SEC to continue to balance regulation, says SEC Chairman
View(s):The Securities and Exchange Commission of Sri Lanka (SEC) says that it continues to ensure that it strikes a balance in regulation since over regulation can stifle growth and discourage active stakeholder participation.
“A vital aspect in maintaining the integrity of the market, as well as making certain that investors are protected is the dissemination of quality and reliable of information on an ongoing basis. Disclosures increase the ability of investors to make informed investment decisions, improve shareholder sentiment, as well as deter management from engaging in improper behaviour. When material information is made available in a timely manner it can also reduce the herd instinct of many investors. Since the lack of reliable and timely information hinders market development as well as investor confidence, the SEC will continue to impose stringent rules and undertake rigorous enforcement action against non compliance,” Thilak Karunaratne, Chairman SEC has said in his 2014 annual report released this week.
“In line with our mandate we continue to monitor, mitigate and manage risk with the aim of promoting integrity in the market. Since systemic risk has the potential to not only affect the financial market but the entire economy as well, our scope of supervision encompasses the identification of risk in regulated entities, issuers, transactions and the market. Through our Risk Based Supervisory Framework we attempt to focus on capital and other prudential requirements for market intermediaries, protect client assets and compliance with internal controls on a regular basis. Our supervisory role further extends to mitigating the settlement risk in the securities market,” he said.
The SEC chief noted that the regulator is firmly committed to taking rigorous action against those who commit regulatory breach, which include market manipulation, misconduct by regulated entities, as well as corporate disclosure-related offences, etc. “However, the current Sri Lanka securities law, which was enacted 28 years ago, has its drawbacks inter alia the enforcement framework built on criminal prosecution and compounding of offences. In the past the SEC has mainly resorted to issuing warning letters, imposing suspensions on investment advisors and compounding. In tandem with the expansion of the capital market it has been considered necessary to make changes to the SEC Act with a view to broaden the range of enforcement powers. The proposed amendments to the SEC Act will introduce a range of administrative and civil sanctions, including the seeking of restitution to any person aggrieved. The SEC increased its efforts to expedite the amendments since this will pave the way for credible regulation and market confidence,” he has said, noting that the amendments to the Act will align the SEC governance structure with International Organisation of Securities Commissions (IOSCO) standards, facilitate the introduction of new categories of market intermediaries and regulation of their business conduct and provide for the regulation of derivative products.