SEC to tighten screws further

7 June 2012 04:37 am Views - 3746

The Securities and Exchange Commission of Sri Lanka (SEC) is to further strengthen the regulatory and supervisory arrangements at the Colombo Stock Exchange (CSE), in keeping with modern trends, SEC Chairman Tilak Karunaratne said.

“Investigation capability will certainly be enhanced and we expect better performance in this area,” Karunaratne noted.

He also said that the SEC is of the view that the settlement risk which currently exists between T (Trade day) and T+3 (Settlement day) will be fully eliminated by improving equity market infrastructure such as establishing a clearing corporation.

“We will also pay more attention to improving corporate governance, improving market liquidity, creating a well-informed and educated investor base, re-evaluating market volatility controls and developing a long-term listed debt market in the immediate future,” Karunaratne stressed.

He also said that introducing a minimum free float is one measure that the SEC is currently contemplating in order to increase the liquidity of the market.

According to the SEC’s 2011 Annual Report which was released yesterday, various cases of market misconduct (front running, insider trading and market manipulation) were detected throughout the year.

As per the report, there were 33 possible referrals raised, which were forwarded to the Surveillance and Investigations Committee of the SEC to determine whether such cases warrant further investigation.

“15% of the detections reported were possible insider dealing cases, 58% can be categorised as market manipulations, 12% possible cases of front running and the rest of the detections were relating to unfair trading practices by dealer/trader, churning, complaints, rumour verifications, error trades resulting in significant drop in MPI and issues relating to Takeovers and Mergers Code,” the report said.

It also noted that during the year 2011, a total of 18 investigations were conducted by the SEC, out of which two investigations remained suspended throughout the year owing to the reason that the issues relating to the said investigations form the subject matter of pending litigation.

Meanwhile, during 2011, notices of action were issued to one individual for the commission of market/price manipulation and to a listed company and the directors thereof for failure to immediately disclose certain material information concerning the said listed company.

“Subsequently, having considered the requests made, the offences against the individual in the case of market/price manipulation as well as the offences against the aforesaid Listed Company, the Chairman and the two Executive Directors thereof were compounded. Warning letters were issued to the two Independent Directors of the said Listed Company,” the report said.

It also said that the SEC warned 16 other individuals in respect of offences committed by them while cases against four individuals who were charged prior to 2011 following investigations were compounded during the period under review.