Conflicts of interest still affect stock market confidence, governance advocate says
View(s):Conflicts of interest continue to erode Sri Lanka’s stock market, a well-known advocate of governance and transparency has said.
Investor K.C. Vignarajah, who has repeatedly frowned on irregular share dealings and companies ignoring the rights of IMS (Independent Minority Shareholders) and raised these issues in the media, in a recent letter to Sri Lanka’s Securities and Exchange Commission (SEC) says for example that stockbrokers (SB) know everything about the trades.
“They give advise, they buy, sell, hold, give or deny credit, force sell, etc and should come out clean,” he said.
Mr. Vignarajah said they should:
(a) Declare their (and of any related party) transactions and shareholdings. They must post the info on the CSE web site, immediately.
(b) Brokers and RPs (Related Parties) must immediately disclose all purchases and sales to the Colombo Stock Exchange (CSE) and on the website.
(c) Stockbrokers must immediately disclose the completed transaction of Directors or Key Management Personnel (KMP) of PLC’s shareholding to the CSE. This should be a primary responsibility of the broker, and should augment the responsibility of the Directors to disclose immediately (in some cases this has taken almost a year to do so!). The earlier requirement of immediate disclosure must be followed, instead of ‘within a curiously extended T+5 period’, within which repeat transactions can take place to manipulate and benefit.
He said the truly Independent Director (ID) must have a keen interest in ensuring a well performing enterprise, have a balanced view and preferably a sufficient stake or even a significant stake to be effective to stall an errant CI (Controlling Interest) and RP. The ID should be by definition, not dependent on the CI&RP for their appointment and must not be connected to, related or controlled by the CI or RP. The shareholdings of IDs must be included in the public float, whereas the shareholding of other Directors, KMP and R.P should be excluded from the public float.
He urged the SEC and CSE to act vigorously to prosecute errant CI&RP in order to restore confidence of independent investors while also praising the SEC for its supportive action in the court case against Touchwood Investments.