Transparency International Sri Lanka, which issued the following statement today has joined in the chorus of urging the authorities to allow more independence to the regulator of Sri Lanka's capital market.
Here we publish the statement in full.
Mr. Tilak Karunaratne who assumed duties as the head of the Securities and Exchange Commission (SEC) on 7th December 2011 tendered his resignation nine months later, becoming the SEC Chairman with the shortest reign to date. His resignation highlights several aspects of corruption in the way our stock market works and is manipulated, and justifies the findings expressed in the Position Paper titled 'Corruption in the Sri Lankan Stock Market' released recently by ” Transparency International Sri Lanka (TISL).
It does not come as a surprise to TISL that Mr. Karunaratne encountered adamant resistance to his investigations due to the combined efforts of certain high net worth investors attempting to evade white collar crime prosecution. This “Stock Market mafia", as the media and public have now dubbed it, is proving to be ruinous to the Sri Lankan economy by eroding the stock market's fair nature. TISL believes that regulation to an accepted level would not necessarily mean a greater government influence in the market or an unfair move against investors. But in the Sri Lankan context such regulation would ameliorate the effects of pump-and-dump market manipulations and insider trading - both problems that the “Stock Market mafia” propagates.
Mr. Karunaratne has resigned on principle; that he was unable to complete high profile investigations being conducted by SEC due to pressure from both the government and high net worth investors. He resigned from his as Chairman of the SEC rather than be subjugated by the corruption in the system. In this scenario the SEC is now unable to complete the ongoing investigations.
This statement is to highlight those in the State Sector and the bureaucracy who actively seek at all times to impede the duties of those they themselves appoint.. These State elements raise a myriad of complex issues in the Sri Lankan stock market so as to stall the prosecution of white collar crime that may eventually get exposed by such investigations.
In conclusion, TISL urges the government to strengthen its resolve against the “stock market mafia” by refusing to cave into the pressure of high net worth investors and provide the SEC with some much needed support, by way of non-interference with ongoing investigations.