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Sri Lanka enforces minimum public float rule

Jun 30, 2017 06:03 AM GMT+0530 | 1 Comment(s)

ECONOMYNEXT – Sri Lanka’s capital markets regulator said it will enforce rules for listed companies to maintain a continuous public float of 20% from 1 July 2017, after giving a grace period of six months as many firms were non-compliant and several delisted.

The Securities and Exchange Commission (SEC) said firms found non-compliant with the new minimum public holding thresholds would be transferred to the Watch List of the Colombo bourse on 1st July 2018 unless due compliance is achieved before that date.

The rule, meant to increase capital market liquidity and give the general public a better opportunity to invest in listed companies, was originally to have come into effect on 1 January 2017.

“This enforcement policy has been introduced following the grant of a period of over three years since the initial introduction of minimum public holding as a continuous listing requirement in 2013 and a further grace period of six months,” the SEC said in a statement.

“This extension of time is characteristic of the accommodative and perceptive regulatory approach adopted by the SEC, and takes cognisance of the need for a reasonable timeframe within which non-compliant companies may take remedial action with respect to public holding requirements.”

The full SEC statement follows:

The Securities and Exchange Commission of Sri Lanka (SEC) has instructed the Colombo Stock Exchange (CSE) to commence enforcement in respect of its November-2016 Revision of Rules on Minimum Public Holding Applicable to All Listed Public Companies. The enforcement measures were developed by the CSE under the direction of the SEC and are due to take effect from 1st July 2017.

The present rules on minimum public holding were introduced by way of SEC Directive in November 2016, and marked a significant enhancement in opportunities for compliance previously available to listed companies. The rules, envisaged as threshold requirements to be adopted on both an initial and continuing basis, took effect in January 2017, with a grace period of six months ending 30th June 2017 being extended to companies failing to comply with the requirement as of 31st December 2016.

In keeping with the decision to introduce enforcement measures in respect of companies failing to comply with the revised rules on minimum public holding prior to 30th June 2017, the SEC approved policies including the transfer of non-compliant companies to a Watch List (Default Board).

Accordingly, companies found non-compliant with the minimum public holding requirement as of 1st July 2017 would be transferred to the Watch List on 1st July 2018 unless due compliance is achieved prior to that date, while others which become non-compliant following 1st July 2017 would be transferred to the Watch List within six months of such non-compliance or on 1st July 2018, whichever date is later. Companies which become non-compliant on any date following 1st July 2018 would be transferred to the Watch List within six months from the date of non-compliance unless due compliance is achieved in the interim.

Other actions contemplated by the SEC enforcement policy include the making of timely market disclosures on public holding positions of non-compliant companies and disclosures on remedial action proposed by such companies.

This enforcement policy has been introduced following the grant of a period of over three years since the initial introduction of minimum public holding as a continuous listing requirement in 2013 and a further grace period of six months. This extension of time is characteristic of the accommodative and perceptive regulatory approach adopted by the SEC, and takes cognisance of the need for a reasonable timeframe within which non-compliant companies may take remedial action with respect to public holding requirements.
(COLOMBO, June 30, 2017)
 


 

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1 Comments

  1. sacre blieu June 30, 05:39 AM

    This rule is years late in been applied. Those who seek to de-list should be heavily penalized as their public float was artificially y boosted by the glossy prospectus and the conniving brokers sponsoring an inflated price as BUY. They should be made to compensate the shareholders ,at least at that initial price. It is well known to many, how the proceeds from the sale were spirited to front and shadow companies. The share market here has been made a mockery of the ideal investment thermometer and the CSE and SEC personal should have the guts and determination to stand firm and straight.

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