The Securities and Exchange Commission’s (SEC) report to the Parliamentary Committee on Public Enterprises (COPE) details the progress of investigations and probes or inquiries since 2010. Copies of the report were received by COPE members last week. The report, sent to COPE on August 17, the day SEC former Chairman Thilak Karunaratne tendered his resignation, [...]

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The Sundaytimes Sri Lanka

Sri Lanka’s securities regulator soon to celebrate 25th anniversary

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The Securities and Exchange Commission’s (SEC) report to the Parliamentary Committee on Public Enterprises (COPE) details the progress of investigations and probes or inquiries since 2010.

Copies of the report were received by COPE members last week.

The report, sent to COPE on August 17, the day SEC former Chairman Thilak Karunaratne tendered his resignation, says that SEC’s Surveillance Division prepared some 45 Surveillance Referrals on various issues.

“Apart from that the SEC received 10 Surveillance Referrals from the Colombo Stock Exchange. Out of the total 45 Referrals, 38 have been discussed by the Surveillance and Investigations Committee (the Committee) and 7 issues had been warranted for investigation upon the approval of the Commission,” the report said.

During the period under review, the committee chaired by the SEC Acting Director General decided various enforcement actions against certain traders, brokers, investors and market participants on various suspected market malpractices. “The committee summoned minor offenders and subsequently warned them to refrain from engaging in such trading practices in the future. Also the Committee cautioned certain investors who traded through the Internet against inappropriate trading patterns at the first instance and warned if the trading pattern were to this continue, the SEC will be compelled to direct the broker to discontinue the internet trading facility,” the report said, adding that the Surveillance Division sought explanations from certain parties who were involved trading in shares prior to the declaration of dividends by companies.

The Surveillance Division has plans to streamline the alerts mechanism of the Surveillance System of the SEC, formulate a database of corporate insiders of listed entities (as an initial step, the information such as NIC numbers and addresses of directors are taken into the database), etc, according to the report.

Developing certain Surveillance tools (mechanism) relating to price fluctuation, Procurement of new hardware for the setting up of production and test systems, which will enable to the Division to have its own Surveillance tools developed inside and arranging a procedure of entering corporate announcements and financial results to the new Surveillance Systems is also on the cards.
The report said that SEC’s Supervision Division has plans to establish a Risk-Based Capital Adequacy model for all Capital Market Intermediaries. “This is to be developed with the technical assistance of an external resource person,” it said.

The report said that the SEC Capital Market Development (CMD) Division is facilitating the fast tracking of the implementation of a Risk Management System for both the Colombo Stock Exchange (CSE) and broker firms (phase I), establishing a suitable Delivery-versus-Payment (DvP) mechanism for stock transactions (phase II), and a Clearing Corporation for central counter party guarantee (phase III) together with the CSE.

It said that the work recently completed by CMD includes facilitating the introduction of a preferential share allocation mechanism for retail investors to broad base share ownership in Sri Lanka and to encourage increased participation of retail investors in unit trusts.
It noted that the SEC’s Corporate Affairs Division is coordinating with the Sri Lanka Accounting and Auditing Standards Monitoring Board to review compliance with Accounting Standards. “Review of Annual Reports for compliance with the Sri Lanka Accounting Standards, Companies Act and CSE Listing Rules is also being done.”

The report said that Corporate Affairs Division has done a full review of 30 companies and is following up on 17 companies.
The SEC is also in the process of producing a corporate documentary in Sinhala, Tamil and English and is also compiling a coffee table book on the SEC to commemorate its 25th Anniversary.

 




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