Sri Lanka market player says not connected with SEC chief's removal

Aug 21, 2012 (LBO) - Dilith Jayaweera, a stock market player who made a presentation to Sri Lanka's president shortly before the head of the island's Securities and Exchange Commission chief was removed says the two events are not connected.

Jayaweera said told a media briefing that was not a 'high networth investor' who bought stocks on his own account but key stocks were bought by a corporate entity Divasa Equity with bank leverage.

Sri Lanka's SEC chairman Tilak Karunaratne resigned last week saying he was under pressure following 17 probes related to stock market frauds.

A so-called 'stock market mafia' was alleged to be behind his ouster.

Karunaratne's resignation came after select investors and an association of stock brokers - from which several had dropped out following a previous meeting with the president and the resignation of a different SEC chief - met President Mahinda Rajapaksa in July.

Another broker dropped out following the second meeting with the president.

Jayaweera made a presentation at a meeting with the President to which the SEC was also called which said among other issues that actions of the regulator in curbing speculative rises of stocks helped bring down the stock market.

The presentation also alleged that the media which 'loosely' used terms including pump and dump, manipulation, fundamentally weak, high P/E were 'anti-government'.

Asked whether he questioned the right of the public or media to dissent with an administration or the right of the media to explain the basis behind fundamental analysis, Jayaweera said no.

Jayaweera said he requested to make a presentation from the organizers before going to the meeting.

He said the presentation he made and the subsequent resignation of Karunaratne was not connected.

Jayaweera said media reports that connected him to the removal of the SEC chief had potential to damage his firm and a foreign investor who was to discuss a property project had already cancelled a meeting following a google search.

Karunaratne had told the media that he was pressured to resign while there were 17 probes related to securities fraud were in the last stages.

Jayaweera said he had received '4 or 5' letters from the SEC for transactions dating back over two years. Many others had also received letters from the regulator.

He said the Karunaratne and the previous SEC chief, Indrani Sugathadasa were possibly misled by SEC secretariat staff but they were both people with high integrity.

Sugathadasa resigned saying she was acting on 'principle'.

Until 2011 Sri Lanka's stock rose to new highs fired by margin credit and loose monetary policy, but the bubble began deflate from late 2011. In mid 2011 monetary policy tightened after credit growth put pressure on the island's dollar peg.

During the credit bubble the time many fundamentally weak stock illiquid were pumped up with sometimes with margin loans.

Some stockholders and brokers with positions in some illiquid stocks were asked not to sell by those who were pumping up the shares, sources familiar with some knowledge of the methods used to pump up stocks say.

Stock - or any asset price bubble - forms during loose monetary policy, and collapse when they run out of steam.

During a bubble all kinds of questionable activities happen and even sophisticated investors can get burnt in the feverish run of stock price gains, rights issues, initial offers, stock splits and a plethora of exotic instruments that naturally come up in such periods.

Jayaweera said factors other than the SEC rules could have contributed to the market fall including higher interest rates and sentiment.

The world's first SEC in the US was formed after a massive stock bubble collapsed in the late 1920s following money printing by the Federal Reserve which eventually plunged the world in to the Great Depression.
http://lbo.lk/fullstory.php?nid=1497322062

joke!

Rapaport wrote:joke!

More to come. Even from the Politicians.

"Jayaweera said media reports that connected him to the removal of the SEC chief had potential to damage his firm and a foreign investor who was to discuss a property project had already cancelled a meeting following a google search."

He couldn't justify his accuracy in media conference.

slstock wrote:"Jayaweera said media reports that connected him to the removal of the SEC chief had potential to damage his firm and a foreign investor who was to discuss a property project had already cancelled a meeting following a google search."

He is reaping now, what he was sowing. Though it is easy to hoodwink locals it is very difficult to do the same trick with the foreigners. One press conference is not enough to wash all the dirty linen DJ.

Upset media unfairly identified him with stock exchange mafia

* Thilak should have stayed and fought mafia

*Says he had nothing to do with resignation of SEC Chairman

* Never used personal relationships to exert pressure on SEC

* Defence Secretary only fixed appointment with SEC Chairman

* SEC & economy drove down bourse

* Anti-government labelling wrong


Controversial critic of the Securities and Exchange Commission (SEC), Dilith Jayaweera said yesterday that the regulator needed to take timely and effective measures against market offenders, sending those guilty to jail if and when proved guilty.

"We need a regulator that acts and not talk. We need a regulator with a backbone. If there are 17 cases being investigated, conclude the investigations and send them to jail, don’t just talk about it," Jayaweera told journalists yesterday, adding that he was upset the media had unfairly identified him with the stock exchange mafia, as a result an Indian investor had pulled out from a recent meeting after doing a check on Jayaweera and his companies on google!

He was grilled by the media for almost three hours after he invited them for a briefing at the Cinnamon Grand Hotel, Colombo, in a bid to clear his name and safeguard the reputations of his companies, while at the same time explain his stance in the sordid affair that had compromised the entire system.

He said he was not a high net worth investor although prices were brought through his company Divasa Equity with bank facilities. "I never personally traded in the stock exchange."

The Treasury and Central Bank have both said the recent slump in share prices was a market correction. But Jayaweera contended that this was an unusual correction.

"The SEC does not need more teeth. The existing laws are ample enough for it to clamp down on market offences. What is lacking is efficient and timely implementation of the law," he said.

SEC Chairman Thilak Karunaratne last week resigned from the post sighting pressures brought upon by an influential group of investors and their crony brokers, with the government not doing enough to support the SEC which was in the process of completing 17 investigations into market offences.

Less than a year ago, Ms. Indrani Sugathadasa also resigned from the same post on a matter of principle for the same reason after the then Director General of the SEC Malik Cader was removed from the SEC after implementing a slew of policy measures to cool off an overheated stock exchange and commencing investigations into market offences.

The Parliamentary Committee on Public Enterprises Chairman DEW Gunesekera has said there was reason to believe a mafia was operating in the stock exchange and the SEC Act must be amended as a matter of priority to give the regulator more teeth to deal with market offenders.

Jayaweera had given a presentation at a recent meeting of capital market stakeholders with President Mahinda Rajapaksa, blaming the SEC for the bourse’s slump. He said the SEC and the media had behaved in an anti-government manner in that terms such as pumping-and-dumping, insider dealing and overvalued stocks were used too loosely and out of context. However, when asked whether people in a democracy did not have the right to dissent, he said no! Labelling those with another point of view as being anti-government was wrong he said.

Jayaweera said the regulator’s ad-hoc policy measures had caused the market to fall, but this was not the only reason. Macroeconomic conditions such as high interest rates and prevailing sentiments in the economy also contributed to the downfall of the bourse, he said. When asked whether he was being anti-government for making such a statement, he said, "Absolutely Not!"

"Both Ms. Sugathadasa and Thilak Karunaratne are capable people of integrity and they should not have resigned. I was very sad to see them resign. I did not have anything to do with Thilak’s resignation," Jayaweera said.

The press repeatedly pointed out that an influential group seemed to have managed to impede the SEC’s efforts in concluding the investigations. But Jayaweera believed there was no mafia in the stock exchange influential enough to move the President, because the President "cannot be influenced in such a manner."

"If there is, then we are all in trouble, the whole country is in trouble. Thilak Karunaratne should name them," he charged. "Thilak had the duty to stay on and fight!"

As to policy directives such as the credit restrictions and price bands, Jayaweera said they were detrimental to the market ( See front page story in yesterday’s issue) but conceded it was a personal opinion and that contrary views should be respected.

Jayaweera himself has been served four or five show-cause letters regarding transactions dating back to two years ago by the SEC and he claimed that he did not use personal connections to influence the SEC.

"I only asked Defence Secretary Deleted Rajapaksa if he knew Thilak Karunaratne and they happened to be close friends. I asked him to make an appointment for me which he did then and there. I visited Thilak and we had cordial discussions. The investigations never came up. In fact we had a lot of hope in Thilak, someone I greatly respect. I thought he would be around for five years or so and take the stock exchange to the next level," Jayaweera said.

Jayaweera praised Ms. Sugathadasa and Karunaratne several times, and at one point charged that the officials in the SEC had misled the two chairpersons.

When pressed to comment on external pressures leading to their resignations, Jayaweera finally conceded, "There is a problem in the system and not individuals, saying they are weak or anti-government or a mafia is not going to help. All stake holders should come together to fix the problem."
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=59740