SEC filing charges against 2 more pump and dump era market offenders
Fresh from attempts to nab two stock market offenders, capital market regulator, Securities and Exchange Commission (SEC) is flexing its muscles to net two more high profile felons from the infamous pump and dump era, well connected sources say.
They told the Business Times that certain offenders during 2011 to 2013 when the worst manipulations of the stock market by high net worth investors happened creating a bubble, are on the chopping block. Indictments are around the corner, a source said noting that certain former ‘big boys’ are already jittery and are ‘working their contacts’ to stop the regulator from filing charges. Whether the SEC will succumb to such pressure (as in the past), remains to be seen.
The manipulations started during SEC Chairperson Indrani Sugathadasa’s time but she ultimately stopped a crash before resigning from her post, harassed, in December 2011. Then Thilak Karunaratne was appointed by former President Mahinda Rajapaksa but less than a year later he was asked to step down by Mr. Rajapaksa for allegedly ‘antagonising’ some high-net-worth investors and then powerful stockbrokers in the country, who were hand in glove with the leaders of the earlier regime. During Mr. Karunaratne’s time 17 probes on stock market manipulations were ongoing but were subsequently closed upon his resignation by his successor Nalaka Godahewa who was appointed by the former President.
The source added that impending indictments are against two powerful and manipulative investors who were part of a gang that was popularly known as the ‘mafia’ and tried their best at the time to stifle some media organisations by targeting reporters who were writing on their share price manipulations. At the time they were above the law and got rid of two Chairmen and a Director General of the SEC within just two years. They had ample help from corrupt officials within the SEC, sources said. In 2015 under a new regime when Mr. Karunaratne was reappointed, they were shaken up but nothing as expected happened as ‘much evidence was destroyed’ while he said that the SEC had a capacity issue.
The SEC through the CID has contacted Interpol recently to summon Ireland-based Dr. Muhammed Bafiq Nizar to local courts, after filing charges in Magistrate’s Court Colombo Fort against him and his brother-in-law Mohamed Imtiaz Samsudeen after six long years on charges of market/price manipulation on doctor channeling company, E-Channeling PLC.
They are among the top 10 shareholders and this probe is among the 17 that were closed during Mr. Godahewa’s (now a Gotabhaya Rajapaksa advocate) tenure in the SEC’s high office. The matter is pending in court and shall be taken up on August 29. Many in the industry question how such a ‘straightforward’ manipulation wasn’t brought to book for six long years. The ultimate answer is that if one transaction was probed, the SEC would have had to continue with the other 16, where mafia was involved. So, after many attempts, during Mr. Godahewa’s time all cases were laid to rest.
The sources added that several brokers and margin providers have been issued with show cause letters and the Colombo Stock Exchange has been directed to investigate them.
They said that months of capacity building and with a focus on enhancing effectiveness, the SEC is transforming itself into an effective regulator with courage to execute and is now showing results.
In January the regulator charged an employee of a stockbroking firm for failing to ‘show up’ for an inquiry. The SEC had summoned the said individual who had evaded coming over to the SEC for a long period to record a statement pertaining to a stock market offence and charged him at the Fort Magistrate Court, after which he agreed to cooperate with the regulator. Thereafter the charge was withdrawn.