The Former Director General of the Securities and Exchange Commission of Sri Lanka (SEC), Arittha Wikramanayake last week called on the SEC to come hard on violators of market rules pertaining to insider dealings and market manipulations so as to ensure the credibility of the capital market. Speaking at a public seminar on insider dealings organized by the Transparency International Sri Lanka (TISL), Wikramanayake, whilst commending the SEC for acting following the recent NSB-TFC controversy, requested the regulator to not bow down to pressure by reversing those introduced which has been the case in the past.
“It is a good sign that we finally have a regulator who appears to have woken up and is sending a strong message especially after the NSB-TFC crisis. Hats off to him. Unfortunately, our market is so weakened that the large players in the market are able to drive down the market by staying away from it, each time the regulator takes action and that’s happening again,” he said.
However, he noted that when this went on, what happened in the past was that the government then got excited about it and unraveled what the regulator had done hoping that the index will go up again.
“The government makes that mistake over and over again. Hopefully, the regulator doesn’t give in to the pressure this time around,” Wikramanayake, an Attorney-at-Law and a Partner at Nithya Partners said.
He highlighted that in the past, the SEC had appeared to have failed to adhere to the basic rules on market trading for a long period of time.
“Not only the people were openly doing it, but they were also made to look like heroes by the media where some were even idolizing them. The impotency on the part of the regulator and the more serious question, which is the conflict of interest the regulator had in regulating made the problem even worse,” he further cautioned. He noted that there was open conflict when the regulator was ‘wining and dining’ with market participants and since people who were engaged in market activities knew what was happening, the regulators then did not have an iota of credibility.
“No serious investors participated in the market for several years. We saw the market indices were going up but if you look at volumes or if you look at participation, it was done by a small clique of persons. A lot of accounts were dummy accounts maintained by brokers. All fictitious persons. The average income earner did not participate in the market activities,” Wikramanayake said at the seminar held at the OPA Auditorium.
He further identified that what is more problematic in this market is that there appears to be a very serious lack of understanding by all of us as to why Insider Dealings is considered to be an offence. “The danger of not understanding the gravity of the offence is that after the excitement is gone these events are forgotten. This is a huge danger since I’ve noticed it gives the violators a lot of confidence to do this over and over again knowing that they do not have to pay a price for their offence,” the one time director general of the SEC said. He noted the objective of regulation is not to eradicate insider dealing but to deter people from engaging in it. “You need to build fences to prevent people from entering it. To make it more and more harder for people to engage in it. But if you find people blatantly violating the law, the regulator has to step in and ensure that there is effective prosecution and punishment,” he further identified. The seminar was also attended by opposition parliamentarians Eran Wickramaratne and Sunil Handunnetti.