I was editing a case study on Stark Corporation (Stark), which was ensnared in one of the biggest scandals involving a company listed on the Stock Exchange of Thailand (SET). Stark was in the SET100 index and the case involved alleged accounting fraud.

Fraud will always happen even in the best stock exchanges. It is the timeliness of actions by regulators and the ability of investors to seek recourse that will ultimately determine whether investors will lose trust as a result of such scandals. There are several things in the case that impress me and sets SET apart from SGX.

First, on 28 February 2023, after the company announced that it would be unable to submit its financial statements on time, the shares were suspended from trading the following day.  If this was to happen on SGX, the likely scenario is that the company will seek an extension, giving all sorts of excuses, and its shares would continue trading.

Second, by March 2023, Stark had appointed its external auditors, PwC, to conduct a special audit (initial phase) after it was notified by PwC, which had replaced Deloitte as external auditors that same month, that it had found “reasonably suspicious circumstances in respect of the performance of the director, manager or any person responsible for the Company’s operation as implied by section 89/25 of the Securities and Exchange Act B.E. 2565”.

The special audit was completed between March and April 2023 and the draft report submitted to the newly-constituted Audit Committee by 23 May 2023. A summary of the results of the special audit was released on 16 June 2023. PwC found 220 unusual sale transactions. In other words, within less than four months after the suspension and commencement of the special audit, a summary of the results had been released. The company eventually released its financial statements together with the summary of the results of the special audit. Throughout this time, the company’s shares remained suspended. Again, if this was to happen on SGX, the special audit could take an eternity. And the shares will likely continue to trade.

A problem is that when SGX issues a notice of compliance requiring an independent review or special audit, it often does not indicate any deadline for completion of the review. Time is of essence when it comes to such reviews. Although not a case involving fraud, take the case of Rex International which was issued a Notice of Compliance by SGX on 29 August 2023 to appoint an independent professional by 29 September 2023. This was to review the circumstances surrounding an acquisition which was an interested person transaction,  the adequacy and effectiveness of the internal control processes and procedures related to acquisitions/disposals and interested person transactions, and compliance with relevant listing rules. The company duly announced the appointment of Ernst & Yong Advisory Pte Ltd as the independent reviewer on 29 September 2023. However, it has now been nearly eight months and I have not seen any announcement of the results of the independent review.

Third, on 6 July 2023, the SEC in Thailand filed fraud charges against 10 individuals, including the Chairman, acting CEO and controlling shareholder, and the former CFO. This kind of speed of enforcement is  extremely rare in our market.

Fourth, not long after, more than 1,300 shareholders stepped forward and a representative of the victims filed a class action seeking compensation of THB2.5 billion. Class action law was introduced in Thailand in 2015. If this was to happen in Singapore, shareholders will probably have to accept their losses, as it is difficult for them to get together to sue.

It is also interesting to me that SET has remained unlisted, bucking the trend of many other exchanges which have sought listing (although it is by no means the only stock exchange that is not listed). Many years ago, I spoke to a senior financial official in Thailand about this. He said that they were considering listing SET but were mindful of the issues that could arise after an exchange is listed. Some 20 years after that conversation, SET remains unlisted. Perhaps this is another thing Thailand has got right.