May 19, 2012, 4:24 pm
The SEC Friday announced that according to arrangements that have been finalized, Taprobane Securities Private Ltd. (TSL) will pay the Sampath Bank approximately Rs. 387 million that the bank paid the sellers on account of the controversial NSB – TFC deal plus interest.
As has been widely anticipated and reported in these columns the sellers will take back the shares and make good the consideration paid by Sampath even though NSB who bought the shares on the CSE on April 27 did not meet its payment obligations.
Interest too is a factor and the SEC announcement made after the market closed on Friday said that this would also be paid.
Sampath made the payment in its role as settlement bank for CSE although there had been no confirmation of the deal by the buyer and the seller the day after the transaction was done on the trading floor (T + 1) as required by CSE rules.
No explanation has been forthcoming from the bank for this action on its part. A claim on the CSE in this connection had been repudiated. Both parties consulted lawyers on this issue, well informed sources said.
The NSB declined to pay for the shares and meet its obligations on the purchase on a government directive. This resulted in the first settlement failure in the history of CSE.
The settlement of the controversial issue is in terms of a May 11 applications separately made to the SEC by TSL and NSB to transfer the NSB stake back to the sellers (``persons identified by TSL’’) and that the transaction to be done outside the CSE’s trading floor.
`` TSL in their application undertook to pay Sampath Bank PLC the consideration due on this transaction including the interest due thereon in settlement of the monies due to Sampath Bank for the settlement services rendered by Sampath Bank on the share purchases done by NSB of TFC on the Trading Floor of the CSE on April 27, 2012,’’ the SEC announcement said.
`` NSB in their application also agreed to transfer TFC shares purchased on 27th April 2012 in its entirety to the persons identified by TSL outside the Trading Floor of the CSE. The NSB agreed to allow TSL to pay Sampath Bank the consideration sum due on this share transfer in satisfaction of the amounts due to Sampath Bank for the settlement services rendered on the share purchases transacted by them on the CSE on 27th April 2012.’’
Sampath in turn has told the SEC that that is would discharge NSB and all parties concerned with the impugned transaction once its money is received.
In terms of the SEC Act, the Commission has the power to permit transfers outside CSE procedures.
The SEC said that its approval to permit the reversing of the transaction outside the trading floor has been granted under ``exceptional circumstances’’ and said that it will not consider this a precedent.
`` The SEC is separately investigating the above mentioned transaction and the parties involved in it. Firm action will be taken against all those who are found to have violated the SEC Act,’’ the SEC declared.
The SEC further said it is currently studying this entire issue and expects to take a series of appropriate measures, rule and procedure changes to prevent such incidents in the future.
``The SEC will also intensify its efforts in implementing the Central Counter Party (CCP) for the CSE which will be the final solution to address settlement failure risk,’’ the announcement said.
Analysts said that the SEC had strived to sort out the problem in the best possible manner but noted that the commission has stressed that this will not be treated as a precedent. Nevertheless there are many questions that needed to be answered, they said, most so by the NSB which had gone into what is widely regarded as a questionable transaction.
There was no word on the progress of the government investigation into the acts of omission and commission by the NSB and the pinning of responsibility on those concerned.