Bangkok: The Securities and Exchange Commission (SEC) is set to implement new margin loan criteria in the third quarter of this year, with a second round of public hearings scheduled to address the substantial impact these changes will have on securities companies.
According to Thai News Agency, Mr. Surasak Ritthongpitak, the Assistant Secretary-General of the Business and Markets Department at the SEC, discussed the progression of enhancing margin loan criteria to tighten risk management within securities companies. The public was initially invited to comment on these improvements in January 2025, but the SEC is preparing for another round of hearings due to the significant implications for securities companies, with an official announcement anticipated in the third quarter.
The revision of the margin loan criteria comes in response to past fluctuations in stock prices used as collateral, which have led to forced sales by securities companies. Such sales often fail to cover the debts, damaging both the companies and the credibility of the capital market. Some companies have extended margin loans excessively relative to their financial standings and concentrated these loans within specific customers or collateral types. Moreover, improper forced sales of collateral, such as investment units, could decrease their net asset value, potentially triggering further redemptions and legal risks. Additionally, certain practices, such as lending against securities without proper constraints, have prompted regulatory scrutiny.
Key improvements to the margin loan criteria include:
1. Revising the initial margin rate for IPO shares to mitigate collateral insufficiency risks.
2. Aligning lending criteria with the financial status of securities companies concerning total and individual customer debts.
3. Limiting collateral concentration per customer and monitoring trading behaviors to prevent inappropriate activities.
4. Enhancing customer credit risk management by enforcing collateral calls and debt repayments.
5. Excluding investment units from marginable securities and collateral in margin loan and securities borrowing and lending transactions.
6. Implementing measures to ensure margin accounts are used correctly for securities trading, particularly in big lot purchases involving related parties, which could resemble prohibited lending practices.
Mr. Surasak also highlighted upcoming criteria for new securities companies, focusing on improving credit information in stock trading. A public hearing on this matter occurred in early 2024, with an announcement expected by February 2026.