Unfortunate precedents in SEC action against NMG directors

1. It was unprecedented for the SEC, the watchdog of Thai capital and stock markets, to blacklist directors of a publicly traded company without having first filed criminal complaints against them as violators of the SEC law. 

In the case of NMG, the SEC only filed a criminal complaint against Nittimol Hastindra na Ayudhya, former chairman of the group, in December last year. Afterwards, Nittimol resigned as chairman and was disqualified as a director of listed firms in accordance with the SEC law.

In addition, the Civil Court last Thursday ruled that Nittimol was the only person responsible for barring other shareholders from attending the annual general meeting of NMG shareholders in April 2015, while the other eight directors were acquitted by the court.

As a result, the SEC’s decision on the same day against these eight NMG directors was not consistent with the Civil Court’s ruling.

2. The SEC has interpreted the law in such a way that its disqualification of eight NMG directors on the same day as the Civil Court’s ruling in this case was based on the public prosecutors’ opinion alone while the court’s judgement was ignored, so justice was not served.

3. It was unusual for the SEC to solicit outsider experts’ opinions on this case before disqualifying the eight NMG directors. It was explicitly stated by the agency itself in its October 6 announcement that the disqualification order was not directly a consequence of the SEC’s criminal complaints against alleged violators of the SEC law regarding duties and qualifications of directors of publicly traded companies.

This underlines the “extraordinary” circumstances surrounding the SEC’s decision, which unfortunately set a new precedent in governing the capital and stock markets in Thailand, especially with regard to disqualification and removal of directors of publicly traded companies en masse. 

The precedent has in effect increased the risks of listed companies, especially when there are legal disputes and criminal cases pending in court.

4. The SEC’s October 6 decision exemplifies the agency’s weakness in investigating cases of this nature, as the disqualification of all eight NMG directors contradicted the agency’s own internal investigation and conclusion.

In addition, the public prosecutors’ decision to forward the case to the Criminal Court, which was cited by the SEC as the basis for disqualifying the NMG directors on October 6, represents only the beginning of the judicial process on this case and not a final judgement.

 5. It was unusual that the SEC did not give the eight NMG directors any chance to clarify the situation even though there were nearly two months to re-investigate the case after the public prosecutors decided to file the criminal charges against Nittimon and the eight NGM directors on August 16, 2016. In fact, all previous suspects in stock-market-manipulation cases were given opportunities to give their side of the story before the SEC decided to file any criminal complaints against them, but such an opportunity was absent in the NMG directors’ case, which has nothing to do with stock manipulation or corruption.

6. The timing was unusual as the SEC announced its decision to remove the eight NMG directors on October 6, the same day that the Civil Court acquitted the eight of wrongdoing as accused by the plaintiffs.