The International Monetary Fund (IMF) has said Sri Lanka’s Securities and Exchange Commission (SEC) has taken measures to improve investigation and enforcement capabilities following a reforms program and recommended SEC to streamline the current enforcement program.
Releasing the technical assistance report for enhancing the effectiveness of the Sri Lankan securities market enforcement program, the IMF said it is imperative that the SEC bring enforcement actions for there to be credible deterrence in the securities market.
The mission recommended that the SEC continues to pursue measures to improve efficiency, effectiveness and accountability. These include: streamlining enforcement related processes to facilitate timely and efficient investigations and prosecutions; adopting criteria for prioritizing investigations and cases and publishing such criteria, where appropriate, to instill public confidence in fair and orderly markets; adopting an accountability mapping system (i.e., program management tools) to track investigation plans and human and financial resource allocation; establishing expert units and/or identifying individual experts to handle specific types of complex investigations and cases (e.g., insider dealing and manipulation); developing staff training modules on these complex matters; and enhancing the enforcement policies and procedures manual to create a detailed, organic and electronic roadmap readily accessible by enforcement staff to guide the conduct of investigations and prosecutions.
To augment the impact of the enforcement program, the SEC is encouraged to foster public transparency to the extent possible without compromising confidential enforcement processes and activities. The SEC could usefully inform the industry of its enforcement policies and processes and publicize the results of its enforcement actions.
The SEC is also encouraged to evaluate the credible deterrence of its enforcement program on an ongoing basis.
Key to credible deterrence is ensuring that the enforcement program is sufficiently robust and flexible to address evolving market misconduct in a timely and dissuasive manner. The SEC should routinely assess its program against emerging market trends and make adjustments as circumstances warrant.
While the recommendations in this report will improve the effectiveness of the SEC’s enforcement program, credible deterrence cannot be achieved without the new civil and administrative enforcement authority in the draft Securities Exchange Act (SEA). The current law effectively limits the SEC to make criminal referrals to the Attorney General to prosecute market misconduct. The criminal standard of proof and reliance on the limited resources of the Attorney General have severely limited the SEC’s flexibility to take timely and dissuasive enforcement action and contributed to undermining the public’s confidence in the regulator and the market. Enhanced enforcement powers alone will not suffice to achieve credible deterrence unless the SEC is able to build capacity to administer the new authority.
This will require a multipronged approach, including, at a minimum, adopting criteria for applying the new enforcement tools, recruiting an experienced director to oversee a robust, independent and fair enforcement program, and hiring and training capable, professional staff to investigate and prosecute administrative and civil cases.
0 comments: