Stock broker companies appreciate the move by the Securities and Exchange Commission (SEC) to revise provisions on the method in which net capital is computed which they allege was erroneous. “ This error has been corrected by the SEC this month,” Tushan Wickramasinghe, Managing Director/CEO of Capital TRUST Securities (Pvt) Ltd Tushan Wickramasinghe said.
“In our opinion the net capital computation cited in Stock Broker Rules which came into effect from February 14, 2012 was erroneous as stock broking firms had to deduct debtor figures from net assets,” Wickramasinghe told Daily News Business .
He said stock broking firms mostly borrow from their holding companies and are not under pressure as they generally do not borrow much from banks. Now broking firms can leverage up to three times their net capital less 50 % of fixed assets, he said. Most companies in the world, make borrowings to enable them to do more business and it is not a crime for stock broking firms to manage their risk properly and borrow from their holding companies.
“Last month, we have seen the market moving up due to the confidence placed in the improving macro economic situation of the country and the confidence that the regulator would do the needful to correct things.
“The request for the amendment in net capital computation and for stock broking firms to extend credit was not to push the market, but merely to correct anomalies in the rules and as it would provide more credit facilities to small investors who were not accepted by banks,” he said .