Mandatory ratings for Lankan stock brokers, SEC says

  The Securities and Exchange Commission (SEC) is exploring the possibility of introducing a mandatory rating for Sri Lanka stock broking firms, SEC Chairman Thilak Karunaratne has said. “In order to enable especially retail investors to select a stock broker by ascertaining the credibility of the firm, the SEC is exploring the possibility of introducing a mandatory rating for stock broking firms. It is envisaged that this rating will aim to preserve the integrity of the market and protect investor interest. The SEC will have an industry consultation before implementing this,” he said in the regulator’s annual report for 2014 released on Wednesday. The report said that the SEC has also decided to mandate the inclusion of “a rating rationale in the prospectus to reduce information asymmetries by providing information on the rated security”. It said credit ratings assigned to a corporate bond issue provides an objective opinion of the credit worthiness and financial strength of an issuing company which enables potential investors to make well informed investment decisions. In addition, each credit rating agency has its own rating methodology. “We will continue to pursue a proactive regulatory framework in conjunction with effective supervision, surveillance and enforcement, in order to achieve an orderly securities market that can fulfill the needs of the Sri Lankan economy,” the chairman said. - ENDS -