‘Cold storage’ of broker licences likely to be approved soon by SEC
Had the ‘cold storage’ process of broker licences, where stockbrokers are able to retain licences without doing any trades, been approved by the Securities and Exchange Commission (SEC), certain brokers may not be in the dumps now, market analysts say.
Clients of Nation Lanka Equities, Navara Securities, TKS Securities and Claridge Stockbrokers whose trading activities were barred due to non-compliance, were requested by the Colombo Stock Exchange (CSE) last week, to transfer their portfolios to any other firm if they want.
This could have been avoided if a strong policy decision had been made two years ago when the CSE proposed to the SEC to ‘cold storage’ struggling stockbrokers’ licences, an analyst said. The risk based Capital Adequacy Requirement (CAR) of 1.2 times the risk requirement of stockbrokers subject to a minimum liquid capital requirement of Rs. 35 million that was made applicable to all stockbroker firms in 2016 prompted the CSE to propose the ‘cold storage’ process of broker licences.
The CSE in its recent circular further revealed that these barred broker firms will only be permitted to resume all trading actives no sooner they comply with the minimum Shareholders’ Fund Requirement which was implemented in January this year as applicable.
SEC officials told the Business Times that the ‘cold storage’ process is expected to be approved at the next SEC commission meeting, after the commissioners and the chairman are formally appointed.
The SEC is without a chairperson after Thilak Karunaratne completed his 3 –year term in January 2018, and, owing to this, many policy decisions including the deactivation or what’s commonly called ‘cold storage’ of licences have been held up.