Stockbrokers back market closure

The Colombo Stock Brokers Association (CSBA) yesterday defended the decision by the Securities and Exchange Commission of Sri Lanka (SEC) to temporarily close down the Colombo Stock Exchange (CSE) for five business days, calling it a “warranted measure”, considering the prevalent economic crisis in the country.

Issuing a statement, the CSBA also said the ongoing power cuts are also hampering the day-to-day trading activities.  “It is the duty of the SEC to protect the investors and take appropriate action as per the provisions made available within Section 30 of SEC Act No.19 of 2021 that requires the SEC to close the exchange during an emergency for a period of five days, in the event of a natural disaster or economic or financial crisis. The inclusion of Section 30 in the new SEC Act serves no purpose, if it isn’t used at a time when Sri Lanka is going through its worse financial crisis to date,” the CSBA statement said.  

It further stated that Sri Lankan citizens are facing significant hardships, including disruptions to power supply, limited access to internet and telecommunication services, causing major disruptions and inefficiencies in conducting the day-to-day trading activities, therefore also meeting the requirements of Section 3 of SEC Act No.19 of 2021, where the market cannot operate in a free, orderly and efficient manner.

“Historical precedence was set in March 2020, when the SEC requested the CSE to be closed only due to the lack of its ability to maintain and regulate a fair, orderly, efficient and transparent securities market. In that instance, the SEC boldly took the decision to close the CSE according to Section 3 and 24 of the SEC Act, which eventually proved to be a correct decision,” the statement noted. 
The CSBA also cited Zimbabwe, Russia and Egypt as examples where stock markets were temporarily closed due to socio-economic crises.  

According to the CSBA, it is the duty of the SEC to mitigate systemic risk on the financial system in terms of Chapter 3 of the SEC Act. Therefore, it stated that the SEC’s decision to close the market is not based on lobbying but enacting the provisions of the SEC Act, which has very clearly stated the circumstances under which the market should be closed.