The SEC said it has consulted all the key stakeholders including the Colombo Stock Exchange, broking community, unit trust industry, margin providers, etc., prior to the issuance of the three new directives last week. It said at the meeting with broking community, 27 of the 28 equity brokers participated.
The three new directives issued by the SEC last week were (a) to amend the net capital computation of stockbrokers; (b) to lift the restriction imposed on executive directors, employees, their spouses and their nominees of all licensed stockbrokers and stock dealers from selling listed shares purchased from the secondary market for a period of six months from the date of purchase; and (c) to lift the upper limit of 20% imposed on the price of transactions carried out on the crossings board of the Colombo Stock Exchange and to re-establish the status quo that existed previously in the Automated Trading Rules.
The SEC wishes to emphasise on the fact that whilst the amendment of net capital computation was a measure to rectify an anomaly that existed in such computation, the removal of restrictions imposed on the sale of the shares purchased by the parties connected to licensed stockbrokers as well as transactions carried out as crossings were steps to establish the status quo that existed in the past by removing the “interim” restrictions imposed by the SEC previously.
Contrary to misconception that safeguards had been removed, SEC said it has indeed has imposed additional safeguards whilst emphasising on the need by the stockbrokers of strictly adhering to the current safeguards which are already existent as per the Stockbroker Rules of the CSE.
“The purpose of this press release is to caution the general public against any deliberate misleading information, which may attempt to disturb the general market sentiments,” the SEC added.
The SEC statement yesterday was in response to investor K.C. Vignarajah acting in public interest firing an email to the SEC warning that the new directives could promote conflict of interests and rampant market manipulation. He claimed that they were detrimental to attaining investor confidence and that “genuine investors and independent minority shareholders” have been “rudely surprised, shocked and saddened” by the SEC action.
Vignarajah also called for timely disclosure of broker and related party trades via the CSE.