Financial Times

Bizarre end to SEC case
Ever since The Sunday Times FT broke the story about the investigation into insider dealing in shares of Aitken Spence by a senior official of a regulatory body, there have been many bizarre twists and turns in the whole affair.

The unprecedented nature of the investigation into the share deals of the then-head of the Colombo Stock Exchange, and as subsequently revealed, the then-chairman of the Securities and Exchange Commission, the markets watchdog, rocked the cosy world of Colombo's corporate elite.

Earlier this year there were warnings by astute market watchers that the SEC might be preparing the ground to compound the insider dealing offence former SEC chairman Michael Mack and former Aitken Spence director Norman Gunewardene was accused of when it did the same in another investigation. These fears have been proved right.

The decision by the SEC Commission, now chaired by Dr Dayanath Jayasuriya, to compound the offences in such a high-profile case, can only be described as bizarre. There seems to be reluctance on the part of the regulators to explain the reasons for compounding the offences against Mack and Gunewardene and the SEC's announcement that under the SEC Act compounding does not entail a finding of guilt.

The act does not say that compounding does not entail a finding of guilt nor does it say compounding entails a finding of innocence. What is the ordinary investor to make of the SEC announcement and the manner in which this controversial case has now ended?

This silence on the part of the authorities is not a good thing as it could lead to all sorts of bizarre rumours. Why the SEC should compound an offence when the Attorney General himself has twice given an opinion that there was enough evidence to prosecute the accused is not clear.

It may be true that the SEC has imposed the maximum fines possible, that the age and health of the accused was taken into consideration and Dr Jayasuriya himself may not have wanted to open himself up to accusations of malice by opposing the request to compound the offence given his previous involvement in the matter.

It may also be true that up to now the SEC had refused a compounding request only once. However, it is a pity that this case was not allowed to proceed because now there would always be a question mark over the whole affair, especially given the outrageous and blatant efforts to scuttle the initial SEC investigation.

Would it not have been in the interests of the two accused, who maintain their innocence, to have proceeded with the case and cleared their names?

If there is no finding of guilt that is only because the matter did not go up for trial. It was only a matter of days before the Appeal Court would have decided whether or not the SEC could proceed with its effort to prosecute the accused.

Why was there such haste to compound the offence by lawyers for the accused? Why did they want the request to compound the offence, made on the same day the Commission met, and just the week before the hearings fixed by Appeal Court, to be treated as "urgent"?

The SEC will have only itself to blame if its decision erodes public confidence in the institution.
The investing public is left wondering whether white-collar crime pays and the impression that gentlemen with means can simply buy their way out by paying a fine not to have their alleged crimes investigated.

Ordinary criminals like pickpockets are known to languish in jail simply for not being able to pay a paltry fine -- sometimes just Rs 1,000 - or put up bail.
This decision by the SEC certainly calls for a review of the law to ensure the rules are applied equally to everybody.

This is in stark contrast to the fate of another high-flying and wealthy Sri Lankan, Sanjay Kumar, head of Computer Associates, who is being prosecuted by US authorities for fraud.

Back to Business