Sri Lankaâ€™s SEC wants laws to protect investors soon
COLOMBO (EconomyNext) – Sri Lanka’s capital market watchdog chief says bureaucratic delays in introducing new laws to protect investors are hampering capital market growth.
Securities and Exchange Commission (SEC) chairman Nalaka Godahewa said he hoped market capitalization of the Colombo Stock Exchange as a percentage of GDP would reach 60 percent by 2020, or 100 billion US dollars, as against 36 percent in 2014, or 24 billion US dollars.
Godahewa told a forum on the ‘Capital Market Vision 2020’ in Colombo that several structural shifts would ensure that this target "which is not forced on the industry" would be met, but the going is slow.
"…there are a few things we could have finished earlier. One such example is the amendments to the SEC Act which was drafted and handed over to the ministry of finance in July 2013," he said.
"A special committee has been reviewing our proposals since then. We hope once this election period is over this committee will complete its work and the new amendments will be presented to the parliament."
A presidential poll is are to be held on January 8.
Some of the key improvements expected through these amendments involve enhanced investor protection, aligning SEC governance principles with international standards, facilitating of compensation to investors through disgorgement, regulation of a demutualized exchange, implementation and regulation of a Central Counter Party clearing and the introduction of civil and administrative sanctions strengthening the ability of SEC to take enforcement action, Godahewa said.
The capital market saw a boom after the three decades-long ethnic conflict ended in 2009 but could not be sustained with the SEC clamping down on rampant market malpractices such as pump-and-dump.
"This was the time that the industry approached President Mahinda Rajapaksa, seeking his personal intervention to restore the market," Godahewa said. It was this request that prompted Rajapaksa to make changes to the hierarchy of the SEC.
“President Mahinda Rajapaksa gave a fresh mandate to the Commission in August 2012, not only to put the market back on track but also to align the capital market with the economic development strategy of the government," Godahewa said.
"The restructured Securities and Exchange Commission diverted most of its energy to formulate a long term strategy.”
Two of Godahewa’s predecessors, Indrani Sugathadasa and Tilak Karunaratne, resigned within a year of each other, both making public comments that they were not allowed to go after market manipulators.
Karunaratne said there were around 17 investigations at the time of his resignation which have now been ended due to a lack of evidence under Godahewa’s watch.
The amendments to the SEC Act sought by Godahewa were pushed by Karunaratne before he resigned and continued to work on before Godahewa was appointed.
“Over the last two years the All Share Price Index of Colombo Stock Exchange has been growing steadily. It is a realistic and sustainable growth. We are in control of the market with up-to-date surveillance support and we can very confidently assure the investing public that 2009-2011 scenario cannot get repeated,” Godahewa said.