Govt. vows action against pump-and-dump traders
Spending Rs. 36 million in a year on overseas promotional roadshows, donating Rs. 4 million for Namal Rajapaksa’s Tharunyata Hetak political youth scheme and Rs.5 million on promoting the Government’s 20-20 vision! This is only the tip of the iceberg in unnecessary spending at the Securities and Exchange Commission (SEC) during the tenure of former chairman Nalaka Godahewa.
Malaysia’s S. Samy Vellu and SEC’s Thilak Karunaratne. Pic by Amila Gamage
SEC sources said that the organisation should never have got involved in funding political organisations, dumping millions of rupees in promotion amidst a series of haphazard appointments, all of which are being scrutinised by the new administrators.“A regulator’s mandate is to regulate the market and facilitate the process, not get involved in expensive promotions,” said one source, endorsing SEC Chairman Thilak Karunaratne’s public comments on Thursday, where he said, “the SEC should not be involved in marketing and promotions”. This was the same scenario at the Central Bank, where the banking regulator unnecessarily got involved in non-bank functions like promoting political projects of the previous regime and spending millions of dollars on foreign advisors like disgraced former IMF Managing Director Dominique Strauss-Kahn for promotions.
While a new Director General is due to be appointed soon, the SEC is looking at the recruitment and appointment process which has broken many rules. In one case, a favoured applicant whose application was received days after the closing date for a particular post was chosen for the job. “In addition to the chairman, all the commissioners also have to share the blame for the previous state of affairs,” the source said.
The SEC has also asked, among other directives, the Citrus Resorts group to explain the delay in the construction of its hotel at Kalpitiya, more than a year after it secured funds from the public through an IPO. Complaints by investors have been flowing into the SEC since the new administrators took office.
Five meetings were organised in Colombo hotels and outside by the SEC to promote the Government’s 20-20 vision spending Rs 4 million, an exercise which was not within the regulator’s mandate, the source said.
Meanwhile Policy Planning and Economic Affairs Deputy Minister, Dr. Harsha de Silva told the Business Times that all investigations on stock market manipulation which were shelved in the previous regime will be revisited.
Responding to a question on market manipulation and insider trading on the sidelines of a ceremony where the Special Envoy (Ministerial Rank) to India and South Asia on Infrastructure, Prime Minister’s Department, Government of Malaysia Dato’ Seri Utama S. Samy Vellu rang the ceremonial opening bell of the Colombo Stock Exchange (CSE) at the start of trading on Thursday, he stressed that stern action would be taken against those who dealt in pump and dump in the past. “We will find out who was responsible for shelving them and get to the bottom of things,” he said, adding that this regime will not allow ‘only a few’ wheeler dealers to dominate the market in the future.
He added that compounding an offence was not on. “This compounding business (by SEC) is all nonsense. You just warn (the offenders) and that’s it,” he said, adding that if an offence is compounded, then the perpetrator admits to guilt.
“Such person shouldn’t be allowed to serve on any board (of directors) at least for 5-10 years,” he said stressing the importance of taking stern action.
He said that such a person should also be barred from trading for at least five years and reiterated that the punishment should fit the crime.
Dr. de Silva condemned corrupt practices in the market saying, “they (manipulators) cut deals with corrupt politicians and get away. So the confidence in the capital market has been waning and this should not be so in the future,” he added.