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Seeks auditors’ help placing legal audit duty on whistleblower reports

Sri Lanka’s Securities and Exchange Commission (SEC) is looking to reward individuals who come forward as whistleblowers to flag irregular conducts of capital market stakeholders, Mirror Business learns.

The new SEC Act, which is being drafted currently, will include provisions allowing the market regulator to compensate the whistleblowers, who provide valuable information about irregular or improper activities of capital market participants.  

Addressing a recent forum on ‘integrated corporate reporting’ organised by Chartered Accountants of Sri Lanka (CA Sri Lanka), SEC Chairman Thilak Karunaratne said the SEC was exploring the possibility of placing legal audit duty on whistleblower reports.

“…to further enhance auditor oversight, the SEC is exploring the possibility of placing a legal audit duty on whistleblowing to report any irregular or improper conduct by the regulatees.”

He noted that since this process is accepted by all the major international audit firms, their local associates would also fall in line.

In a complementary development, Sri Lanka’s parliament has recently passed a witness protection bill, which was first presented to parliament in 2008 but was deferred. 

“In pursuit of ensuring that markets are fair and transparent, we believe that there should be full, timely, and accurate disclosure of financial results and other information that is material to investor decisions.”

“Enhanced transparency also leads to improvements in the performance of companies and enables businesses in becoming magnets for inward investment and more resilient in the face of future challenges,” Karunaratne said. 

The SEC Chairman in his speech also stressed the need for corporates taking full account of their environmental, social and governance (ESG) activities and ensuring that their governance structures meet the expectations of the wider society. “Going forward corporate disclosure of ESG aspects has developed in a variety of ways over more than two decades. And Integrated Corporate Reporting has become a tool that is used to enhance the information of stakeholders and to ensure that these companies act as good corporate citizens. Therefore, it is imperative that we explore the possibility of encouraging listed companies to adopt ESG reporting on a voluntary basis,” he noted.