Sri Lanka SEC backs investors’ association to protect minority rights
COLOMBO (EconomyNext) – Sri Lanka’s capital markets regulator is helping to form an investors association with the aim of better protecting the rights of shareholders, particularly minority interests, its chairman said.
"We get a lot of complaints (from minority shareholders) but there’s very little we can do," declared Tilak Karunaratne, chairman of the Securities and Exchange Commission (SEC).
Forming an investors association that could act on behalf of individuals and groups of minority shareholders could help, given the high cost and delays of court action, he told a forum for retail investors on minority shareholder rights.
Karunaratne suggested Sri Lanka follow the example of other jurisdictions which have formed investor associations to look after the interests of minority shareholders because of the high cost of litigation.
"The right to go to court is one of the costliest exercises in the country," Karunaratne said. "Therefore minority shareholders, even though they have legitimate complaints, are reluctant to go to court.
"That’s why an investors association becomes important. Thailand and Malaysia have strong and lively associations formed by the capital markets and regulators jointly."
In Malaysia the regulator contributed funds to help form the investors association to look after the interests of investors.
"They are very powerful and can even go to court on their own if shareholders complain and they see some merit in the complaint. The costs are borne by them.
"That’s what we must do here," Karunaratne told the forum organised by the Colombo Stock Exchange (CSE) in association with the Institute of Chartered Accountants of Sri Lanka and The Chartered Financial Analysts Society of Sri Lanka.
He said in his previous tenure as chairman of the SEC they tried to form an investors association and drew up a constitution and discussed it with the CSE.
But the move ended with his resignation within months of his appointment. Karunaratne quit complaining that the then-government interfered with his efforts to probe market irregularities.
A similar attempt by the Sunday Times newspaper’s ‘business club’ which he also helped was "sabotaged by majority investors," Karunaratne said.
"They got into the association and did not allow it to be formed," he noted adding: "Again we are trying to form an investors association that’ll look after the rights of shareholders."