Nonetheless, it has been criticized that the draft of TCL is unclear that it fails to indicate the responsible authorities for administering the registration process. Even it is registered, the remedy of nullification is not available,140 instead, the enforcement could be done only against the transferee who is well aware of the wrongfulness of such transfer.
The comparative analysis shows that although the TTCMA was newly introduced to Thai legal system, and is limited to the transaction in capital market, the concepts of TTCMA is beyond what was adopted in other Asian countries; especially China, and South Korea, providing that it clearly identified the key concepts of trust by taking into account the development of trust in common law jurisdiction. The duties of trustee and concept of constructive trust are explicitly clarified, and there is an authority responsible for supervising the actives of trust.
V Comments for Further Development
A Summing Up the Problems
As illustrated, although regulatory framework on the protection of bondholders is "fundamentally sound, secure, efficient and reliable"141,several impediments can be identified, as previously discussed.
Generally, the institutional investors encounter strict regulator environment, discouraging them from trading, rather than encouraging them to manage risk prudently.
Furthermore, the strong reliance on the mission of ensuring orderly market and investor protection resulted in the exceedingly prescriptive approach and overemphasizing on the merit evaluation, rather than setting up general principles and monitor adherence to those principles.
The main regulator, the SEC, could only impose administrative sanction for any violations under the SEA. SEC does not have leverage to bring civil enforcement against wrongdoer. The criminal investigation of more serious violation involves with the high standard of proof and time-consuming process.
The class action law has no existence under Thai legal regime, so that the affected party cannot file the lawsuit collectively on behalf of that injured parties. Therefore, investors are reluctant to invest in medium-sized firms, resulting in the overall volume of bond trading is limited and illiquid.
Furthermore, the enforcement actions for remedies under the Thai practice are considerably weak. There are limited approaches for bondholders to exercise their rights for remedies with no clear-cut on whether there is the perception of the concept of "Non-Action Clause". There is also no existence of minority bondholder protection mechanism.
The role of "market maker" is non-competing in Thai bond market as it mainly relies on an “agency basis”, rather than relying on banks or brokers, operating as dealers or “market-makers” committing risk capital to the market.142
Finally, there is the lack of effectiveness in ensuring the independence of directors and internal control, resulting in the impediment of check and balance system, and ineffective role of investor to promote good governance among issuers (listed companies).143 Moreover, an incentive to promote corporate governance seems to concentrate on large-sized corporations.
B Comments for Further Improvement
In order to promote better market environment for corporate bond, several measures should be implemented.
The redundancy of rules and practices making the capital market over-regulated should be critically minimized and move toward merit-based approach, providing that the regulators will not make decision on behalf of the investors as to what could be invested. As the result, the regulatory cost for private sectors will be minimized so that the overall market will be more competitive and flexible.144 New products that match with the needs of various types of investors could come up. In this regard, it must be kept in mind that the preservation of market integrity, where the confidence of the overall market should be ensured. Hence, an attempt to engage stakeholder in industry to participate in formulation of codes of conduct for intermediaries is strongly required, as well as the focus on the promotion of corporate governance. Private sector should also increase their roles as SROs.145
There must be an amendment to the SEA by deregulating the requirement of criminal proof so that the adjudication under the SEA would be easier, and that the proof beyond reasonable doubt should be no longer required. In addition, the amendment of the SEA should further grant the leverage to SEC that it can refer criminal actions directly to the Public Prosecutor, without a separate review by the Royal Thai Police or the DSI; therefore, it could reduce time-consuming process.146
The provisions of class action should be incorporated into Civil Procedure Code expeditiously, by taking into account the Thai social value which is based on compromise. The robustness of having class action law will be impaired if it contradicts the fundamental value of the whole society; otherwise, the investors will opt to negotiate with the issuers rather than filing the cases.147
Keeping in mind that the development of class action law in Thailand does not exist, if the class action law has launched, the Thai court seems to be reluctant to set the amount of compensation given to the claimant and the entire class, as it is likely to be more familiar with the calculation of individual complains.148 Therefore, any ambiguity of languages set forth in the drafted law, such as the enforcement of debt repayment, should be explicitly clarified in the provisions or subsequent laws.
SEC should expand its power, wherein it could independently file civil enforcement actions against any person or entity violating the SEA or the SEC regulations. The leverage should include money sanctions, restitution to investors, and the ability to order corrective action. SEC should be given the power to temporarily suspend trading in individual securities, when warranted, and to bar persons from serving as Director of listed companies. Moreover, the court should support the SEC by ordering a person or company to comply with the request to testify or to produce document in an investigation.149 The SEC, together with the TBMA, should further provide guideline for bondholder remedies and minority protection.
Moreover, there should be coordination with other regulatory bodies in Thailand through formal MOU for the exchange of information on all regulatory action taken or contemplated and relevant to other signatories.
C Further Integration of ASEAN Capital Market
The next step necessary for corporate bond market development in Thailand and other South-East Asia is the policy toward the integration and internationalization of regional capital market by bridging the gap in ASEAN countries. In this regard, ASEAN Finance Minister has launched Capital Market Implementation Plan as the "pan-ASEAN vision" paving the way for the establishment of ASEAN Economic Community in 2015.150
For Thailand, top priority should be achieved is to abolish the monopoly and improve competitiveness of SET, so that it could be responsive to fast-changing business environment. The first step is to demutualize SET by converting it into public company segregating exchange business from capital market development work.151 As the result monopoly on exchange business will end, allowing other trading platforms permitted to trade listed stocks, and enhancing the liquidity and investment base to promote linkage global capital market.152 In order to develop domestic bond market, the Bank of Thailand should take the lead in developing and promoting the private repo and securities borrowing and lending market by providing alternative tool to manage liquidity with low risk.153
The integration of capital market involves several issues. Firstly, the laws concerning cross border litigation, both the criminal enforcement and the resolution of commercial dispute should come into existence, so that regulators will have the process to share and exchange information through international agreements. The regulators have to work together to facilitate private sector to take cross border legal action at low cost, without referring the case back and forth between the relevant countries. The concept of international insolvency law must also be incorporated into Thai legal system; however, this would be a big exercise, and involve many other agencies outside financial arena.
Secondly, the integration of capital market also involves the new diversification of financial products. This means that the current supervisory approach (through SEC) is not sufficient, as it will incur in a high cost of transaction, involving a number of authorities with overlapping jurisdictions. Therefore, the transformation from “institutional scheme” into “twin peaks” or “single authority” model seems to be more proper. Moreover, the regulations have to be amended running away from the "merits-based" regulations toward the "disclosure-based" approach, because the expansion of the market sizes would be inevitably occur, so there will be more varieties of participant joining in.
The development of corporate bond market in Thailand is strengthened as the result of the fundamental soundness and comprehensiveness of regulatory framework. The country can exhibit a high level of compliance of international standard as stated in certain international report such as the "FSAP report". Nevertheless, there are several impediments incurred, including the weakness of private investment, the redundancy of regulations, the reliance on merit-based regulations, the requirement of criminal proof and referral process, the lack of power of SEC to bring civil action, the inexistence of class action law, the ineffectiveness of market maker, and the dependence of directors of company.
In responding to these problems, there should be the amendment to the SEA in certain aspects, especially the minimization of excessive regulations and the adjudication process. For regional integration, further reform of the overall institutional framework is required in order to respond the expansion of marker and the diversity of financial products.