SEC assures investor protection: New SEC Act before 2021 Budget
By Ishara Gamage
Sri Lanka’s Capital market regulator, the Securities and Exchange Commission (SEC) said they would never reduce the credibility of the market that they regulate, as they also need to protect the interests of investors.
The SEC on Thursday (17) presented its annual report for 2019 themed “Striking the right balance” to Minister of Finance PM Mahinda Rajapaksa.
According to the report, enacting the new SEC Act is the highest priority in order to strengthen regulatory powers and market activity.
Meanwhile speaking to Ceylon FT, SEC Chairman Viraj Dayaratne stated that the new Commission is currently reviewing the provisions of the Bill and planning to present it for Parliamentary approval before the upcoming 2021 Budget and present the Colombo Stock Exchange Demutualisation Bill thereafter.
It also stated that consensus was arrived at with the stockbrokers to distribute the apportionment of shares with the Capital Market Development Fund at a ratio of 70:30. In addition, the Commission also approved to propose necessary amendments to the draft Demutualisation Bill to accommodate a Strategic Investor at the point of sale of 30% of the entitlement of the Broker Members and the Capital Market Development Fund (CMDF).
According to the annual report, in 2019 the SEC successfully concluded three investigations. It also commenced five new investigations including two investigations into possible Insider Dealing and three investigations into Price/Market manipulation.
The SEC is in the process of procuring a sophisticated surveillance system with adequate tools to identify undesirable behaviour through a suite of sophisticated alerts.
Releasing the 2019 annual report review, SEC Director General Chinthaka Mendis stated that they need to ensure that the SEC strikes a right balance in regulation since over-regulation can stifle growth and discourage active stakeholder participation in the market.
He emphasised that the need to facilitate the entry of a “strategic investor” (via Demutualisation Act) to the CSE, as a shareholder who will be committed to the development of the securities market which could lead the capital market to the next level.
Mariana Mazzucato (Professor at University College London of Economics of Innovation and Public Value and Founder/Director of their Institute for Innovation and Public Purpose), memorably argued in her book ‘The Entrepreneurial State’, it is the duty of the State to take the lead in innovation and economic transformation. In fact, she explains that the meteoric rise of China, South Korea, Singapore, Taiwan and Malaysia was due to the right involvement of the State in the business world, not as a meddler in the private sector but as a key partner in growth and innovation through a well-designed, consistent and successfully implemented system of State intervention.
SEC Director General Mendis said the SEC can no longer restrict itself to a traditional role and conventional approach. It is imperative for the SEC to review its role to provide impetus to capital formation while striking the right balance between market regulation and market development. According to him the aim was to highlight how the governments of countries mentioned above have created an enabling environment for the private sector to flourish, and how they have helped their companies to become global players and why Sri Lanka should support our private sector to reach that level.