Blatant manipulation, corrupt practices in CSE must stop:MPs
Eminent economists and concerned parliamentarians called out to stop blatant manipulation and corrupt practices in the stock market and bring crooks to justice.
They stressed the fact that the ‘stock market mafia’ is real and not a term used randomly generalising the stockbroking industry, but stated in the context to highlight robbers and their barons in the share market.
“Many accuse me of ‘many’ things, but I am as much a patriot as you are and I won’t let crooks take away people’s money,” Dr. Harsha de Silva, MP after emotional outbursts by two stockbrokers against him and Sunil Handunnethi (JVP MP) both of whom were panelists at a discussion on “Government Policy on the Equity Market” which was organised by European Chamber of Commerce of Sri Lanka (ECCSL) in Colombo on Thursday.
Brokers – Manjula Kumarasinghe, Director Asia Securities and Eardley Kern, Head of Sales and Marketing, Lanka Securities who said they have more than 40 years experience between them in the industry, asked the two MPs to stop the rampant usage of ‘stock market mafia’ in their public discussion. They charged that the term ‘mafia’ is used ‘loosely’ by many politicians, setting the stage to kill the industry and curb foreign investments into the country.
“When you Google the term ‘mafia’ in Italy, you get ‘godfathers’, when you Google ‘mafia’ in Japan, you get ‘Yakuza’ and when the term mafia in Sri Lanka is Googled, then stock market appears.
My question is will you continue on that stand? Because when we meet foreign investors, they ask us about these things,” Mr. Kumarasinghe said, adding “Dr. Harsha saying what the former Securities and Exchange Chairman (SEC) Thilak Karunaratne said about the stock market being a mafia and Mr. Sunil Handunnetti calling it a Soodu Pitiya or a casino is detrimental to our trade – especially when we try to bring foreign investments into the country.”
Adding to his question, Mr. Kern observed that there’re a large number of professionals in the stockbroking industry and many are also qualified. “We carry out at least six audits in the company (throughout the year). Many firms do that.
My point is that with all those controls, there are those who are errant. Ignorant people can be taken for a ride anywhere,” he alleged.
Giving an example of how rampant this situation (those who are ignorant) is Mr. Kern said, “I have put money in the NSB Pension Fund.
I’ve been taken for a ride by the NSB, as they only give 4 per cent as interest and I didn’t know this.”
In response Dr. de Silva said, “It’s not my problem that you can’t bring foreign investments into the country. Do you mean to say that there’s no mafia in the stock market? We’re – Sunil and I – from two different parties, but we stand on the same side when there’re issues like this, which robs decent people of their rightful money.” Charged about the allegations leveled at him on being unpatriotic, he said that he has come into parliament with great disadvantage to his financial situation.
He said that those who say that there’s no mafia are the unpatriotic ones. “Let’s put the crooks behind bars and erase the (mafia) term (pertaining to Sri Lanka) from Google. Let’s do something about it. Then you can bring foreigners into the country.”
“I’ll stand here today, tomorrow and the days to come to stop manipulators from robbing innocent people’s money. What has happened has happened, because those who could do something didn’t. This is my country as much as yours and we’re (Mr. Handunnethi and himself) trying to develop this country, which is both yours and mine.”
Responding to a comment on the London Interbank Offered Rate (or LIBOR) also being manipulated abroad, Dr. Silva said that those responsible were put behind bars. “Who has gone to jail for securities fraud in Sri Lanka? So let’s be honest about what we’re saying. We’re not saying that the entire industry is mafia, but that a mafia is operating within the industry,” he said.
Dr. Dilesh Jayanntha – Independent Economic Advisor to the ECCSL who was on the panel noted that a regulator can always be blamed if the market goes up on a bubble and then crash. “At the time when the Colombo Stock Exchange
(CSE) was booming, there was too much leverage. I’m aware of this, because I’ve been investing in the CSE for a long time.”
Dr. Jayanntha told the Business Times that the CSE would’ve further gone up and created a bubble and the market would have crashed steeply, had it not been for SEC’s intervention during former SEC Chairman Indranee Sugathadasa’s time. “Where there was rampant credit extension, the approach was that many investors wanted to make a quick buck and on top of that the stockbrokers want to maximize their commissions. To increase and maximize their commissions they had to increase their turnover. So the brokers had an incentive to entice clients to extend credit (last year),” he explained. He said this is why brokers had clients to borrow (credit) to buy as it’ll increase the clients’ buying power. “Despite the client making a loss, his/her stockbroker will earn a commission on each transaction, which is why Mrs. Sugathadasa had to step in to control the impending credit bubble.”
Industry expert, K. C.Vignarajah who spoke on ‘Energizing the Stock Market and Good Governance’ said that many accuse him of trying to bring the market down, but he’s not a fool to cut his nose to spite his face. “I have invested money in the CSE as well. It’ll be foolish of me to bring the CSE down (in a situation like this). I’m concerned about the governance in the CSE so that decent investors can make money,” he said.
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