ECONOMYNEXT – Sri Lanka’s Securities and Exchange Commission should not hunt investors and companies and the practice had dealt a blow to corporate governance, a former regulator said, as the watchdog resumed stalled investigations into market scams.
"This is where corporate governance has been dealt the biggest blow (kaney pahara)," Udayasri Kariyawasam, a former Chairman of the watchdog told reporters in Colombo on June 14.
"The Securities and Exchange Commission is the market regulator.
"Its job is not to hunt various companies like a policeman, to hunt various investors as a policeman. That is not its duty."
He said in addition to undermining corporate governance there was also an idea that the SEC was going after some investors not based on a policy decision but because they have been ‘encouraged’ to do so by various people.
There was uncertainty which was a ‘killing factor’ for stocks, he said.
Kariyawasam said the stock market has fallen since the beginning of 2015. Values of stocks held by investors have fallen by more than 130 billion rupees he said.
He said rising interest rates was also discouraging stock market investments in 2015.
A new administration was elected in January, had re-instated an SEC Chairman sacked by the ousted Rajapaksa regime, who has re-opened stalled probes.
During the last administration two SEC chairmen and a director general were replaced as they tried to probe pump and dump and cornering scams committed during a credit and stock market bubble that peaked in 2011.
Sri Lanka’s current administration is also embroiled in a central bank bondscam.
The first SEC in the word in the US was also set up after US stock prices – particularly at the New York Stock Exchange – collapsed in the late 1920s with the end of the ‘roaring 20’s’ economic and credit bubble fired by the Federal Reserve.
The burst bubble led to the so-called Great Depression. In addition to the formation of the SEC, credit fired manipulations committed during the bubble also led to rules curbing margin trading and capital market activities allowed for commercial banks.
In the US however in addition to the SEC, the serious securities frauds are also prosecuted by the New York District Attorney under anti-fraud and racketeering laws.