New Sri Lanka stock market misconduct criteria to improve enforcement: IMF

ECONOMYNEXT – New criteria for reporting capital market wrongdoings to the regulator by Sri Lanka’s stock exchange should help improve investigations and enforcements, the International Monetary Fund (IMF) said.

Sri Lanka’s Securities and Exchange Commission (SEC) and Colombo Stock Exchange (CSE) run parallel surveillance programs to identify misconduct in the market.

New criteria on referring market misconduct to the SEC for investigation should help streamline enforcement, the IMF said in a new report after an assessment of SEC functions by an IMF Monetary and Capital Markets mission which visited Colombo.

The mission visit was in response to an SEC request for technical assistance.

The Surveillance Division of Sri Lanka’s SEC “believes that many of the matters referred by the CSE are too small to merit SEC attention and that the threshold for referrals should be raised,” the report said.

“Such matters will remain under consideration by the CSE and be re-evaluated if a pattern of wrongdoing emerges or other circumstances develop to warrant referral to the SEC.”

By providing guidance to the CSE, the Surveillance Division will save staff review time and the CSE will get the feedback it needs to focus its surveillance activities, the IMF said.

Recent reforms include developing criteria for the CSE to apply in making referrals to the SEC and inviting the CSE surveillance staff to attend meetings of the Surveillance and Investigations Committee during deliberations on their referrals, the report said. 

“The staff of the two organizations discuss their surveillance results informally, but the CSE claims that it does not get formal feedback as to whether its surveillance activities are of assistance to the SEC,” it said.

“From their point of view, they make referrals to the Surveillance Division, but never see any enforcement actions resulting from their referrals. By inviting the CSE to attend committee meetings during deliberation of CSE referrals the SEC will provide welcome transparency about its internal processes.”
(COLOMBO 24 May 2019)





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