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Sri Lanka to balance regulation with development: SEC Chairman

ECONOMYNEXT – Sri Lanka’s Securities and Exchange Commission will play a developmental role and balance regulation to create confidence among investors, Chairman Viraj Dayaratne has said as the market moved to eliminate paperwork.

The SEC will have “a robust regulatory regime that can create confidence in the stock market and safeguard the interests of the investors.”

“At the same time, we are aware, that it is our duty to ensure that we facilitate the development of the market and as such we are determined to create a balance between regulation and development of the market,” Dayarate said.

“We assure that we will play a proactive role in the development of the stock market and partner all stakeholders in taking our market to the next level – to that of an emerging market in the not too distant future”.

He was speaking at an event marking the ‘digitalizing’ of market operations where paperwork in opening trading accounts, payments and settlements are removed, attended by Prime Minister Mahinda Rajapaksa and State Minister Nivard Cabraal.

Dayaratne said the new administration has appointed Nivard Cabraal as a state minister who will oversee stock markets, showing the commitment of the new administration to support the market.

Though Sri Lanka led with scripless securities and automated trading in the 1990s, the pace had slowed later, he said.

After the Coronavirus crisis, the SEC had driven the digitalizing of the market working with the Colombo Stock Exchange and the broking community.

The Colombo Stock Exchange will also have a mobile app, and the SEC will run a youtube channel to improve knowledge and education.

Director-General Chinthaka Mendis said the SEC was keen to educate investors as well as young people.

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The SEC was also studying broader changes.

“In fact, SEC has been particularly busy over the past few months, starting with the feasibility study of the entire stock market, we have been focusing on technical and regulatory reforms vis-à-visto make our market business-friendly, particularly to make our market attractive for local and foreign investors,” Mendis said.

“In a more general sense, I would say, SEC can no longer be restricted to its traditional role of market regulation and take the conventional approach to boost the confidence of investors.”

The first Securities and Exchange Commission was set up in the US in 1934, during the Great Depression by the so-called New Dealers, who also set up many other state agencies to intervene and delay the recovery.

The Great Depression was the result fo the so-called ‘roaring 20s’ credit bubble fired by the Federal Reserve with excess liquidity created from open market operations, which it had stumbled on to partly by accident.

The bubble was characterized by widespread securities scams.

The US stock market collapsed on October 29, 1929, after the Fed was forced to tighten policy, triggering the Great Depression and greater state interventions.

Sri Lanka’s SEC had also come under fire for not acting during a stock market bubble in 2011 which ended with a currency crisis that saw the rupee falling from 113 to around 131 to the US dollar by its end.

Among the rules the SEC had brought was to force key shareholders to sell more shares to ‘improve liquidity’ which was driving some firms out of the stock market. (Colombo/Sept17/2020-sb)

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