This is NOT the answer to CSE ills: Harsha
With political pressure mounting on capital markets regulator, Opposition MP Dr. Harsha De Silva, echoing sentiments of many like minded investors, broker firms and others in civil society, said the Colombo Stock Exchange (CSE) could be revived only if macroeconomic conditions improved and concrete steps were taken to wipe out rampant market malpractice.
With regard to white collar crimes and manipulations, such as pumping and dumping, Dr. De Silva is urging the government, as has others in the recent past, to implement the law and punish those guilty of market malpractices, warning that the failure to do so will result in a biased justice system, where those in the good books of the administration were let off the hook.
Dr. De Silva’s made these comments in response to a statement attributed to Treasury Secretary Dr. P. B. Jayasundera in a daily newspaper that the stock exchange must move up.
There is an influential group trying to tie-up the SEC’s hands and the suppression of information is already underway as reported in yesterday’s issue. A press conference regarding the meeting last Tuesday with capital market stakeholders and Dr. Jayasundera was ruled out with the Treasury opting to send a ‘positive’ press release to the media instead. At a previous meeting, Dr. Jayasundera had told the SEC that political considerations would have to be taken into account, asking for a relaxation of regulations.At the time of writing, no such press release was issued by the Treasury.
"The CSE will only move forward in a sustainable manner if two things happen: One, the macroeconomic situation needs to get better, after all the market value today is a reflection of the profitability of the companies listed on the exchange in to the future, and if the macro situation gets better for the listed companies to do better, share prices will move up," UNP Economic Spokesman Dr. De Silva said.
"Here policy consistency and better governance is key. Stability in interest rates, exchange rates and lower inflation expectations will certainly help. So, for a sustainable rise in the CSE one will have to have increasing opportunities for real growth in the economy in general. With growth prospects down it is not possible to expect a sustainable rise in the indices beyond realistic levels.
"Secondly, the CSE itself needs to improve. White collar criminals and manipulators have to be dealt with once and for all. You cannot have a cancer and ignore it. It must be removed before it shuts the entire system down. The CSE and the Securities and Exchange Commission has not done enough to prosecute wrong doers. I don’t recall a single instance since the ERI case. Even there, the directors and SEC agreed to compound the case for a mere Rs. 3 million each. What we need to do is to implement the law not to ignore it. Otherwise the law will be biased; if you are on the good books with certain people you are above the law," Dr. De Silva said.
"We must use the CSE to raise funds for development and for that, that is for the IPO market to take off, the secondary market must function. And this cannot be for a short period after powerful people intervene to direct the SEC what to do, it must be sustained. If not we will have yet another boom and bust," he warned.
Respected personalities such as C. P. De Silva and K. C. Vignarajah have already expressed their opinions on the matter, both calling for tough action against market offenders. Four broker firms have also expressed their opinion that the CSE was not over regulated.
President Mahinda Rajapaksa has refused to intervene in the tussle between the regulator and certain influential investors, assigning the task to Dr. Jayasundera instead.
"At the first meeting with capital market stakeholders, Dr. Jayasundera did not even mention the ongoing investigations, this is a worrying trend," a source close to the Finance Ministry said. "Even the officials from the SEC and CSE were silent throughout the meeting! But what was discussed at length was the negative reporting of the media. A request to hold a press conference was turned down and the Treasury said it would send its own statement."
"All that certain sections of the media have highlighted in the recent past is the need to stamp out market offences, how on earth could this be a bad thing?" a market analyst asked when contacted for his views.
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