A World Bank team here to assist the Securities and Exchange Commission (SEC) SEC to amend its law and also demutualization of the Colombo Stock Exchange will complete a consultation paper by next month, according to informed sources.
“They have made much progress since mid August and will put out a consultation paper on each area by November," an SEC source told the Business Times.
He said what the SEC wants to do is essentially harmonise regulation with those of the region. He added that the regulator is also trying to incorporate stringent deterrents for manipulators to the SEC Act.
“The SEC needs to have a wider armoury of how to deal with offenders. We identified certain offences which are in the SEC rules and will incorporate them under the SEC Act,” the source noted.
The SEC has identified offences such as manipulation (which is attempting to interfere with the free and fair operation of the market and create artificial, false or misleading appearances pertaining to share prices), front running (where a broker executes orders on a share for his/his clients own account while taking advantage of advance knowledge of pending orders from his customers), etc to be incorporated under the Act.
“Presently there’s only insider dealing under this Act,” the source said. He said that by including these under the Act it’s easier for the SEC to uniform the offences.
The source added that the regulator also plans to bring in stringent punitive action against these offences. He explained that in other countries, those who violate (SEC) regulations are typically required to pay both penalties and disgorgement. Penalties are punitive while disgorgement is about paying back profits made from those deals that violated the SEC's regulations.
The SEC says this is a better deterrent than the criminal sanctions which are now practiced. “This is also practiced in Malaysia and the burden of proof is lesser than in criminal sanctions. The proof is on the balance of probability,” he added. |
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