Chuwong case a wake-up call for transparency in stock trading

The mystery gets deeper as a stockbroker is also involved in transfers. A stockbroker and her mum have told police they received separately more than Bt30 million worth of shares from Chuwong.

The transaction happened four days before his death.

Chuwong’s signatures in the stock-transfer transactions are a part of the police investigation into whether his death was an accident or a murder.

In this case, if it is proved that the signatures were forged, the credibility of the securities industry’s standards on the stock-transfer audit system might be tainted.

However, the two regulatory bodies – the Securities and Exchange Commission and the Stock Exchange of Thailand – and the Association of Thai Securities Companies (Asco) continue to be silent.

At least the public should be informed about how trustworthy the audit system of the securities industry is, in case they decide to become stock investors. What measures will the SEC use to tackle any brokerage firms found to have made inadvertent technical errors or committed a fraud?

The brokerage house where the stockbroker woman is working is also mum. At least the executives should say something about the company’s stock-transfer system and whatever procedures it uses.

As is known in stock-trading circles, some traders don’t comply strictly with the rulebook when they place orders for the purchase or sales of stocks for their clients. 

Beyond the Chuwong case, the case is relevant to the whole issue of stock transfers. Some brokers have raised concerns that the regulatory body should introduce a new rule on stock clearing and settlement, requiring investors “only” to make payments for shares bought from the stock market through the automatic transfer service (ATS) system as compulsory. Cash transactions should be barred.

Using this method would help reduce money laundering and fraud, as transactions could be traced back to their origin.

However, this idea is still just talking shop among brokerage firms, as some are yet to agree with it. It would not be surprising if securities houses backed by politicians tended to disagree with the idea.

Most certainly, the ATS system is unlikely ever to take effect as a new rule on share trading on the stock market for several reasons, even though it would make transactions more transparent.

Although many may argue that this would cause inconvenience to investors, some believe that it’s just one time when the investors open their stock accounts at the brokerage firm and they also open a bank account for money transfer via ATS. After that, the payment for shares bought will be automatically transferred from the buyers’ bank account to the seller’s bank account.

The Thai stock market, considered an emerging market, needs to have more transparency to win the confidence of investors.