Financial Times

Insider Trading
SEC preparing to compound case against Mack?
A statement by the Securities and Exchange Commission about compounding a case against a director of CT Smith Stock Brokers with no admission of guilt has led to widespread speculation that the ground is being prepared to compound the insider dealing case against former SEC chairman Michael Mack.

Palitha Silva Gunawardena , SEC Director General issued a brief statement on September 25 saying CT Smith Stock Brokers director Rohan Fernando "compounded the alleged offence on the understanding that it was not an admission of guilt and it was on that basis that the SEC withdrew the action against Mr Fernando."

Gunawardena drew the attention of the public to references to this case in the SEC's annual report of 2001, which however makes no mention that the case was compounded on the understanding that it was not an admission of guilt. Experts said offences are usually compounded on an admission of guilt.

Gunawardena could not be reached for comment as he is abroad and up to the time of going to press had not responded to The Sunday Times FT e-mail query forwarded to him. SEC director corporate affairs, Lasinee Seresinhe, who is the officer in charge in Gunawardena's absence, declined comment.

The SEC annual report said it investigated certain transactions of Commercial Bank shares by CT Smith's Fernando after the market price suddenly dropped from Rs 185 to Rs 162, a fall of more than 12 percent in a day. Proceedings were instituted against Fernando for violating Rule 19 of the SEC rules. The case was compounded at Fernando's request for a sum of Rs 200,000 in terms of Section 51 (A) of the SEC Act and the charges withdrawn by the SEC.

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