For mutual fund operator licenses, the MOF has attached requirements pertaining to creation of private pension programs for employees of the operator that are unrelated to regulatory standards for granting a license. *Assessment: Broadly Implemented* ### Organizational responsibilities, Board composition and independence (Principle 2) - Legal and structural features: - SEC created in 1992 with enactment of the SEA. - Board comprised of 11 members: six ex officio (including the Minister of Finance as Board Chair, the Governor of the Bank of Thailand (BOT), permanent Secretaries of the MOF and MOC, the SG of the SEC) and 4–6 members appointed by the Cabinet on the Minister of Finance’s recommendation. - Appointed members serve staggered fixed 6 year terms and must include at least one legal expert, one accounting expert and one financial expert; none of the 4–6 expert members may be a political official. - Section 262 of the SEA empowers the Minister of Finance, separately from his authority as Board Chair, with overall supervision and control for implementation of the act and harmonization with government policies or Cabinet resolutions. - Proposed amendments and governance practices: - Minister of Finance has proposed replacing the Minister as chairman with an expert appointed by the Cabinet upon the Minister’s recommendation; other expert members would be nominated by a panel of former senior government officials and appointed by the Minister. - Board typically meets once a month, confines itself to rules/regulations and fee-setting; generally does not play a direct role in daily operations though the law permits greater involvement. - Transparency and accountability: - SEC is self-funded from fees and has independent authority to set salaries; permanent endowment may be used for temporary shortfalls. - Permanent Audit subcommittee of 3 independent members; Thailand government Audit Office performs an annual audit; Section 31 requires the Audit Office to submit a final audit report to the Minister of Finance within 90 days from the end of the fiscal year; the SEC includes this audit report in its public annual report on the SEC website. - All SEC final actions are public; notices of proposed rules/amendments and all final rules published on website and in the Government Gazette; public comment is permitted; industry subcommittee reviews proposals prior to publication. - Any SEC action may be challenged in the Administrative Court; the court may reverse an SEC action only if it exceeded authority or failed to adhere to procedural requirements. *Assessment: Partly Implemented* - Key comments and recommendations: - Board composition and statutory powers (including Minister of Finance’s statutory role) potentially jeopardize operational independence. - SEC should consider publishing the actual text of proposed rules in addition to summaries, because technical language is critical to understanding impact and cost. ### Adequacy of powers, resources and capacity (Principle 3) - Staff, resources and authority: - SEC has broad legal authority consistent with legal duties. - Full control over financial budget from industry fees it sets and collects; permanent endowment for shortfalls. - Board sets salaries based on prevailing private sector salaries; usually higher than other governmental workers. - Staffing: 421 employees of the SEC; over 50 percent have advanced degrees. - Licensing authority: lacks final legal authority for approval of licenses for broker-dealers and mutual fund operators; has licensing authority over all other market intermediaries and professional groups (auditors, financial advisors to companies, investment advisers and mutual fund supervisors). *Assessment: Partly Implemented* - Key comments: - Under IOSCO methodology, licensing may be assigned across entities but must be independent of governmental or commercial interests. - Historical MOF policy of not granting additional brokerage licenses and requirement for new entrants to purchase existing licenses undermines regulatory independence. - Mutual fund operator approvals have been conditioned on non-regulatory requirements (creation of provident funds), highlighting lack of regulatory independence. ### Regulatory processes and disclosure (Principle 4) - Legal framework and publication: - Official Information Act, Section 7 requires all state agencies to publish in the Government Gazette by-laws, regulations, orders, circulars, rules, work patterns, policies or interpretations intended to be of general application. - SEC publishes actions, disciplinary actions, current and former regulations on its website. - SEC publishes summaries of inspection reports for securities firms and mutual funds, including an evaluation grade. - Investor education programs: seminars, published materials; assisted in creation of Thailand Investors Association (TIA) and Thailand Institute of Directors Association (IOD). *Assessment: Fully Implemented* - Comment: Public release of inspection report summaries and grades is a positive innovation; SEC commended for efforts leading to creation of TIA and IOD. ### Professional standards and staff conduct (Principle 5) - Employee code and restrictions: - SEC Board adopted employee code of conduct covering confidentiality, personal stock trading, negotiations for future employment and conflicts of interest. - Employees cannot purchase individual company stocks but may invest in mutual funds and government debt. - All investments must be reported to the SEC within 3 days; no routine practice of monitoring compliance. - Spouses and minor children not prohibited from purchasing stocks but transactions must be reported by the employee. - Internal auditor has authority to investigate employee misconduct including prohibited investments. - SEC staff immune from personal civil liability for lawful official actions; SEC as entity can be subject to civil liability and staff can be subject to criminal action brought by a private person. *Assessment: Broadly Implemented* - Recommendations: - Consider expanding restrictions on employee investments to spouses and minor children and to any accounts over which an SEC employee has decisional authority. - Consider periodically reviewing brokerage accounts of employees to verify compliance. - SEC staff should be legally immune from prosecution for lawful exercise of official duties. ### Use and oversight of SROs (Principles 6 and 7) - SROs in the market: - SET and TFEX (wholly owned by SET) perform SRO responsibilities. - Other entities with SRO roles include the Federation of Accounting Profession (FAP), Thailand Bond Market Association (TBMA), and Thailand Securities Depository (TSD). *Assessment under Principle 7 is appropriate* - SET/TFEX/TSD oversight details: - SEC authority to review and approve SET rules other than trading and clearing operations; SET typically submits draft regulations to SEC for prior approval unless urgent. - SEC may instruct SET Board to amend rules if necessary to safeguard public interest; proposed SEA change would empower SEC to instruct SET to amend any rules when change in capital market renders rule inappropriate. - SEC appoints 5 members of SET Board. - SEC conducts periodic inspections of SET; SET submits electronic audit trails of all daily trading on a 24 hour delivery basis. - TFEX: Derivatives Law provides SEC with oversight authority including trading rules; TFEX must submit reports on member positions, large open positions, daily trading and market irregularities; SEC Board can impose sanctions up to license revocation. - TSD has rulemaking authority over its membership subject to SEC review via SET authority. - FAP and TBMA: - FAP created in 2005; authority to create Thailand accounting standards, interpret application, license accountants, impose disciplinary sanctions; budget and staff resources extremely small and currently only formally adopts (not formulates) standards. - TBMA oversees OTC bond market; SEC regulations require all bond dealers be members; TBMA created price reporting and disclosure system and provides fair value prices for certain debt securities; has authority to adopt rules concerning trading and reporting subject to SEC review and approval; authority to discipline or expel members (not yet applied). *Assessment: Partly Implemented* - Comments and recommendations: - SEC should have discretionary authority to review all SET rules and direct amendment of rules inconsistent with SEA policies and fair markets (including circuit breakers and “net trading” rules). - SEC should consider additional funding for FAP to enable effective interpretive and disciplinary functions. - SEC currently cannot review SET disciplinary actions; an example where Administrative Court reviewed SET discipline despite SET not being a governmental body highlights potential legal/jurisdictional issues. ### Inspection, investigation, surveillance powers (Principle 8) - Legal powers and practice: - SEC has full powers to conduct surveillance, inspections and investigations; may demand all relevant information from regulated entities without formal process (Sections 264 of SEA and 103 of DA). - Limited authority to compel testimony or documents if a person refuses to comply; remedy is referral to criminal authorities for obstruction of justice, with only a fine as remedy and court cannot order compliance. - Recordkeeping: typical retention period is 5 years (2 years for investment advisors). - Requirement to tape record all phone calls with customers; SEC conducted a “thematic” inspection of tape recording systems and records. - SET has primary responsibility for market surveillance and performs preliminary inquiries before referring matters to SEC; SEC does not perform real-time surveillance but receives daily trading activity on a T+1 basis and analyzes it against insider transaction reports. - To initiate an SEC investigation authorization must be obtained from the SEC SG; the SEC Board has no role at authorization stage. *Assessment: Fully Implemented* - Comments: - TBMA trading is limited (fewer than 300 trades per day common); SEC should examine whether bond market surveillance is sufficient. - Inability to obtain a court order requiring compliance with testimony/document production warrants an amendment to the SEA. ### Enforcement powers and process (Principle 9) - Enforcement authority and limits: - SEC staff can investigate violations by any person or entity; authority to demand documents/testimony not limited to registered persons. - Administrative sanctions can be imposed only against registered entities or persons: reprimand, suspension, license revocation, limitation on business. - Administrative process: recommendation reviewed by internal SEC enforcement committee, submitted to SEC SG; defendants may submit written statement to SG for reconsideration; subject may appeal to SEC Board within 30 days; alternatively appeal to Appellate Committee (independent body of 5–7 experts appointed by Cabinet). - Criminal sanctions: stronger sanctions against registered or nonregistered persons require criminal prosecution; SEC must refer criminal matters to Royal Thai Police (RTP) or Department of Special Investigations (DSI), which then refer to Public Prosecutor. - Settlement process: Thailand Settlement Committee (TSC) of three persons appointed by Minister of Finance (one RTP, one BOT, one MOF) may impose criminal fines for offenses specified in section 317 of the SEA as an out-of-court settlement; not available for corporate fraud. - Criminal referral process often lengthy: review by RTP or DSI typically takes one year or longer; approximately 20 percent of SEC criminal referrals are dropped at this stage; completion of trial and final judgment typically requires one or more years. - SEC cannot impose civil enforcement sanctions under the SEA (money fine allowed in Derivative Act but not SEA); no remedy requiring violator to reimburse or make restitution to injured investors; money fines go to government. - SEC can suspend market trading but not trading in an individual equity or debt security; SET may temporarily suspend trading in a listed stock. - Private actions: must be brought as breaches of contract or fiduciary duty except shareholder suits and IPO prospectus suits (one year statute of limitations). Class actions not authorized though SEC has recommended allowing them. *Assessment: Partly Implemented* - Key recommendations: - SEC should obtain legal authority to bring civil enforcement actions on its own behalf to reduce delays and apply an appropriate civil standard of proof where imprisonment is not sought. - Amendments should include authority to disgorge ill-gotten gains or losses avoided and to authorize SEC, TSC or civil court to order restitution/compensation to injured parties. - SEC should have authority to use administrative power to bar persons from serving as a Director of a listed company if found to have violated securities laws. ### Enforcement effectiveness, inspections and compliance programs (Principle 10) - Inspection and surveillance resources: - SEC staff: 25 responsible for inspection of securities firms and comparable number for mutual funds and investment advisers. - Typical inspection workload: annually 12–15 routine inspections, 3–4 “for cause” inspections and 1–2 “thematic” inspections. - Risk-based selection and focus: routine inspections focus on prudential risk, operational risk, risk to client and information technology risks. - Routine exam resourcing: estimated 3–4 staff working onsite for 2 weeks. - Inspection cycle: all securities firms inspected on a 4 year cycle (SEC staff estimate). - Public disclosure: firms graded after inspection and grades made public on SEC website. - Enforcement referrals from inspections: during the past 3 years inspection staff referred 64 inspection reports to the TSC for imposition of a fine. - Market surveillance: - SET conducts real-time market surveillance using commercial oversight software; SET typically contacts companies and key traders when patterns are identified. - TFEX has installed a commercial market surveillance package. - SEC receives T+1 daily trading data and uses it for enforcement investigations. - Compliance requirements and enforcement process: - SEC accepts public complaints by telephone, letter, internet or in person; staff expected to respond within 30 days. - Regulations require firms to separate sales/trading/analysis and sales/back office functions; each firm must have compliance department and internal auditor; SEC inspections review these functions. - SEC has authority to bring administrative actions for firm supervisory failures (two cases brought in 1999 and 2005). - Administrative monetary fines authority limited: derivates Act provides money fines; SEA does not authorize money fines. - Criminal referral statistics: in 15 years since law enactment, 21 of 84 criminal referrals (5 of the most recent 7 criminal referrals) were eventually prosecuted; 16 convictions resulted, two cases dismissed and three cases pending. *Assessment: Partly Implemented* - Comments and recommendations: - Timeliness of SET referrals should be examined and procedures revised if delays hamper investigations. - Further examination of OTC debt trading surveillance capacity may be warranted. - SEC has committed resources and training to enforcement, but external legal and procedural impediments (criminal referral delays, limited remedies) reduce overall effectiveness. - Issues regarding legal definitions of market misconduct are discussed under Principle 28 (not included in the supplied content beyond reference). ### Information sharing (Principles 11–13) - Authority to share information: - Sections 316 of the SEA and Section 153 of the DA require confidentiality but permit SEC to share confidential information with foreign and domestic regulators and other entities. - SG delegated information sharing approval to Asst. SG for Enforcement; no requirement for prior approval from SG, Board or other government body; no formal request required; dual illegality not required; no type or purpose limitations specified. - SEC has entered into formal bilateral MOUs with 13 other countries; applied to become a signatory to IOSCO multilateral MOU and is listed in Appendix B of the IOSCO agreement pending resolution of one impediment in Principle 13. - Domestic MOUs with DOI and DSI; agreement in principle with BOT though BOT believes limited in ability to provide certain confidential information due to its legal authority. - SEC responded to 28 foreign requests for assistance in 2006 with no refusals; 23 requests involved “boiler room” sales frauds potentially operating out of Thailand. - Limitations and impediments: - Under the Derivatives Act the SEC may obtain information to assist foreign regulators even if no violation of Thai Law is suspected; similar authority does not exist in the Securities Act, preventing SEC from qualifying as a full signatory to IOSCO multilateral MOU. - SEC cannot file civil lawsuits on its own behalf and thus cannot provide assistance to foreign regulators seeking enforcement of injunctive or similar foreign court orders. - SEA authority to seize assets applies only where there are reasonable grounds to believe a wrongdoer will remove or dispose of assets for violations of Thai Law; cannot be used to assist foreign regulators seeking to freeze assets. - Any foreign requests for information on financial conglomerates subject to same limitation; SEC can provide information only if it possesses it or can obtain it voluntarily. *Assessments:* - Principle 11: Fully Implemented - Principle 12: Broadly Implemented - Principle 13: Not Implemented - Key recommendation: - Amend SEA to permit the SEC to seek and provide information to foreign regulators even when the SEC does not have its own enforcement interest in the matter; consider authority to assist foreign regulators in seeking legal remedies where appropriate. ### Issuer disclosure, shareholder rights and corporate governance (Principles 14–16) - Disclosure regime (Principle 14): - Thailand disclosure system evolved from merit-based to disclosure-based; SEC no longer requires profitability or specified debt/equity ratios. - Prohibits multiple classes of equities with different voting rights. - Companies intending to sell equity securities to more than 35 investors must register with SEC; registration statement/prospectus is comprehensive. - Deviations from IOSCO disclosure standards: (1) 3 years of financial statements, not 5 years; (2) executive compensation to top 5 executives provided as aggregate amount; (3) major shareholders defined as holding 10 percent of company’s stock; (4) 12 months of historical share price included. - Registration requirements: statements must be signed by Board and Financial Adviser; assets appraised by professional appraiser on SEC list in accordance with Thailand accounting standards; SEC permits deletion of certain confidential trade information from public copies. - IPO review: SEC conducts full review including examination of auditor work papers and onsite visit to company HQ; goal to complete within three months of filing. - Debt offerings limited and must be rated by one of two private rating agencies. - Filing requirements: quarterly reports within 45 days of quarter-end (financial statements reviewed by auditor); annual report within 110 days containing audited financial statements and required disclosures. - Shareholder meeting notices: at least 7 days prior to meeting and published in a newspaper at least 3 days prior; 14 day notice required for extraordinary business transactions; SET requires 14 days notice for delisting, acquisition/disposal of major assets or affiliated transactions equal to or exceeding 3 percent of net tangible assets. - Special reports required immediately upon occurrence of specified events. *Assessment: Fully Implemented* - Comment: Disclosure system is comprehensive; SEC may consider procedures for advance notice to secondary market of large sales by insiders or major shareholders of stock issued in private transactions. - Shareholder treatment and corporate governance (Principle 15): - Voting and shareholder protections: - Thai Law prohibits shares with more than 1 vote; 75 percent vote required to amend bylaws, issue new shares, waive preemptive rights, approve M&A or sell material assets. - Thresholds for calling special shareholder meetings: minimum 20 percent of total issued shares or 25 shareholders holding 10 percent of total if controlled by at least 25 shareholders. - Right to submit matters: individual shareholders holding 33 percent of issued shares may submit matters for inclusion but company not required to consider at annual meeting if time does not permit. - Request to appoint an examiner requires 20 percent of all shares issued or 33 percent of total number of shareholders. - Tender offers: - Acquirers acquiring or disposing of 5 percent of paid up capital must disclose holdings; update within one business day for 5 percent increments. - Mandatory full tender offer requirement at 25 percent of voting rights; applies at 50 percent or 75 percent for those already holding more than 25 percent. - Tender offers must remain open for 25–45 business days with a 20 business day withdrawal window. - Tender price must not be less than any price paid by the acquirer during previous 90 days; both tender offer and company must retain separate financial advisers for fairness opinions. - SEC created a Tender Offer Committee of private experts appointed by the SG to review and grant waivers of some requirements. - Major shareholder disclosure: holders of 5 percent or more must report changes within one business day of surpassing next 5 percent increment; prospectus and annual report must list 10 largest shareholders and beneficial identities. - Corporate governance initiatives: - SEC issued a director’s handbook; SEC and SET require audit committee of at least three independent directors (one with accounting expertise). - SEC and SET helped create IOD to train directors and create public list of qualified independent directors. - SEC supported creation of TIA to represent retail investor interests at shareholder meetings. - SET released updated Principles of Good Corporate Governance in March 2006 reflecting OECD revisions and 2005 World Bank ROSC recommendations. - ROSC recommendations and SEC actions: - ROSC found basic shareholder rights largely in place but recommended further reforms (cumulative voting, SEC authority on timing of annual meeting and proxy solicitation, stronger fiduciary duty enforcement and director removal mechanisms). - SEC has proposed amendments: reduce shareholder votes required to call meeting to 10 percent; give SEC authority to regulate meeting timing and required disclosure; entitlement for shareholders with 5 percent of votes to add items to agenda prior to sending out agenda (with Board able to exclude specified categories); proposal for private class action right. - SEC and SET considering requirement that IPOs and listed companies have independent directors equal to at least one-third of board size, but not less than 3. *Assessment: Broadly Implemented* - Recommendations: - Consider requiring timely changes in shareholdings of major beneficial shareholders. - Consider adopting independent director composition changes as being considered with SET. - Accounting and auditing (Principle 16): - FAP is the official accounting standard setter created in 2005 (full description of FAP activity beyond this point is in the source but truncated in the supplied content). *Assessment: (not explicitly stated in supplied excerpt for Principle 16)* --- *Italic: IMF staff report content from the supplied PDF chapter/section.* ### 2004. The FAP has adopted the IAS as its standard rules on accounting, as well as ### _cr09148 - 2004. The FAP has adopted the IAS as its standard rules on accounting, as well as ### Accounting and auditing standards adoption and implementation - In 2004 the FAP has adopted the IAS as its standard rules on accounting, as well as the International Standards of Auditing (ISA). - Thirty five IAS standards have been formally adopted by the FAP, and 10 other standards are under review. - The transition from the current Thailand Accounting standards to IAS is scheduled for completion at the end of 2007. - The FAP is the official interpreter of Thailand accounting and auditing standards. ### FAP governance, standard-setting process, and resources - Standards are adopted after review by the FAP standards committee, including a public hearing and opportunity for public comment. - Standards committees are comprised of representatives of major accounting firms, smaller accounting firms, the SEC, the BOT, the Department of Business Development, the DOI, the Office of the Auditor General (OAG) and experts from academia. - The Oversight Committee of the FAP is heavily weighted with ex officio members representing key government agencies; the Permanent Secretary of the MOC is the Committee Chair. - The Oversight Committee has established a sub-committee to review the standards proposed by the FAP; the sub-committee plays an active role to ensure consistency with international standards. - The FAP currently has very limited full-time staff and relies heavily upon accountants at the SEC and industry participants on standards committees to assist in interpretive decisions. - Any general interpretive guidance developed with the input of the SEC is available on the SEC website. ### Auditor independence and board audit oversight - SEC/SET regulations require all listed companies to have an independent audit subcommittee of its Board, with authority to oversee preparation of annual audited financial statements and to review quarterly financial statements. - Auditor independence rules require audit partner rotation after five years and mandatory disclosure of company fees paid to auditors, the audit firm and affiliates for audit and non-audit services. - These auditor independence provisions appear not to be applicable to listed companies with majority government ownership, as they are audited by the OAG. - Under Thai Law, SET listed companies that are majority owned by the government are audited by the OAG rather than by a private auditing firm; the OAG applies the same set of generally accepted auditing standards as private firms. - It was not possible to identify or assess any differences in audit quality or whether this arrangement affects independence; the report recommends examining whether reliance upon a government auditor for government-controlled companies has an adverse effect on investor decisions. ### Assessment: accounting and auditing framework - Assessment: Broadly Implemented - Comments: - The Broadly Implemented assessment reflects that the FAP is in a transitional period and was created in 2004. - It is assumed that with completion of the adoption process the FAP will be able to focus limited resources on timely, authoritative and uniform interpretations; if the FAP lacks resources this assessment would be lower. - Recommendation: If the FAP lacks sufficient full-time resources, efforts should be made by the SEC, the MOC and the MOF to identify additional sources of funding sufficient to enable the FAP to fulfill its mandate. - Given FAP’s national authority and its recent establishment, consideration should be given to initiation of Accounting and Auditing ROSCs. ### Market size and FAP reach (as reported) - There are 518 listed companies in Thailand. - There are a total of 285,711 registered companies and 831 public companies. - The FAP has been in existence for slightly more than one year (at time of assessment). ### Principles for Collective Investment Schemes (CIS) Principle 17 — eligibility and regulation of CIS operators - Assessment: Fully Implemented - Description and key rules: - The SEC has a comprehensive program to regulate persons and entities seeking to operate a CIS and/or market shares in a CIS. - Operators must apply for and obtain a Mutual Fund management license, considered a special category of brokerage license. - As with a brokerage license, the application is reviewed by the SEC which makes a recommendation for approval or rejection to the Minister of Finance. - Only financial institutions may obtain a license. - During the first 5 years of operation a CIS operator may not have majority foreign ownership. After 5 years, a foreign owner may apply to the MOC for a license to become a majority owner. Foreign firms that have a financial institution subsidiary registered in Thailand are not considered foreign. - Implementing regulations for licensing are prepared by the SEC but SEA requires ministerial regulations issued by the Minister of Finance; the Minister has typically imposed requirements consistent with other governmental policies (example: requiring mutual fund operators to agree to create provident funds for employees). - Review process entails a “fit and proper” review of the entity and its management and 10 percent shareholders, a review of management and operating structure, and a requirement for adequate financial resources. - SEC staff conducts an onsite examination of the CIS to assess operating capacity and resources. - CIS operators must obtain prior SEC approval of changes in management, ownership or control. - Ongoing minimum net worth standard: B 20 million. - Firms with B 30 million net worth must notify the SEC and submit a rectification plan. - Indemnity insurance required against fraudulent acts by operator officers and directors. - Operators with assets under management of less than B 25,000 million must have a combined net worth and insurance totaling B 120 million. - Larger operators must have a combination totaling B 220 million. - Licensed securities firms may sell mutual fund units; other financial institutions must obtain a limited broker-dealer-underwriter license (LBDU) from the Minister of Finance upon the recommendation of the SEC. - The SEC has an extensive inspection program for mutual fund operators and for marketing entities with an LBDU license. - Ongoing reporting required: funds must report monthly fund assets held, all affiliate transactions, and investments in the funds by fund operators and affiliates. - Any advertising material must be submitted to the SEC for review 7 days prior to usage. - Licensed and unlicensed CIS operators, employees and agents may be subject to criminal prosecution; licensed persons are also subject to administrative sanctions by the SEC. - Comments: A comprehensive system exists for licensing, approval and continuing oversight. The Minister of Finance’s authority to make final license decisions and impose nonregulatory obligations was noted but does not affect the final assessment. Principle 18 — legal form, structure, and asset segregation - Assessment: Fully Implemented - Description and key rules: - Mutual fund operator licensed by the SEC; operator files a prospectus to obtain approval for each mutual fund prior to sale. - Mutual fund assets must be deposited with a fund supervisor (approved by the SEC) who must not be affiliated with the fund operator; typically an unaffiliated bank. - Fund supervisors are responsible for monitoring a fund’s net asset valuation process. - Any material change in investor rights requires a shareholder vote with a majority of all shares; if not significant the change may be submitted to the SEC for approval and would take effect 15 days after notification of shareholders. - Funds must be independently audited annually; audits must examine appropriateness of fund expenses and adequacy of asset valuation. - Comments: - An unusual problem: if a new or amended SEC regulation requires an existing fund to change its by-laws or materially affects shareholder rights, the fund will be required to seek a shareholder vote to achieve regulatory compliance. - Obtaining 51 percent of shareholder votes can be expensive and lengthy; the SEC should examine whether to waive the shareholder vote requirement in cases where the change is required to comply with governmental regulation, or consider legal amendment if authority is lacking. - If the change does not materially affect shareholders, a fund may obtain SEC approval and the change will be effective 90 days after shareholders have been notified. Principle 19 — disclosure for CIS investors - Assessment: Fully Implemented - Description and key rules: - SEC rules require investors to receive a fund prospectus containing a summary of material information and a detailed explanation of the fund, including all information specified in the IOSCO methodology. - The summary must be structured in a question and answer format and include fund investment strategy, explanation of risks including a warning statement, all fees and expenses. - Prospectus must be updated annually; material changes require immediate update. - Funds must prepare and provide to the SEC semi-annual and annual reports every six months; the annual report must be provided within 3–4 months of the end of the calendar or accounting year and the semi-annual report must be provided within two months. - Reports must be provided to potential investors upon request. No requirement for quarterly earnings statements, but earnings statements are normally included in semi-annual and annual reports and may be requested from the AMC any time. - Reports must include portfolio holdings and performance information about the fund and the fund operator. - Advertising material must be submitted to the SEC for review 7 days prior to usage; false, misleading or unauthorized advertising may lead to administrative sanctions and fines. - All mutual funds must be audited annually. - Comments: No comments. Principle 20 — asset valuation, pricing, and redemptions - Assessment: Fully Implemented - Description and key rules: - All mutual funds must perform daily net asset value (NAV) calculation in accordance with Association of Investment Management Companies (AIMC) guidelines, approved by the SEC. Fair market value must be applied to all assets. - When alternative pricing methods are used, a record must be maintained. Mutual fund supervisors (trustee, custodian) must check NAV calculation daily. - Illiquid debt securities are priced by reliance upon daily price tables prepared by the TBMA. - Illiquid equity investments are priced according to the last executed trade on the SET, or if there are no recent trades, based upon the best bid price available. - Open-end funds must publish NAV daily in the newspaper and closed-end funds must publish weekly, on the next business day. - Interval funds that do not redeem shares daily must publish NAV on a monthly basis, next business day. - Funds may suspend redemption for one business day under specified circumstances; longer suspensions require SEC approval or may be ordered by the SEC. - If a fund fails to apply AIMC pricing guidelines and it results in a pricing error greater than 0.5 percent of the true price, then the fund operator must compensate injured investors. - Comments: - Thailand mutual funds are permitted to invest a maximum of 15 percent of fund assets in nonpublic companies, with a maximum of 5 percent of fund assets in the securities of a single company. - Valuation challenges noted for nonpublic companies and thinly traded stocks; TBMA pricing information has become the standard for debt securities. - Mutual funds generally do not purchase equity interests in unlisted public companies, with the exception of the 2 “venture capital” funds operating in Thailand. - The SEC’s inspection program randomly selects samples of such securities to examine pricing for NAV calculations. ### Principles for Market Intermediaries (Principle 21) - Assessment: Partly Implemented - Description and key rules: - Securities firm license applications are reviewed by the SEC which makes a recommendation to approve or reject to the Minister of Finance. The SEC retains authority to approve licenses as derivatives operators and investment advisors. - In reviewing securities and derivatives firm applications the SEC considers management and operating capacity, risk management and internal control systems; the SEC also reviews and must approve firms’ directors, executives, and 10 percent shareholders. - The SEC applies a fit and proper test based on prior violations of securities or banking laws as well as relevant educational degrees or work experience or a combination. - The SEC reviews a firm’s Board of Directors and ¼ of the firm’s Board must be independent. - A securities or derivatives firm must obtain prior SEC approval for changes in firm control, its Board, its managing directors or its major shareholders. - The SEC may order a firm to change its management or take necessary actions to protect the public and may recommend to the Minister of Finance revocation of a license. - The SEC licenses sales personnel (sales representatives and analysts) who must pass a qualifications exam prepared by the SEC and administered by the SET’s Thailand Securities Institute (TSI). - The SEC conducts a risk based examination program and publicly discloses inspection results and the grade the firm received. - Observed restriction on new entry: - Final authority to grant a license rests with the Minister of Finance. - To protect economic viability of existing securities firms, no new securities firm license has been granted for many years; new entrants have been required to purchase the stock of an existing securities firm and thereby acquire its license (often the license is the only valuable asset of a defunct firm). - The MOF and the SEC have publicly announced that this policy, along with the regulation of minimum commission rates, will expire at the end of 2012. - Comments: - The Partly Implemented assessment reflects that licensing decisions must be made in a fair and equitable manner; requiring prospective entrants to purchase a defunct entity’s stock to acquire a license makes fairness difficult to conclude. - The public announcement of policy change was noted as relevant to the assessment. *Source: _cr09148 (PDF chapter/section) — provided content.* ### 2012. If this date is extended, it might warrant an assessment of not implemented. ### _cr09148 - 2012. If this date is extended, it might warrant an assessment of not implemented. ### Principle 22 — Initial and ongoing capital and prudential requirements - Description: - Securities firms: initial capital of B 100 million. - Derivatives firms: initial capital of B 25 million. - Private advisors/private fund managers (no custody): initial capital of B 20 million. - Net capital ratio: 7 percent. - Minimum liquid capital: B 15 million (B 25 million if joint securities firm and derivatives firm). - Reporting: monthly reports on financial adequacy (14 days after the end of the month), audited semi-annual and annual financial statements, monthly client asset statements and margin loan reports. - SEC permits approval to use alternative value at risk capital models; one Thailand subsidiary of a major foreign firm currently approved. - Assessment: Fully Implemented - Key findings and comments: - The SEA initial capital requirement of B 100 million is determined at time of initial license grant and is of little practical significance; the SEC net capital regulations are the meaningful prudential standard. - It is rare for a securities firm to approach the warning level of 1.5 times minimum net capital; most firms have ample net capital due to limited proprietary trading, lack of market-making, and limited underwriting. - Common business activity risk: customer failure in extensive daily “net trading” — SET requires “netting” accounts have a minimum cash balance of 10 percent of open positions, which may be insufficient in sharply declining markets. - Derivatives trading levels are very limited; no notable net capital risks. ### Principle 23 — Internal organization and operational conduct - Description: - SEC regulation 42/2543 (brokers) and 65/2547 (derivatives firms) require internal compliance unit and internal independent audit unit; internal control and risk management systems approved by board. - Controls over access to nonpublic confidential information, separation of sales/analyst staff from trading staff, supervision of sales staff. - Know your customer duty; firms must tape record all phone calls between customers and the firm and retain tapes for one month. - Investor complaint files: retained for two years; investor complaint reports submitted quarterly. - Customer assets: segregated account at the TSD; assets deposited within 24 hours. - Stock borrow/loan program: investors must authorize every stock loan on a transactional basis. - Assessment: Fully Implemented - Key findings and comments: - Tape recordings retention period of one month (unless a complaint received) may substantially reduce utility for oversight; longer retention should be considered. - Compliance unit guideline exists but compliance unit not required to have authority to correct misconduct or direct employees to refrain from action; must refer matters to board. ### Principle 24 — Procedure for dealing with failure of a market intermediary - Description: - Early warning: firms below 1.5 times minimum net capital must immediately notify SEC, submit corrective plan, may not expand business, and provide daily reports until ratio exceeded for two consecutive business days. - Firms with capital equal to or below general liabilities for 5 consecutive business days or failing to settle with TSD or clients must cease operations. - TSD may order additional collateral if unsettled positions for three days combined reach or exceed 8 times net liquid capital. - SEC lacks authority to order appointment of a receiver or liquidator; it may rely on Section 143 of the SEA to order corrective action including transfer of customer accounts; Minister of Finance can revoke a license. - Unclear bankruptcy protection for customer assets held in legal name of firm for beneficial ownership of customers. - TSD customer protection fund: currently valued at B 500 million. - TSD member initial contribution: B 900,000. - TSD monthly contribution into clearing fund: rate between 0.008 percent and 0.016 percent of total monthly trades, reviewed quarterly, depending on firm’s risk level. - SET security fund: B 100 million; may borrow up to B 2 billion. - Assessment: Partly Implemented - Key findings and comments: - IOSCO methodology requires clear plans to deal with firm failure; SEC lacks statutory authority (receiver/liquidator) and is proposing SEA amendment. - TSD and SET funds are available only for settlement of outstanding trades, not to reimburse investors for stolen customer assets or misappropriated excess cash balances. - Coordination plan with other regulators is needed; SEC working on a MOU with BOT and DOI. ### Principles 25–30 — Secondary market, exchanges, transparency, enforcement, exposures, clearing and settlement - Principle 25 (establishment and oversight of trading systems) - Description: - Two trading systems: SET (including MAI) and TFEX (wholly owned by SET); both authorized under Thai law and directly supervised by SEC. - SET minimum listing standards: companies must have B 300 million paid-up capital, minimum 1000 shareholders, minimum free float 30 percent with no more than 15 percent owned by control persons/entities, and 3 years audited financial statements indicating a profit in two of the years. MAI not subject to these minimums. - SET is an automated direct order interaction system; strict price/time priority; firms not permitted to internalize and cross customer orders. - SET electronic trading platform for listed corporate debt: virtually no daily trading; corporate and government debt traded OTC in dealer market. - Assessment: Fully Implemented - Comments: No comments provided. - Principle 26 (ongoing regulatory supervision of exchanges) - Description: - SEC conducts onsite inspections of exchanges; inspected SETTRADE in 2005, completed full inspection of SET in 2004, another inspection scheduled in 2007. - Inspections review listing, trading, audit trail maintenance and surveillance. - SET operates dispute resolution for member-member disputes; does not offer customer-member dispute resolution. - Assessment: Partly Implemented - Key findings: - SEC inability to review SET rules pertaining to trading and operations is substantial; SET has used exemption to create minimum trading spreads, permit customer net trading, and adopt circuit breakers. - Amendment of law to provide SEC discretionary authority to review and direct changes in SET trading rules is recommended. - Principle 27 (transparency of trading) - Description: - Equity trading must occur on SET; SET posts trades and the three best bids and offers and sizes; mandatory trading increments range B 0.10–6.00 and typically B 0.5. - Real-time access available to investors at low monthly rates; many firms provide free access to customers. - No central limit order book (CLOB) disclosure beyond best bids/offers; large block trades may be negotiated outside BBO and crossed/disclosed at end of session. - TBMA debt reporting: SEC Reg 56/2548 requires all dealers to report debt trades to TBMA within ½ hour; TBMA publishes government trades upon receipt and corporate trades twice daily; daily last sale reporting list and fair value pricing for nontraded issues. - Daily liquidity in TBMA (excluding bank repo) typically less than 300 transactions; total estimated value of corporate debt market approx. B 4 trillion; daily trading value less than 1 percent of total. - TFEX: one product (SET50 future); mid-2006 average 200 contracts daily, recently grown to 2000 contracts, occasionally 4000 contracts; full transparency in bid/offer and transaction reporting. - Assessment: Broadly Implemented - Key findings and recommendations: - Consider increased “depth of book” disclosure or creation/dissemination of a central limit order book for equities. - Further improvements in bond market transparency needed, particularly ready access to pre-trade bid and offer quotations; consider requiring dealers to disclose bids/offers and size on an electronic system and promote electronic trading. - Encourage electronic reporting to TBMA (fax reporting currently not significant). - Principle 28 (detect and deter manipulation and unfair trading) - Description: - SEA contains prohibitions on insider trading, material misstatements or omissions, and market manipulation; SEC empowered to enforce. - Insider trading prohibition applies only to insiders, temporary insiders and tippees who act as nominees of insiders or were induced to trade for benefit of insider. - Market manipulation prohibition requires proof that conduct was intended to induce trading by others or to cause change in market price. - Assessment: Broadly Implemented - Key findings: - High evidentiary standards make prosecutions difficult, inhibiting criminal prosecutions and effective deterrence. - Need for clearer definitions of misconduct and appropriate evidentiary standards to enable effective enforcement and public confidence. - Principle 29 (management of large exposures, default risk and market disruption) - Description: - TSD monitors firm aggregate unsettled trading exposure; rule: in a 3 day period, unsettled positions with net settlement value must not exceed 8 times net liquid capital; TSD may direct increased capital deposit. - TSD daily monitors firm open loss risk values against internal market risk measures. - TSD may decline to act as settlement counterparty and direct firms to bilateral settlement. - SEC may demand identity of any firm customer. - Assessment: Not Implemented - Key findings and comments: - IOSCO methodology requires NI when regulator lacks clear authority to isolate a failing firm’s risk to avoid systemic market disruption. - TSD discretion to substitute bilateral settlement for central settlement when a firm fails raises systemic risk and may undercut TSD’s claim to central counterparty preference under bankruptcy law. - SEC aware and seeking legal action to remove impediment. - Principle 30 (clearing and settlement oversight and design) - Description: - TSD operates central clearance and settlement for all equity and some debt; acts as registrar for listed companies. - Virtually all equity and most debt dematerialized and traded on book entry basis. - Settlement cycles: equity T+3, derivatives T+1, debt commonly T+2. - TSD utilizes multi-lateral netting and a real-time gross settlement system (RTGS). - TSD performs central counterparty functions but lacks legal designation and authority as a central counterparty. - Assessment: Assessed separately (see CPSS/IOSCO Assessment of Securities Settlement) - Comments: None in this unit. ### Summary implementation and recommended priority actions (selected highlights drawn from Table 2 and Table 3) - Selected implementation gradings and key issues: - Principle 1: BI — transfer final licensing authority from MOF to SEC recommended. - Principle 2: PI — potential for Minister of Finance involvement in daily SEC operations risks independence. - Principle 9: PI — SEC lacks civil enforcement authority, cannot suspend trading in individual stocks, cannot order violators to compensate defrauded persons. - Principle 13: NI — inability to seek/provide information unless SEC has its own interest. - Principle 29: NI — lack of authority to isolate failing firm risks. - Priority recommended actions (selected from Table 3): - Create formal coordination mechanism among governmental agencies with capital markets authority. - Amend the SEA to transfer final licensing authority over securities firms to the SEC. - Amend the SEA to expand SEC enforcement powers: authority to file civil enforcement actions, impose money sanctions, restitution to investors, order corrective action, bar persons from serving as Directors, temporarily suspend trading in individual securities, and refer criminal actions directly to the Public Prosecutor. - Extend the one month record retention requirement for tape recorded customer calls. - Empower SEC to appoint a liquidator or receiver to protect customer accounts, preserve assets, and transfer or deliver out customer assets in event of a failed firm that misappropriated them; address bankruptcy law protection for customer assets held in street name and settlement integrity for unsettled transactions. - Seek amendment to SEA to permit SEC discretionary review/approval of all SET rules, including trading and operations rules. - Clarify legal definition and evidentiary standards for prohibited market misconduct (insider trading and market manipulation). - Grant TSD legal authority of a central counterparty and remove discretion to decline to settle trades; ensure member firm security deposits are legally under the TSD and not subject to creditor rights in bankruptcy. - Finalize a formal MOU and coordinating body for information exchange and early warnings among SEC, BOT, DOI and other regulators. *Italic: Content derived from the IMF staff report contained in the supplied PDF content unit.* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr09148.pdf_