Some thoughts on the Mack episode
As we have reported in our business pages today, Finance Minister K. N. Choksy has accepted the resignations of Messrs. Michael Mack and Hemaka Amarasuriya from the Securities and Exchange Commission (SEC) while he will decide this week about what he is to do about the resignation of Dr. Dayanath Jayasuriya from his position of Director General of the Commission. But that will not be the end of the matter which, predictably, will have to be sorted out by the courts.
A major problem that has arisen from this issue is conflict of interests. Undoubtedly, regulatory bodies like the SEC, essential to ensure a level playing field in the stock market, cannot be wholly bureaucratic instruments. While there are ex officio members on the commission like the Registrar of Companies, the Deputy Secretary of the Treasury, Deputy Governor of the Central Bank and the President of the Institute of Chartered Accountants, private sector businessmen, both retired and active, have been members of the SEC from its inception; and rightly so. They, after all, command more expertise and practical ability of matters that come within the regulatory turf than government officials and it is necessary that these skills are profitably employed.
Ours, however, is a small business world and as a former President of the Institute or Chartered Accountants memorably said not long ago, the regulators and the regulated can sometimes be business pals or cocktail buddies. That can and has caused problems as evidenced by SEC Director General Jayasuriyas conflict of interest allegations appended to his letter of resignation. He has alleged that some of the non-official members of the commission drawn from the private sector had dealings with the DFCC Bank of which Mack was chairman and were connected to auditing firms handling Aitken Spence audits. Ideally, they should not have participated in discussions of contentious issues as Michael Mack has very properly not done. We do not know whether Jayasuriya himself or his secretariat had pointed this out to the commissioners at the proper time. If not, that too has been a dropped catch.
The finance minister, who enjoys a well deserved reputation as one of the countrys top lawyers, did not allow himself to be pressured or any way influenced by personalities and positions they held and took up the very correct position that the SEC should forthwith follow the advice of the Attorney General who, after all, is the principal law officer of the state. As Mr. Choksy told parliament last week, although he had no statutory control over the decisions and working of the commission, he was of the view that both in principle and as finance minister he owed the public a duty to intercede. Hence his advice to the commission which the SEC, despite clearly stated reservations of some of its members, is following without demur. All credit then to Amarasuriya for quitting the SEC in the context of his candid disagreement of the prosecution decision the course the commission must follow in the light of the AGs determination.
In that sense, all concerned have come out well from what was undoubtedly a very difficult situation. Mack has always enjoyed an excellent reputation in the business world and few if any would believe that he would deliberately engage in any wrongdoing, most so for personal profit. In his very dignified resignation letter to the finance minister, he has made the point that he has yet not been told what price sensitive information he had when he sold his Aitken Spence shares; nor his explanation sought by any authority on that score. The AG has faulted the SEC for having sought a second opinion in this case, something that had not been previously done. There is validity in that stance given the fact that one of those investigated was the SECs own chairman. But it must not be overlooked that the AG himself has made one change in his departments original advice that Mack, Gunawardene and Manil de Mel be prosecuted by saying that a show cause letter be served on de Mel while the other two be prosecuted. The SEC seems also to have been in error in including a chartered accountant who is the Chairman of the Peoples Bank in the 2-man panel appointed to review the AGs original advice. As we report in our business columns, the minister himself had commented that this was not the wisest of decisions.
All in all, while there have been faults and weaknesses that have been revealed in this episode which one newspaper rightly called an "imbroglio", the course of events have broadly unfolded the way it should have. That is all to the good. The SEC, after all, investigated its own chairman, the AG was consulted on the results of that investigation and although a second view on the opinion tendered by the Solicitor General was obtained, the commission did not simply go along with that but sent the report to the AG who had the benefit of studying it and also taking account of the submissions of counsel for Mack and the others before finally making up his mind. The minister made clear that the SEC must follow the AGs advice. All concerned actors very correctly did not interfere with the due process once finality on the matter at issue was reached. Now, as we said at the beginning, it will be a matter for the courts to sort out. A prosecution decision does not mean the establishing of guilt. Undoubtedly all relevant matters will be carefully evaluated and assessed in the correct forum. That is as it should be.
Your comments to the Editor