Published On: Fri, Nov 12th, 2010

Thailand SEC Files Complaint Against Former UBS Securities Executive

The SEC has filed a criminal complaint with the Department of Special Investigation against Numkrit Jeraputtiruk, former executive of UBS Securities (Thailand) Limited (UBS), for taking unlawful gains for himself or others at the expense of UBS’s clients.

The complaint also alleged six other persons for aiding and abetting Numkrit’s commission of misconduct, namely (1) Pawaris Phatwongsathon, (2) Meena Kamphaengkaew, (3) Patara Thumrongvit, (4) Chalalai Saliwattana, (5) Duangduean Limsuthapoch and (6) Rosathorn Kittikuntanasan.

Numkrit’s and the associated persons’ wrongdoings are in contravention of Sections 311 and 315 of the Securities and Exchange Act B.E. 2535 (1992).

The SEC investigation stemmed from a referral from the Stock Exchange of Thailand identifying suspicious trading behaviors of a UBS employee who was responsible for executing securities trading for or on behalf of its clients, all of which are institutional clients.

According to the SEC findings, during the period from 5 January 2009 to 13 October 2009 Numkrit – then assistant director of UBS International Equity Sale responsible for providing brokerage services to local and foreign institutional clients – dishonestly used the information regarding clients’ trading orders he had accessed by virtue of his duty and ran a fraudulent scheme whereby the orders of UBS’s clients would match with those of his conspirators.

In doing so, the UBS’s clients did not receive the best price available on the market but had to pay more or sell for less. On the contrary, Numkrit and his associated persons were not exposed to any market risk and gained profits from every transaction they entered into in connection thereof.

For the sale side, Numkrit sold the securities owned by UBS’s clients to his conspirators at the price less than the best bid available on the market by putting through the big lot board or the foreign board. The securities was then resold promptly at the best price available on the main board which was always higher than its acquisition price. The buy side would occur in the opposite direction. Instead of buying securities for UBS’s clients at the best offer available on the SET main board, Numkrit made an arrangement with the conspirators who bought the securities at the best price available on the market and then flipped it back to sell to UBS’s clients at a higher price by putting through the big lot board or the foreign board.

The scheme involved more than 600 transactions for trading volume over 3 billion baht. Numkrit and the conspirators gained profit of approximately 37 million baht from such activities.

Subsequent to the case mentioned above whereas Numkrit, Chalalai, Duangduean and Rosathorn are named in the criminal complaint the SEC has filed with the DSI, these four individuals are banned from engaging in or associating with any securities or derivatives business firm and their registrations with the SEC as securities business personnel have been revoked.

The findings in this case also revealed that there were weaknesses in UBS’s internal control and compliance systems which failed to detect the irregularities in this matter which had continued for over nine months. The SEC therefore ordered the company to review and reinforce its relevant systems. Meanwhile, the SEC will consider further appropriate measures in due course.

In this regard, the institutional clients whose orders were mishandled by dishonest acts of Numkrit will have the rights to claim from UBS a fair compensation for damages incurred in connection thereof. The company informed the SEC that compensation payment to its local and international clients is underway.

Following this case, the SEC sent a circular to all securities brokerage firms urging them to heighten the systems for internal control to ensure compliance of its business conduct with ethical and professional standards of the industry.

“Securities firms are doing business based upon clients’ trust and confidence. Any breach of fiduciary duties owed to their clients would undermine the integrity of the industry and the capital market as a whole. The SEC will not tolerate dishonest conducts of market professionals who seek personal benefit at the expense of their clients. It is the duty of each and every securities firm to deal with its clients in a fair and honest manner and must take a prompt and appropriate action once it becomes aware of any irregularities in its course of business,” said SEC Secretary-General Thirachai Phuvanatnaranubala.

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