The new investigation team of Securities and Exchange Commission of Sri Lanka (SEC) was able to complete three investigations and four others are at different stages of completion during last year, said Thilak Karunaratne Chairman SEC in their annual report 2016.
The ultimate aim of a capital market is to ensure that investors and issuers alike have confidence to trade in the market.
“Given that market abuse poses a threat to confidence and integrity, we continued to upgrade our investigative skills in order to effectively detect and investigate potential securities law violations. “Being a signatory to the IOSCO Multilateral Memorandum of Understanding (MMoU), the SEC successfully sought assistance from several jurisdictions to conduct these investigations,” he said.
Greater international cooperation among regulators is vital to deal with challenges faced by capital markets and enhance overall market regulation of Securities Fraud and Abuse, he said. The present negative market sentiments underscore the importance of the SEC remaining vigilant to address growing risks and vulnerabilities.
Subsequent to obtaining Board approval and broker consultations, the CSE made recommendations to the SEC to approve the introduction of risk based capital adequacy requirement based on international best practices to instill better financial discipline and ensure that stockbrokers are prudent in their business conduct.
“Although a few stockbrokers criticised this move due perhaps to ignorance and misconception, this framework is expected to strengthen the stock broking industry and enhance the protection of client assets. Unless all stakeholders work in unison we will not be able to achieve the expected regulatory outcomes.”
He said meanwhile in a bid to ensure the general public gets a greater opportunity to invest in the capital market and to increase market liquidity the SEC directed all Public Listed Companies to comply with the Rules on Minimum Public Float on a continuous basis
“As a result of a high incidence of non-compliance among listed entities and taking into consideration the views of the market, we decided to revise the Minimum Public Float requirements to provide listed companies with a wider range of options to comply with the Rules effective from January 2017. We expect the revised criteria will encourage more listings on the CSE.”
In 2016 the SEC successfully facilitated the implementation of an integrated Broker Back Office and Order Management System (OMS) for stock broking firms which is jointly financed by the SEC and CSE.
The OMS will not only be a pre-requisite for the market to move to a Central Counterparty (CCP) - DvP system but also enable seamless trading, clearing and settlement of securities.
The SEC was only the third in the world to have an International Organisation of Securities Commissions (IOSCO) Country Review which started in July 2016.
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