In an ocean full of financial sharks, life can be difficult for retail investors, especially when these investors have little or no power to exercise their rights when those at the top commit fraud.
The dispute between Inter Far East Energy Corporation (IFEC) executives and retail shareholders is a case in point. The fiasco has dragged on for nearly four years, since IFEC shares were listed in late 2014.
The shares have been flagged with a suspended trading symbol (SP) since December 2016.
Internal disputes and financial scandals have turned into a crisis for retail shareholders, as some members on IFEC's board of directors have continued to obstruct shareholders' meetings, leading investors to take matters into their own hands despite having market regulators in place.
The Securities and Exchange Commission (SEC) recently recommended IFEC shareholders exercise their right under Section 100 of the Public Limited Company Act of 1992 to set up a shareholders' meeting and appoint new directors in order to resume business operations.
Section 100 states that the combined shares held by retail shareholders must reach 10% of total shares to set up a shareholders' meeting. Once this requirement has been fulfilled, the board of directors must arrange a meeting within 45 days.
Mechanisms to help retail shareholders set up extraordinary shareholders' meetings are already in place, according to the Stock Exchange of Thailand (SET).
SET president Pakorn Peetathawatchai said the bourse will support organisations representing investors' benefits, such as the Thai Investors Association, in filing class-action lawsuits for securities.
"The SET will support associations related to investors such as the Thai Investors Association to act as a representative of shareholders to file a securities class-action litigation," Mr Pakorn said.
Retail shareholders' meeting
Investors hold placards in front of the SEC office, demanding an IFEC shareholders' meeting. Apichart Jinakul
Mr Pakorn said shareholders with a combined 10% of total shares can come to the SET with their share certificates as evidence for the Thailand Securities Depository (TSD). The bourse will help these investors by releasing documents related to a shareholders' meeting via the SET's electronic announcement platform.
In the case of lost share certificates, the TSD can help issue new share certificates.
Shareholders must prepare specific issues and arrange a shareholders' meeting's venue, date and time, the record date or book closing date and the meeting agenda, which has to include details in both Thai and English for publication on the SET.
Shareholders requesting to set up such meeting must submit the requested form and evidence to the SET, while the meeting agenda must be announced via the bourse's electronic media at least 14 days prior to the record date and book closing date.
Helping hands
Setting up the shareholder meeting is not the only solution. A business lawyer who requested anonymity suggested that shareholders inform police officers of criminal actions if they have clear evidence of fraud and corruption.
"In this case [clear evidence of fraud], this would be faster. As the directors are still active in the company, a criminal case would stop them."
The lawyer said the fraud and corruption case would be stronger with the help of a whistleblower, employee or worker who provides information to be used in legal proceedings in the event of violations.
If regulators make criminal charges, the accused directors could be removed from their positions.
However, according to the SEC's website, repeated complaints of the same matters that have already been clarified by the SEC, without new information or additional supporting evidence, cannot be brought forth.
Other issues beyond the SEC's responsibility are matters under supervision of other laws; for instance, Ponzi schemes, poor services or poor product quality, advertising blockage on sidewalks, poor construction quality, incorrect information provided by insurance companies/brokers, or unfair credit consideration.
Legal counselling needed
IFEC investors carry a funeral wreath and black banners to protest the 'death' of the SEC. Kitja Apichonrojarek
"One problem of minor shareholders is that they do not have legal counsel," the lawyer said. "If they had access to a lawyer, they could file a securities class-action lawsuit in accordance with the Public Limited Act of 1992, which was amended last year."
If the plaintiff wins the case, the attorney handling a securities class-action lawsuit can receive a fee not exceeding 30% of the value for incurred damages.
But even though securities class-action litigation has been available in Thailand for about two years, there has not been a court ruling on the issue, as most cases have been associated with consumer lawsuits.
Most business people and investors who are older than 30 may have heard about securities class-action litigation if they remember Enron Corporation, the lawyer said.
Enron was an American energy company known for using accounting loopholes to hide billions of dollars in debt from failed deals and projects.
Enron shareholders filed a US$40-billion lawsuit after the company's stock price, which achieved a high of $90.75 per share in mid-2000, plummeted to less than $1 at the end of November 2001.
Enron's $63.4 billion in assets made it the largest corporate bankruptcy in US history until WorldCom's in 2002.
