ECONOMYNEXT – Ethical standards in Sri Lanka’s capital markets need to improve further to ensure investor confidence and trust and financial stability, Vajira Wijegunawardane, Director General of the Securities and Exchange Commission (SEC) said.
Maintaining high ethical standards is the only way that Sri Lanka can become an important emerging market in the world, he said.
“Ethics is about principles, values and beliefs and it goes beyond obeying laws, rules and regulations,” Wijegunawardane,told a training programme awards ceremony organised by the Capital Market Education and Training Division #, the training arm of the SEC.
“ In my opinion our industry has further to go on its journey to drive up ethical standards and I hope our new entrants as well as the existing market participantss will strive to uphold and sustain professional behaviour in order to maintain integrity in our market.”
Wijegunawardane said the SEC aims to inculcate ethical standards to establish trust which is essential to building confidence in the market.
“We anticipate that every individual in the industry will embrace these opportunities and standards to serve our capital market.”
He recalled how in the recent past an erosion of trust has affected many markets around the world.
“Most often misconduct leads to long term consequences such as bad publicity, legal sanctions and loss of reputation,” Wijegunawardane said.
“In my opinion factors that lead to trust deficit is caused by individual decisions and therefore it is important that we foster a culture of good conduct among market participants so that appropriate levels of professionalism exist within the industry.”
Wijegunawardane said past financial crises have shown that there is a distinct correlation between the standard of ethical behaviour and the stability in a financial system.
He quoted Christine Lagarde, Managing Director of the IMF, as saying “ethical behaviour is a major dimension of financial stability.”
Wijegunawardane said customers will only patronize financial institutions and market participants if they have confidence that they will be treated in a fair manner and their best interests safeguarded at all times.
“In the financial service industry reputation also plays a very important role,” he said.
“Market participants need to remember that consequences of reputation damage due to lack of professionalism driven by short term profit motives can be counterproductive in the long term.”
Wijegunawardane said professionalism and capital market integrity is fundamental to SEC’s overarching mandate.
“No amount of regulation can substitute for high standards of industry wide ethics.”
(Colombo/July 27 2015)