UNP MP Ravi Karunanayake on Wednesday tabled a motion in Parliament requesting the Committee on Public Enterprises (COPE) to summon two former chairpersons of the Securities and Exchange Commission (SEC) seeking a full disclosure into their resignations.
"Former Chairman of the SEC and a former Member of Parliament Tilak Karunaratne said that the stock market was being manipulated by a ‘mafia’, who had forced his resignation, and also the resignation of another former Chairperson of the SEC, Ms. Indrani Sugathadasa, wife of the Secretary to the President.
"DEW Gunasekera, Chairman of COPE said that he believed a mafia had a strong grip on the Colombo Stock Exchange and that the government should, as a matter of priority, take steps to amend the SEC Act, and he went on to state that the government should look into EPF investments in the stock exchange so as to safeguard public monies.
"The Sri Lanka Institute of Directors regarding the disturbing developments at the SEC said that it would lead to widespread indiscipline and a breakdown in law and order. Therefore, I move that this House directs COPE to summon Tilak Karunaratne and Ms. Indrani Sugathadasa before COPE and request these two former Chairpersons to make a full disclosure with regard the goings on in the SEC and who comprises this mafia and to present their findings to this House," Karunanayake said in his motion presented to the Secretary General of Parliament.
Speaking to The Island Financial Review, Karunanayake said the next step would be to fix the date for the summons. "Probably two weeks from now COPE will be able to speak to both Ms. Sugathadsa and Mr. Karunaratne and once and for all expose this mafia," he said.
According to market sources, the mafia is made up of several groups not necessarily acting together, and some of them are highly connected to the centre of power in the country.
"Naming and shaming, and penalising, should be done after the investigations. Not just the 17 mentioned by Tilak Karunaratne, but also newer investigations which no doubt would have come up with the recent bull-run at the bourse. Some tough penalties should be handed out to those found guilty of committing market offences," one market analyst said not wanting to be named.
The government did nothing but allow two SEC chairpersons resign from office within a year of each other.
"Like the rupee depreciation, the government probably saw the market’s fall as a bad report card, and certain parties made use of this to convince the government that the SEC was somehow to blame," another market analyst said.
Several broker firms and market analysts have already shown that the bourse’s recent demise was a market correction driven mostly by weakening macroeconomic fundamentals.
The recent rise of the bourse is heavily sentiment-driven.
"The SEC’s policy stance has not changed since when Tilak Karunaratne left, so arguments blaming him and the SEC for the market’s fall were not based on fundamentals. It was always about the investigations," the analyst said.
"If there is a mafia, taking it down will be near impossible simply because it is a mafia, and in this country, as is everywhere else, they have powerful friends and a layer of legitimate fronts and masks. Unveiling all this would take a heavy toll on the established system, and there will be blood," another analyst said.