Colombo Stock Brokers Association (CSBA) defended the decision of the Securities and Exchange Commission of Sri Lanka (SEC) to temporarily close down the Colombo Stock Exchange (CSE) for five business days as a warranted measure, considering the prevalent economic crisis in the country as well as the disruptions faced by traders in conducting day to day trading activities owing to the recurrent power supply disruptions.
The CSBA President Jaliya Wijeratne stated, “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 the 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.”
They 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 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.
According to the CSBA, “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 & 24 of the SEC Act, which eventually proved to be a correct decision.”
Other international markets have also closed at various periods to protect their investors during catalytic events. Zimbabwe for instance closed the Stock Exchange for over one month from the 26 June 2020 until the 3 August 2020 due to the various measures taken to protect the currency and the resultant impact on the Financial Sector.
Similarly, the Moscow Stock Exchange was closed from 25 February 2022 to 24 March 2022, after the Russian Ruble dropped to an all-time low following the invasion of Ukraine. Moreover, the Egyptian Exchange was also closed for 55 days from 28 January 2011 onwards due to the Arab Spring revolutions.
According to the CSBA, it is the duty of the Commission to mitigate systemic risk on the Financial System in terms of Chapter 3 of the SEC Act. Therefore, they 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. As such, the SEC would have taken due consideration of the points highlighted above, and the prevailing Economic, Political, Social and Financial Crisis in Sri Lanka which does not make it at all possible for the CSE to be a fair, orderly and transparent securities market. Therefore, the SEC has taken a correct decision to direct the temporarily closure of the Exchange for five business days from 18 April 2022 to 22 April 2022.