SEC needs to control economic power blocs in the stock market
View(s):Sri Lanka’s Securities and Exchange Commission (SEC) has been urged to effectively deal with mergers and acquisitions that “give rise to the concentration of economic power and market control opportunities”.
In a letter to SEC authorities, governance advocate and rights activist Chandra Jayaratne has requested the SEC to make a public media announcement informing all stakeholders of the securities rules and regulations applicable and the effective enforcement processes in place within the SEC in dealing with mergers and acquisitions.
He has said that if no such regulations and enforcement processes are in place, the public has a right to know the rationale for such a lacunae to be allowed to remain within the regulatory regime, and what strategic steps are being planned by the Government and the relevant authorities in order to remedy such an unacceptable situation.
Mr. Jayaratne, a former Chairman of the Ceylon Chamber of Commerce who regularly raises issues of public, social and economic importance, said the concentration of economic and market control power in the hands of a few would affect the interests of consumers and businesses. It would negatively impact on the growth and prosperity of the nation and its people in the longer term, due to the inherent likelihood of such concentration leading to anticompetitive practices in an effort to obtain and maintain control, he added.
“Such fears have resulted in appropriate securities regulations being enacted and enforced with effectiveness, to combat the likely anticompetitive practices, diminished free market opportunities and limits placed thereby on individual initiative,” he said.
Therefore Mr. Jayaratne pointed out, it was deemed essential for effective market operation and growth and prosperity of nations and people that “Concentration” arising from the mergers of two or more previously independent undertakings, the acquisition of direct or indirect control (whether by purchase of securities or assets, by contract or otherwise) of the whole or parts of one or more other undertakings, or the establishment of a joint venture involving the acquisition of joint control of a full function joint venture undertaking are regulated and effectively controlled by a duly empowered regulator. The letter explained ‘control’ as: “Control” (both ‘sole control’ or ‘joint control’ in cohort with other undertakings, where the control arises from the joint initiatives of the separate undertakings in exercising decisive control) is exercised by rights, contracts or any other means, which either separately or in combination, confer the possibility of exercising decisive influence over an undertaking by a party acquiring the ability to determine an undertaking’s commercial strategy, irrespective of whether such acquisition allows majority or minority control by way of shareholding, but provides by way of the size of such shareholding, associated veto rights, rights of control over board appointments, other rights granted to shareholders explicitly or otherwise, empowering such a party to get adopted or block strategic commercial decisions including approval of annual budgets or business plans and appointments of key management.