Many ‘genuine’ investors have expressed concern over this week’s decision by the Securities and Exchange Commission (SEC) to remove credit restrictions and lift a time-bound ban on brokers as investors and selling their share portfolios, a well-known investor and public rights activist said. “Many genuine investors have been rudely surprised, shocked and saddened by the [...]

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The Sundaytimes Sri Lanka

‘Genuine’ investors concerned over relaxation of rules on brokers’ as investors

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Many ‘genuine’ investors have expressed concern over this week’s decision by the Securities and Exchange Commission (SEC) to remove credit restrictions and lift a time-bound ban on brokers as investors and selling their share portfolios, a well-known investor and public rights activist said.

“Many genuine investors have been rudely surprised, shocked and saddened by the decisions taken and directives issued subsequent to your meeting with a section of the broking community, on Monday,” said K.C. Vignarajah, in a letter to SEC Chairman Nalaka Godahewa and other commissioners.

“It appears from media reports that neither consultations nor discussions have been held with the other stakeholders and the investing public who are severely affected by your decisions,” he added.

Mr Vignarajah, who has long campaigned for the rights of independent minority shareholders, also praised the SEC for its recent decision on asking Watawala Plantation to appoint ‘truly independent directors’ and also calling for public comments on a consultation paper on Related Party transactions.

But he pointed out that Monday’s decisions on lifting the credit squeeze and a 6-month freeze on trading of shares owned by brokers, greatly retarded market manipulations and malpractices have not been explained.

Vague defenses of ‘free market’ have been aired by those who do not understand the basic premises of a free market, the letter said.
“The rationale for earlier rules was to minimize, as far as possible insider dealing, market manipulation, front running, pump and dump practices, which impoverished the average genuine investors who did not belong to the above categories who unjustly enriched themselves,” he said.

Suggesting that this would lead to a lot of conflicts of interest when a broker trades on his or on related parties’ accounts, he said the minimum safeguards of full disclosure to the market have not been stipulated. The brokers should announce their and their related parties’ shareholdings in PLC’s and should report their transactions in the Colombo Stock Exchange website simultaneously.
“It is also most important that the broker discloses to his client, (either buyer or seller) prior to the transactions that he was selling or buying his own shares.”




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