The 'Investment Policy Statement and Standards of Professional Conduct of EPF' issued in 2002, has stated that it could not invest in banks and financial sector companies as the EPF was managed by the Central Bank, which also regulated them, creating a conflict of interest.
But deputy finance minister Gitanjana Gunewardene has said that the investment policy has been revised in 2009 to allow the EPF to permit purchases of bank stocks.
"[A]nd the EPF has invested in the banking sector since 2009, following the decisions taken by the Monetary Board (the governing body of the Central Bank)," the minister told parliament on June 05, according to a transcript of his speech.
"It had formulated a new policy in 2009 and that is how investments started to be made in other sectors."
Opposition legislator Harsha de Silva, an economist has said the EPF should not buy bank stock as the Central Bank was privy to insider information about entities it regulated.
De Silva said it was "unbelievable" that such a change was made and that it was apparently kept secret for three years, until the revelation was made in parliament.
"But much, much, more importantly how did the legal issues including 'conflicts of interest' on insider information suddenly disappear?," he asked in a statement.
Minister Gunewardene said the EPF law also allowed the Monetary Board to buy and sell any security it considered fit.
De Silva has also questioned some investments made by the EPF, with weak fundamentals.
"So does it mean that EPF can now invest in companies even on the second board? Any company? Any bank?" he asked.
De Silva called for the new investment policy to be made public, with the justification for reversing the earlier monetary board decision along with the minutes of the meeting that arrived at the decision.
Earlier in the week, the EPF said in a statement that it had diligently followed all internal guidelines to assess and invest in stocks, but opposition legislators have continued to allege that rules have been violated ignoring assurances by the fund.
"Therefore, this unfounded allegation could be categorized as a part of a systematic attempt which is designed to provoke a disturbance to the stability of the financial system, since the EPF is a substantial element of the total financial system," the EPF said.
"Accordingly, the public is advised not to be misled by these unfounded and politically motivated allegations."
The most controversial investment made by the EPF include Laugfs Gas and Galadari Hotel.
Minister Gunewardene had told parliament that 88.4 percent of the fund was invested in Treasury bonds, 0.76 percent in corporate bonds, 0.46 percent in unlisted securities and 7.4 percent in listed securities.
He said that a great deal of noise (visharler andolayanak) was being made about a small percentage of funds.