These issues emerged at a media briefing on moves by a group of investors to announce the Association of Independent Shareholders of Sri Lanka (AIS). “We saw two chairpersons at the Securities and Exchange Commission (SEC) stepping down within the space of two years after well-connected investors raised a hue and cry about over-regulation. These were respected people appointed by the President,” said good governance and minority shareholder rights activist K.C. Vignarajah, speaking on behalf of the group. “This is when one wonders whether the President has lost control of the situation,” he told reporters. He said that letting go of these righteous chairpersons wasn’t done by the President on his free will. “It was bad advice by the so-called manipulators,” he charged.
Members of the core group - from left: Chaturanga Perera, Mahendra Amarasuriya, K.C. Vignarajah and Charitha de Silva. Pic by Athula Deshapriya
He said that the proposed AIS is timely as it will raise awareness of widespread malpractices in board rooms and the Colombo Stock Exchange (CSE) with the hope of someday taking legal action against companies and entities guilty of repressing minority shareholders and a host of other misconduct taking place with impunity. “The President should look at his advisors more carefully. The President was misled and lost control of the situation,” he added.
The core group helping to form the AIS includes Mahendra Amarasuriya (former Chairman-Commercial Bank), Charitha P. De Silva (former Chairman – Aitken Spence and the Ceylon Chamber of Commerce) and Chaturanga Perera, Senior Partner, LEX Partners Law Academy, along with Mr.Vignarajah. Mr. Amarasuriya reiterated that the SEC should be ‘independent’. Officials said they hoped the AIS will be incorporated within a month. Together with the core group, the association has so far attracted around 25 investors.
Mr. Vignarajah said market misconduct such as insider trading and pumping-and-dumping were taking place with impunity and that directives introduced by the former chairpersons, Indrani Sugathadasa and Thilak Karunaratne, were intended to protect small time investors at the CSE from those manipulating the market and making ill-gotten returns at their expense. Mr. Amarasuriya said that there’s a bad situation of governance which has prompted many professionals and good people to want to migrate. He along with Mr. Vignarajah reiterated that the CSE wasn’t over regulated. “The SEC has resorted to only compounding offenders for a few million rupees, so how can anyone say the bourse was over-regulated?” he questioned.
Mr. Vignarajah noted that there are around two to three thousand individuals being used to manipulate the market via insider dealing and pumping-and-dumping through mobile phone messaging. Mr. Amarasuriya noted that the network of two to three thousand individuals is fuelled by the mafia.
“Everyone thinks the market is now doing well. Brokers say the market has direction and that people are no longer afraid. Only time will tell whether or not another bubble is forming,” Mr. Amarasuriya said, adding that share prices of some companies have increased by more than Rs. 1,000 with 20 to 40 shares being traded but the companies in question have no proven track record.
Mr. De Silva noted that it’s criminal behaviour when those manipulators enrich themselves with pump and dump practices. He said a fair majority of the companies in the Ceylon Chamber of Commerce has failed to comply with the chamber’s own code of conduct.
He also pointed out that many firms create shareholder fatigue by not declaring dividends. Minority shareholders are not respected and not paid decent dividends leading to rampant minority shareholder oppression. “When a company doesn’t pay dividends, its share value depreciates,” he noted.
Heads roll at SEC; most staff demoralised
There is a massive reshuffling at the Securities and Exchange Commission (SEC) with roles being reassigned and staff being shifted, creating a demoralised environment, sources said.
They said that Chandu Epitawela, Director Surveillance who took a lot of flak from the so-called mafia recently, has been transferred to the Corporate Affairs Department while Surana Fernando (who was Director Corporate Affairs) has taken over as Director Supervision. Namal Kamalgoda who was Director Supervision has replaced Mr. Epitawela as Director Surveillance. The changes were made on Thursday. They added that this was done on the whims and fancies of two individuals harbouring animosity against these officials.