The Securities and Exchange Commission (SEC) on the back of compounding Environmental Resource Investments Plc and two of its directors over securities-related offences, is to caution six investment advisors.
It is also gearing to bring in stringent risk management systems to the brokering houses in six months, informed sources said. “The SEC will warn six stockbrokers pertaining to malpractices within a few months which has has come as a result of the probes carried out by the SEC during the past year,” a source at the Commission told the Business Times.
He said that the regulator is also gearing to introduce a risk management system, which is a precursor to bringing in demutualization and dematerialization of the Colombo Stock Exchange and establishing the Central Counter Party (CCP) system.
Analysts say that in volatile financial markets such as Sri Lanka both market participants and market regulators need models for measuring, managing and containing risks but that such systems will not be welcomed as the SEC had brought in a spate of rules during the past year.
“But market participants need risk management models to manage the risks involved especially at a time like now when the regulators are trying to bring in the CCP. Now the financial integrity of the stock exchange is at stake and by bringing in appropriate margining and risk containment the market will be ready for CCP," an analyst said.
According to the SEC source, effective risk management practices render stability to the financial markets and its participants by ensuring proper and timely settlement of the trades. “It also prevents market manipulations and other abnormal price behaviour. It is imperative for any participant in any market to have a thoroughly well tested and reliable risk management system to shield it from any future rude shocks," he said. |
E-mail
