Investigations relating to insider dealing, market/price manipulation, complaints, front running and submission of false accounts were conducted by the Securities and Exchange Commission (SEC) during last year, according to its 2009 annual report released this week.
The report said that out of the 10 investigations, only one party was taken to courts with regard to submission of false accounts, while two investigations relating to front running, two insider dealing cases and one case relating to a complaint are pending. It also said that two letters of caution were sent to two listed firms pertaining to market manipulation and with regard to a complaint received by the SEC.
The report noted that two insider dealing cases were terminated after investigations and a market manipulation case was suspended during last year.
Udaya Sri Kariyawasam, SEC Chairman in 2009 has noted in his statement that in a bid to secure long term reinvestment in the securities market, SEC has taken steps to improve the quality of disclosure to investors. “We have taken many steps to ensure that listed companies provide investors with important, accurate and timely information necessary for judging their financial soundness, management capability and business outlook,” he has said.
He has also noted that SEC has seen some suspicious price and volume movements, which may have been the result of volatile market conditions. “We have responded with a series of investigations into apparent leaks and insider trading, followed by prosecutions. We need to exercise greater control over how confidential information is handled by companies both within their own organisations as well as extremely with advisers and other service providers,” Mr. Kariyawasam has said.
He has also said that a more difficult challenge for the SEC is the influence of rumours on market prices and volumes. “It can be a difficult task to distinguish between a rumour spread with manipulative intent and the expression of a genuine rational opinion. Many rumours have at least an element of truth that has somehow leaked, sometimes deliberately,” he has said.
He has noted that Sri Lanka has fared better than many countries during the Global Financial Crisis (GFC) due to its low correlation with global markets and the robust regulatory system. “However, there are international regulatory changes taking place in response to the GFC, many of which are still in the early stages of development.
For example, we have initiated the amending of the Takeovers and Mergers Code (TOM) in order to harmonise the Sri Lankan law with international norms. We have also analysed the changes in legislation needed to demutualise and regulate the Colombo Stock Exchange (CSE), and forwarded a draft Cabinet Memorandum to the Ministry of Finance and Planning. We have also prepared a draft bill on regulation of asset backed securitization or Parliament approval,” he has said.
Director General SEC, Channa de Silva (who resigned recently) has in his statement said that the market was devoid of any major scandals and malpractices and was able to increase the confidence of investors.
“The amendment to the SEC Act has also paved the way for the SEC to issue directives to all public listed companies in keeping with the objects of the Commission in protecting the investors and ensuring that professional standards are maintained in the capital market,” he noted.
He has said that SEC has made major strides in investor awareness and education by establishing Capital Market Information Centres (CMICs) at three universities during the year and they are equipped with cyber café styled kiosks, computers and capital market related literature.
“These centres provide intranet facilities and a comprehensive information and research to tertiary level students. Every endeavour has been made by the SEC to include capital market related subjects to the secondary level curricula as well,” he has said.
He has also said that Certificate in Financial Journalism to educate the existing financial journalists and attract potential financial journalists was an outstanding success. “We expect that the education arm of the SEC will launch a diploma in financial services and also pursue our dream of commencing a Masters degree in capital market studies in the future.”
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