Industry profits up 260% to Rs 6B in 2021

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The profitability of the Sri Lanka’s stock broking industry witnessed a 260% increase, recording a net profit after tax of Rs 6,308 million in 2021 compared to a net profit after tax of Rs1,751 million reported in 2020, the Securities and Exchange Commision of Sri Lanka (SEC) stated in its 2021 annual report.

During the year of 2021, total turnover of the stock brokers increased by 215% compared to the previous year.

“This was largely due to the stock market becoming the preferred choice for a large number of investors due to the lower bank interest rates prevailed during the year, and other progressive steps taken by the Government and the SEC to develop the capital market,” it stated.

“Additionally, the digitalisation of the end to-end operations of the CSE spearheaded by the Joint Committee of the SEC and CSE appointed by the Chairman of the SEC also contributed to this overall growth” it stated.

During the period, extensions were granted to two stock brokers to re-activate its business operations having considered their appeals for extension due to extraordinary supervening impact caused by the Covid-19 pandemic. These two stock brokers inactivated its business operations for two years in terms of Section 12 of the CSE Stockbroker Rules and subsequent approval of the SEC. Furthermore, two stock brokers underwent name changes, with the approval of the SEC.

During the year, the SEC approved two new Unit Trust Funds to be introduced to the capital market that will mainly focus on the Dollar denominated instruments issued by the Government of Sri Lanka subject to the said Funds obtaining the necessary approval from the CBSL. The SEC also stated that they have issued a ‘Show Cause’ from the Chairman/ Chief Executive Officer of a holding company as to why the SEC should not take action against him with regard to certain manipulative trades in violation of Rule 13 and Rule 14 of the SEC Rules in the shares of a public listed company carried out by several accounts related to the group of companies to which the holding company belonged.

 Nine identified investors were issued ‘Notices of Action and/or ‘Show Cause’ to explain as to why the SEC should not take action against them for their unusual trading patterns in the shares of a listed public company that caused a significant price increase in the shares of the company which was deemed to be abnormal by the SEC.

Nine identified investors were issued “Warnings” against causing undue price volatility/changes to shares listed on the CSE by using buy orders containing one share to less than 100 shares.

By Ishara Gamage