Stock investors on margins to get relief till end-June

• SEC writes to brokers and margin providers asking for moratorium  
• It is however unclear whether CB’s refinance facility covers margin investors
• Data not yet available on loans extended by banks under margin trading until March 11

The Securities and Exchange Commission (SEC) yesterday asked brokers and margin providers to refrain from charging interest and to provide a moratorium for the investors who have purchased stocks on margin facilities. 

In a letter addressed to the Colombo Stock Exchange and all stockbrokers, the securities market watchdog said such moratorium on equities investors would be applicable from March 11 to June 30, 2020 or until a date which the regulator deems appropriate. 

“The Securities and Exchange Commission of Sri Lanka taking into consideration the impact caused to investors as a result of the drop in valuations of listed securities on or about March 11, 2020, has decided to grant a moratorium to the clients of all licensed stockbrokers and registered margin providers from the payment of interest on credit extended to them, which are due during the period commencing March 11, 2020,” a letter signed by SEC Director General Chinthaka Mendis said.

Although the SEC in its letter made reference to the broader refinance facility introduced by the Central Bank last week, it was unclear if the margin investors would also be covered under the same facility. 

A circular issued by the Central Bank titled, ‘Rs.50 billion six-month refinance facility to support COVID-19-hit businesses including self-employment and individuals’, dated March 27, however made no reference to the investors who bought shares on margin. 

“This decision has been made upon taking into consideration the decisions taken by the Central Bank of Sri Lanka to set up a refinancing facility to implement the decisions taken by the Cabinet of Ministers on March 20, 2020, to introduce a wide range of fiscal and financial concessions to those who have been adversely affected due to the unprecedented situation presently prevailing in the country,” the SEC letter said. 

“Therefore, all licensed stockbrokers are hereby directed to pass on the benefit they will derive from the decisions announced by the Central Bank of Sri Lanka to their clients and are directed to refrain from charging and recovering interest on credit extended to their clients until June 30, 2020,” the letter further said. 

The data is yet to be ascertained as to how much of loans have been extended by banks under margin trading until March 11, 2020. 
Sri Lanka’s stock market remains closed until the curfew is lifted.