Financial Times

Protecting minority shareholders
By Duruthu Edirimuni
There’s good news for Sri Lanka’s marginalised small shareholders who often complain of being browbeaten by bigger shareholders or cold shouldered by arrogant company directors.

The Securities and Exchange Commission (SEC), amidst plans to broad-base the stockmarket, is keen to provide some protection to the country’s much-harried minority shareholders, according to new SEC chairman Gamini Wickramasinghe.

In an exclusive interview with The Sunday Times FT, Wickramesinghe said the SEC wants to take forward the best practices in regulation and also protect the minority shareholders. The new chairman, one of the pioneers of Sri Lanka’s IT revolution with his highly successful Informatics Group, revealed plans to raise more initial public offerings (IPOs), rope in the small and medium sector companies, strengthen the regulatory environment, establish a corporate governance institute for capital market participants and set up investor centres around the country.

Just a week after taking over, Wickramasinghe’s immediate attention is focussed on seeking ways of increasing the market capitalisation of the Colombo Stock Exchange (CSE) and bringing in more IPOs towards November and December this year. “We plan to educate companies that have a potential to come in with IPOs, on the advantages of listing their firms in the CSE and bring in some IPOs during the latter part of the year,” he said.

“At present we have only 240 listed companies and we want to see the marketing teams of both the CSE and SEC working together to bring in more companies,” he explained. He declined to commit as to how many IPOs will be targeted for this year, but said that the SEC wants to increase the present market capitalisation of US$ 6.5 billion and facilitate SMEs into the CSE.

“We will have a mechanism to help the SMEs to enter the CSE by introducing a dedicated tier for them this year, different from the existing tiers,” he said.
He said this tier will have different levels of supervision and entry requirements for listing companies and will help firms with lower issued capital to be listed at the CSE. “We are also planning to target companies on a sectoral basis such as the garments, IT, telecom and health sectors in our marketing drive.” He said the regulatory environment will be bolstered by strengthening the ‘gaps’ in the present regulations. “We want to keep an ear to the ground and work together with other regulatory authorities such as the Sri Lanka Accounting and Auditing Standards Monitoring Board (SLAASMB) to strengthen the stock market regulatory setting.

The company accounts related issues will be closely monitored and screened together with SLAASMB,” he said. The SEC also wants to recommend and encourage companies to obtain a rating. “It will not be a mandatory requirement, but we want to recommend it as a health check,” he added.
Wickramasinghe said that an institution for corporate governance under the aegis of the SEC will be set up in a few months and the current code of governance, which is voluntary at present, will become mandatory. “The corporate governance institution will educate all capital market participants including company directors about corporate governance and we want to create a situation where they are not ignorant on this subject,” he said, adding that the corporate governance code will be made mandatory in consultation with the Institute of Chartered Accountants.

The SEC also has plans to establish modern investor centres around the country, with the first centre to be set up in Colombo. “We want to have investor centres around the country, resembling well advanced Internet cafes, which will attract investors. It will have (free-to-use) terminals for trading and a very comfortable environment. We plan to have the first one in Colombo within the next three months and depending on the success and the demand, we will expand the centres around the country,” he said.
Wickramasinghe said the SEC’s corporate plan for the next three years will finalised this week.

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