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SEC making slow progress?



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Securities and Exchange Commission (SEC) Chairman Dr. Nalaka Godahewa says around five investigations into market offences in the Colombo Stock Exchange have been concluded resulting in two warning letters being issued, somewhat slow progress if going by Dr. Thilak Karunaratne’s portrayal of affairs just before he resigned from the top.


"Investigations are an ongoing process and so far around four or five cases have been brought before the commission members. While some of these were nothing serious, we have issued warnings letters which are on the SEC website," Dr. Godahewa told The Island Financial Review.


"There are about 10 cases that would be brought before the commission in due course and we would publish the findings in case of wrongdoing as and when they are concluded," he said.


The SEC website has details of two warning letters issued.


Dr. Godahewa’s predecessors Dr. Thilak Karunaratne and Ms. Indrani Sugathadasa both resigned within a year of each other after trying to take a tough stance against rampant market offences.


Dr. Karunaratne has said a group of well connected investors were successful in exerting pressure on the SEC to stall the investigations. He had told the parliamentary Committee on Public Enterprises (COPE) that a ‘mafia’ was running the stock exchange and investigations into share trades of 17 counters were being probed before his resignation.


COPE Chairman D.E.W. Gunasakara has acknowledged the existence of such a mafia.


"We only meet each of the public enterprises once a year and our recommendations are released to the authorities. It is now up to the SEC to take this matter further," Gunasakara told The Island Financial Review.


Dr. Godahewa however, disagrees about the number 17. "As I have said in the past, investigations are ongoing and if there is proof of wrongdoing action would be taken."


Some of Dr. Godahewa’s business connections, just before assuming the role of SEC Chairman, had received letters calling for explanation by the SEC during Dr. Karunaratne’s tenure.


The actions of a group of influential investors and their crony brokers have dented the image of the country’s stock exchange. A crackdown on rampant market offences was termed a senseless witch-hunt which was scaring away investors, this group said and propagated, pillorying Dr. Karunartne and the SEC. It also criticized the price bands.


The market had slumped due to fundamentals, frictions in the macro-economy, but the influential group of investors and their crony brokers blamed the SEC instead, and the government took the bait; hook, line and sinker. Both Central Bank and Treasury annual reports for 2011 had said in their annual reports that the market slump was due to overheating. Some broker firms also said high interest rates were to blame for the slump as well.


Four broker firms, however, stood by the SEC when everyone else campaigned to impede the SEC.


Treasury Secretary Dr. P. B. Jayasundera had told a meeting with the SEC that political considerations were too strong. And publicly, he said he was sad Dr. Karunaratne had to resign, when he delivered the 9th Annual Sujata Jayawardena Memorial Oration at the Sri Lanka Foundation Institute last year.


Insider dealing, pumping and dumping and the callous behaviour of some, if not most, broker firms are much talked about. Dr. Karunaratne has also highlighted instances where brokers enriched themselves at the expense of their clients.


Dr. Godahewa said a media mafia was responsible for tarnishing the image of the country’s stock exchange.


In all this foreign buying has been spectacular in the exchange in recent months.


"The Colombo bourse is no doubt a destination with vibrant prospects. If there is money to be made, investors would flow in regardless. But what should matter to us Sri Lankans is that decency and the rule of law prevails," a broker said. "The status quo today seems to be everything-is-forgotten-and-let’s-start-a-fresh. This is what probably having the friends in the right places can do," one senior broker and market researcher said.


Two Warning letters:


1.) Nishantha Joseph Silva and Chanaka Udithalal Mendis, investment advisors attached to Lanka Securities (Pvt) Ltd—Based on the findings of an investigation carried out by the SEC with regard to suspected Front Running (as set out in the Rule 14 of the SEC Rules published in Gazette Extraordinary No. 1215/2 dated 18th December 2001) in the shares of Colombo Land & Development Company PLC and Ceylon and Foreign Trades PLC the aforesaid individuals were issued with warning letters dated 7th November 2012.


2.) Nishantha Mudalige and Damian Le Grand, investment advisors attached to DNH Financial (Pvt) Ltd—Based on the findings of an investigation carried out by the SEC with regard to suspected Market/Price Manipulation (as set out in the Rule 12 of the SEC Rules published in Gazette Extraordinary No. 1215/2 dated 18th December 2001) in the shares of Nation Lanka Finance PLC the aforesaid individuals were issued with warning letters dated 5th November 2012.


 
 
 
 
 
 
 
 
 
 
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