By Sanath Nanayakkare
Several minor offenders who had been involved in suspected price manipulation, insider dealing and front-running in the Sri Lankan Capital Market were warned to refrain from engaging in such trading practices in the future, Securities Exchange Commission (SEC) Annual Report 2013 revealed.
"A director of a public listed company was strongly advised against trading in his company shares prior to potential price sensitive information being released to the market. In this case, the said director had purchased shares just prior to certain information of the company was released to the market. This executive director was discharged of liability owing to the lack of impact the information had on the market."
"One suspected insider dealing investigation which was started in 2013 is still going on", the report further revealed.
"Meanwhile, One investor and four investment advisors on the Colombo Stock Exchange (CSE) were warned while a listed company was cautioned following separate investigations conducted into allegations of market misconduct", it further revealed.
Fifteen investigations were reportedly conducted by the Securities Exchange Commission (SEC) during the Year 2013, into instances of suspected market misconduct related to price manipulation, insider dealing as well as front-running.
Securities Exchange Commission (SEC) is responsible for effectively monitoring trading activities on the Colombo Stock Exchange (CSE) detecting and preventing any transactions that violate the SEC Act. This is reportedly done by real time monitoring of trading activity using a state-of-the-art surveillance system.
Some of the data given in the SEC Annual Report 2013 are as follows.
Suspected Case No.
Insider Dealing 04
Front Running 03
Market Manipulation 05
"Investigations constitute a salient aspect of the SEC’s role as the regulator of the capital market. The swift and efficient conduct of investigations into instances of suspected market misconduct serves to maintain an orderly and fair market, boosts investor confidence, and thereby contributes to the development of the Sri Lankan capital market."
"During the year 2013 two investigations were commenced based on investor complaints against a stockbroking firm and the said investigations were in progress in end 2013".
"In another instance in Year 2013, an investigation pertaining to the business affairs of a Listed Company was commenced and the said investigation was being finalized as at end December 2013".
"Meanwhile, two petitioners have cited the SEC and CSE as respondents seeking a Writ of Mandamus on the SEC to conduct an investigation against a broker and a margin provider, and a Writ of Prohibition, preventing the SEC from renewing the licence and registration of the said broker and margin provider".
"The SEC has already commenced an investigation into the allegations made by the petitioners with notice to Court and the matter is pending before the Court of Appeal".
"In an instance involving EPF funds, the SEC was cited as the 8th Respondent in fundamental rights application filed before the Supreme Court against the members of the Monetary Board of the Central Bank of Sri Lanka. The petitioners had alleged that certain trades on the CSE by EPF were in violation of Capital Market Law".
"However, the Supreme Court dismissed the application and made an observation that it is prudent for the Monetary Board to disclose to the public the principles behind the investments made in the CSE by utilizing the EPF funds," the report further said.