would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc.. 
Home
By R.M.B. Senanayake
In recent times several companies seeking listing on the Colombo Stock Exchange through an Initial Public Offering have previously sold such shares to private parties. These sales are made at a price much below the price for the shares in the Initial Public Offering.
One company had sold its shares at Rs 6 in a private placement and then issued the same share to the public at Rs 14. Another company is said to have sold its shares at Rs 7 and is quoting the same share at Rs 29.
The Independent Accountant is expected to state all material facts in the Prospectus. But they do not refer to such private sales prior to the Public Sale. There is also no transparency at the time of the sale during a private placement.
Of course the Company Law does not allow an offer to the public for a private company. But other countries allow a private placement market which is fully transparent.
In India such private sales are only permitted to qualified institutions like the Insurance Companies, the Provident Funds and the Mutual Funds. In USA such private placements are subject to restrictions. They are called Restricted Securities and cannot be sold for one year. They have also to be registered with the Regulatory Authority. The Securities Exchange Commission may consider adopting either the Indian or the American practice. The small investor needs protection and it is the Securities Exchange Commission that can do so. It is the small investor who keeps the stock market ticking and nothing should be done to undermine his interest.
The private placement market can be developed and it could eventually become a corporate bond market too. But the market needs to be transparent. Otherwise the private placement will be confined to a few persons known to the company and its directors. There could even be abuse where a favored few are given shares at a lower price so that they can sell out in the secondary market- the stock market and then make a significant profit. Is this within the principles of good corporate culture? So the issue of private shares by a public company even if it does not go public should be called upon to register with the Securities Exchange Commission. Its prospectus or offer for shares through private placement should be posted on the Stock Exchange website s that any person who is interested could apply.
The writer is an economist and is the General Manager of a Colombo based stock brokering firm. You can reach him via raja.senanayake712@gmail.com
http://www.news360.lk/markets/stock-market/pre-open-placement-of-shares-should-be-made-transparent
In recent times several companies seeking listing on the Colombo Stock Exchange through an Initial Public Offering have previously sold such shares to private parties. These sales are made at a price much below the price for the shares in the Initial Public Offering.
One company had sold its shares at Rs 6 in a private placement and then issued the same share to the public at Rs 14. Another company is said to have sold its shares at Rs 7 and is quoting the same share at Rs 29.
The Independent Accountant is expected to state all material facts in the Prospectus. But they do not refer to such private sales prior to the Public Sale. There is also no transparency at the time of the sale during a private placement.
Of course the Company Law does not allow an offer to the public for a private company. But other countries allow a private placement market which is fully transparent.
In India such private sales are only permitted to qualified institutions like the Insurance Companies, the Provident Funds and the Mutual Funds. In USA such private placements are subject to restrictions. They are called Restricted Securities and cannot be sold for one year. They have also to be registered with the Regulatory Authority. The Securities Exchange Commission may consider adopting either the Indian or the American practice. The small investor needs protection and it is the Securities Exchange Commission that can do so. It is the small investor who keeps the stock market ticking and nothing should be done to undermine his interest.
The private placement market can be developed and it could eventually become a corporate bond market too. But the market needs to be transparent. Otherwise the private placement will be confined to a few persons known to the company and its directors. There could even be abuse where a favored few are given shares at a lower price so that they can sell out in the secondary market- the stock market and then make a significant profit. Is this within the principles of good corporate culture? So the issue of private shares by a public company even if it does not go public should be called upon to register with the Securities Exchange Commission. Its prospectus or offer for shares through private placement should be posted on the Stock Exchange website s that any person who is interested could apply.
The writer is an economist and is the General Manager of a Colombo based stock brokering firm. You can reach him via raja.senanayake712@gmail.com
http://www.news360.lk/markets/stock-market/pre-open-placement-of-shares-should-be-made-transparent
