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Insider deal suspected in NSB’s purchase of TFC shares

+2
asithameegahagedara
Quibit
6 posters

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Quibit


Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics

Multimillion-rupee share transaction
A staggering Rs. 390 million stock market transaction by the state-owned National Savings Bank (NSB) has triggered a major row, forcing both President Mahinda Rajapaksa and the Treasury to intervene.

This is while the Securities and Exchange Commission (SEC) has launched its own investigation into some alleged irregularities.

The deal involves a 13 per cent stake of The Finance Company (TFC) being bought by the NSB on April 27 at around Rs. 50 a share. This was through four separate transactions involving two TFC directors and NSB Chairman Pradeep Kariyawasam, when the share market price was hovering around mere Rs 30-31 a share. The SEC is probing the deal.

Dinal Wijemanne, one of those involved in selling 2.9 million shares at Rs 50 to NSB, was among those questioned by SEC in the past two days. “The SEC also called the brokers involved in the transaction to ascertain the facts behind the deal,” a source close to the investigation said. The SEC, among other matters, is looking at whether there was any insider trading involved.

Mr. Wijemanne is a director of TFC and also Taprobane Securities, the broker for NSB. The Sunday Times learns that the other three sellers at Rs. 50 a share were ABC Radio chief deleted Silva, motor car dealer, Yoga Perera and another who has been identified only as a Mr. Perera.

An investigation by the Sunday Times revealed that NSB Chairman Kariyawasam was involved in the decision to purchase the TFC stock and had requested the bank’s investment committee to support his decision. Investment committees in banks were set up following guidelines introduced by the Central Bank to ensure good governance. Mr. Kariyawasam was not available for comment.

The TFC share this week was trading in the range of Rs. 30 to 31. A senior official of the NSB, it has come to light, is unhappy with the Chairman’s move and has complained to Treasury Secretary P.B. Jayasundera. The matter was later discussed with President Rajapaksa.

The four sellers, it is also learnt, have already been settled their dues, and the share transfer had taken place. Sampath Bank, one of the settlement banks at the CSE, has paid the Rs. 390 million to the sellers, though NSB is yet to settle this amount. Settlement banks act as guarantors for payment of trades.

When trade unions at the NSB complained to the top management about the transaction, they were told that the bank had to look for new investment avenues because there were few other investment options available.

While 60 per cent of the NSB investments go into Treasury Bills and government bonds, another 10-20 per cent goes into housing loans’ transactions. There is also provision to invest in the stock market, but trade union officials say that such investment should be in blue chip companies that are doing well, not others.

The TFC was revived by the Central Bank after the crash of its parent, the Ceylinco Group, and later taken over by a group of investors. The finance company is on the path to recovery but is yet to settle some earlier depositors who have requested their monies back after the Ceylinco crash.

NSB trade union officials said they were told that the TFC investment was under a new strategy called corporate entrepreneurship. “Whatever it might be, bank money (and also public money) should not be invested in risky ventures,” one official said.

The opposition has raised concerns over the increasing use of EPF funds in the stock market, the increasing state control of local commercial banks, and investments by state banks in the stock market. The NSB issue is expected to figure in Parliament next week, with questions being raised by opposition legislators including economist Harsha de Silva.While the SEC has no role as far as buying a stock far above its market price is concerned as it’s the individual’s choice, the Commission can ascertain whether any rules were violated in the transaction. “There are reports that one of the brokers on behalf of the sellers had offered two board seats to the buyer,” one source said. Such decisions are usually taken by the board of directors of a company and not individual directors.

Non-involved brokers and traders said the deal had created credibility and confidence issues in the market, since initially the NSB refused to honour the deal, after it went through. “Rightly or wrongly, when shares are transferred, the seller must be paid within the prescribed period (3-4 days),” one broker said.

There is also provision to invest in the stock market, but trade union officials say that such investment should be in blue chip companies that are doing well, not others. The TFC was revived by the Central Bank after the crash of its parent, the Ceylinco Group, and later taken over by a group of investors. The finance company is on the path to recovery but is yet to settle some earlier depositors who have requested their monies back after the Ceylinco crash.

NSB trade union officials said they were told that the TFC investment was under a new strategy called corporate entrepreneurship. “Whatever it might be, bank money (and also public money) should not be invested in risky ventures,” one official said.

The opposition has raised concerns over the increasing use of EPF funds in the stock market, the increasing state control of local commercial banks, and investments by state banks in the stock market. The NSB issue is expected to figure in parliament next week, with questions being raised by opposition legislators including economist Harsha deSilva.While the SEC has no role as far as buying a stock far above its market price is concerned as it’s the individual’s choice, the Commission can ascertain whether any rules were violated in the transaction. “There are reports that one of the brokers on behalf of the sellers had offered two board seats to the buyer,” one source said. Such decisions are usually taken by the board of directors of a company and not individual directors.

Non-involved brokers and traders said the deal had created credibility and confidence issues in the market, since initially the NSB refused to honour the deal, after it went through. “Rightly or wrongly, when shares are transferred, the seller must be paid within the prescribed period (3-4 days),” one broker said.

http://www.sundaytimes.lk/120506/News/nws_02.html

asithameegahagedara


Stock Trader

SEC cannot do anything against these powerful insider dealers. Particularly because of the involvement of Pradeep Kariyawasam who is the husband of the current chief justice Dr (Mrs.) Shirani Bandaranayake. Despite the academic qualifications of the wife it is a well known fact that Mr Kariwasam a former cricketer, does not even have GCE qualifications to hold a high profile corporate job such as NSB chairmanship. Kariyawasams whose highest achievement in career was as a car salesman was made chairman of government owned Sri Lanka Insurance in 2009. He was removed from that post in 2010 due to constant protests by the SLIC board who found it extremely difficult to work with a man who has no knowledge experience or ethics. Then he landed at the top post of NSB. His financials misappropriations and many insider dealings at NSB are no secretes to people at NSB but he always had full protection from the government being the husband of the chief justice. It is no secret that this job has been given to him to the keep the judiciary happy. Now that Pradeep Kariyawasam has got caught to one of the biggest financial scandals can we expect government to take action. No it will not happen.

Kithsiri

Kithsiri
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics

Totally agree with Asitha.

Only good thing about this man is that he was a good cricketer during his school days (but this is no qualification to get a position of that nature).

This is why what we are compare to countries obtained freedom many decades after us.

I see no light at the end (unless we do something collectively but again who is going to Bell the Cat). Shocked

worthiness


Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics

Why independent trade unions do not raise the voice against the top seats who are totally unqualified for such posts? Everyone can recall what happened to CPC appointing cricketers for top posts.
Dirty politics make their henchmen richer & richer letting them to waste billions of public funds. This needs special investigation intervened by Top level & punish wrongdoers publicly in order to avoid such tricky acts in the future. Scrutinizing the approval level of this transaction could reveal the hidden agenda behind this transaction.
CSE must implement new rules now to observe the price level of this type of transactions & prevent the action of team of thieves who steal state coffers.

CSE Leak Professor


Stock Analytic
Stock Analytic

“There’s an to head of a stock brokering firm who is called to be the Cashier of Malik” many other sources from Colombo Stock Exchange told CSE Leaks adding that industry officials are aware that particular top official charged money from ‘SEC caught investors and brokers’ telling them that he can sort the matter with Director General of SEC at several occassions.

Link: http://www.cseleaks.com/2011/10/sri-lankas-buckle-tight-regulator-to-go.html

sapumal


Vice President - Equity Analytics
Vice President - Equity Analytics

Kariyawasam is a one of the top evaluators in the Island. That's may be the reason he was elected as chairman by the president. That's why he carried out a deal without board approval

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