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Reforming the capital market landscape

The capital market plays a significant role in the country's socio-economy.

Not only does it serve as a funding source for the public and private sectors, but it can also help maintain balance in the financial system, which is a crucial mechanism for economic growth, job and income distribution and public saving.

In light of the greater influence exerted by global economic processes, the capital market must also adapt and improve to ensure that the local capital market is in sync with internationally accepted standards.

Globalisation, with technological development, the emergence of new business models, and fierce local and global competition amid an economic slowdown, has created a challenge for the capital market.

These factors put to task agencies serving as regulators as they are expected to revamp laws and regulations to make them fit with changing situations to ensure lower costs and obstacles.

The market needs regulations that can help the country be more competitive and resilient.

In a survey conducted in 2018 by the Economist Intelligence Unit and PwC, 370 executives at companies from across the globe mentioned legibility, clarity of laws and regulations and listing cost as factors that they consider when deciding to invest in foreign countries.

The quality of investment laws and regulations, according to this survey, becomes more paramount when investors make decisions on emerging markets.

In other words, a favourable economic environment, through a clear and legible legal system and reasonable investment cost, are keys to capital market development.

With such defining factors, the UK government in 2022 announced the financial and capital market reforms programme, known as the “Edinburgh Reforms”, which aims to revise laws and regulations to make them relevant to the post-Brexit situation.

The programme brings forward a set of 30 sector-wide policy initiatives, particularly regulations that have been in use since 2008, such as legislation on short-selling and listing procedures, as well as commodity derivatives business.

Back to Thailand, the local capital market cannot afford to overlook the importance of these laws.

Regulators must also strive to update legal changes in the economic landscape, technological development, and investor demands.

Moreover, the legal adaptation must be in line with that of the superpowers.

Key laws govern the capital market, including the Securities and Exchange Act (BE 2535) 1992 and the Public Limited Companies Act (BE 2535) 1992, as well as numerous rules and regulations.

However, as those laws have been used for a long time, some might be irrelevant, if not outdated, or even impose unnecessary burdens or costs on business operators.

The past years saw several agencies trying to tackle problems.

The Securities and Exchange Commission of Thailand (SET), in particular, has pursued the so-called Regulatory Guillotine scheme during 2020-2023 to remove unnecessary procedures and paperwork so as to develop a more business-friendly application process for more than 80 projects.

This fast-track regulatory reform in Thailand would help reduce regulatory burdens and improve the quality of laws.

The Thailand Development and Research Institute (TDRI), with financial support from the Capital Market Development Fund (CMDF) in conjunction with SET and the Federation of Thai Capital Market Organizations (FETCO), conducted a study titled “Thai Capital Market Regulatory Guillotine” to review existing policies and regulations.

The project makes policy recommendations to repeal or revise existing laws and regulations and approval processes to ensure that the legal mechanism is up-to-date, efficient and in line with the principle of legal efficiency as stipulated in Section 77 of the 2017 Constitution of the Kingdom of Thailand.

The study will be launched in a series under “Thai Capital Market Regulatory Guillotine” to encourage and foster knowledge sharing.

Among examples are the amendment of a law titled Know Your Customer (KYC), rules regarding shareholders’ meeting invitation process, proposed new rules on the management of dividends and unclaimed dividends or laws to promote saving in the capital market and protection of retail investors.

The study seeks not only to review the existing capital market law but also to make policy recommendations for the nation’s related agencies on other laws that have not been reviewed before.

The work is to help strengthen the Thai capital market’s competitiveness and the country’s economic driving engine.

Kiratipong Naewmalee, PhD, is a Senior Research Fellow for Law Reform at the Thailand Development and Research Institute. Policy analyses from the TDRI appear in the Bangkok Post on alternate Wednesdays.

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