SEC to hold bank execs responsible for the sale of financial products

The move is part of the SEC’s three-year capital-market development plan, focusing on more practical and efficient regulations as the business environment changes. 

“Not only the banks’ investment consultants and sales representatives, but their executives will have to be punished if they fail to comply with the new practices on the sale of unit trusts,” Rapee Sutcharitakul, secretary-general of the SEC, said.

After these responsibilities were discussed with the banks, their executives asked for time to adjust, so the new rules would not take effect until 2018, he said. 

Unit trusts of mutual funds are now sold via the banks, accounting for about 80 per cent of their total market value of more than Bt4 trillion, equivalent to 40 per cent of the country’s gross domestic product and 40 per cent of the banks’ total assets. 

About 20,000 people in the banking industry are involved with the sale of unit trusts, since they also act as investment consultants. 

“The banks, which command an 80-per-cent share, will have to improvise infrastructure to support their salespersons,” Rapee said, adding that if the banks sold any unit trusts, they would be required to have a system in place to assure the investors.

For example, the banks would set up a product-selection system with which salespersons could get enough information to allow them to understand each product. 

In addition, the banks would be required to have a system for monitoring their salespeople to ensure that they sell appropriate products to their customers without taking benefits for themselves. 

Moreover, there should be a process for monitoring complaints.

Not only will salespeople lose their investment-consultant licences if they fail to comply with the rules, the banks’ executives will also be held responsible, he SEC secretary-general said. However, he declined to go into detail on what penalties the executives would face if companies under their supervision breach rules or don’t comply with requirements. 

Although asset-management firms are required to make a prospectus when issuing a mutual fund, Rapee said no one read them, as they contain over 100 pages. Therefore the SEC has set up a new solution, pushing those authorised to sell unit trusts to supply a fact sheet with only a few pages. 

The full prospectuses will remain, but for only legal purposes, and the fact sheets will help investors understand the funds better, Rapee said.