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FINANCIAL CHRONICLE™ » DAILY CHRONICLE™ » Over 30 cases including insider trading probed by SEC in 2011

Over 30 cases including insider trading probed by SEC in 2011

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sriranga

sriranga
Co-Admin

High growth in the Colombo stock market seen in 2009, 2010 and in the first quarter of 2011 caused a high degree of price volatility with many regulatory and supervisory issues, forcing the Securities and Exchange Commission (SEC) to step in and take several – perhaps not very popular – measures to curb the volatility and to reduce the systemic risk in the capital market, a report said.

SEC Chairman Thilak Karunaratne, in the commission’s 2011 annual report, said that after extensive consultations last year with all stakeholders, amendments to the SEC Act were finalised, while the Unit Trust Code was amended and gazetted to enable the regulation of exchange traded funds. "The SEC is in the process of finalising the draft bill for the demutualisation of the Colombo Stock Exchange to bring our capital market to be in line with those in more mature jurisdictions," he has said.

He has said that in mid 2010, as fears of a speculatory bubble grew, SEC imposed credit restrictions in order to bring sanity in the market. However towards the latter part of 2011 in order to stimulate the market, these restrictions were relaxed to some extent and further concessions. He added that this year, the SEC is determined to further strengthen the regulatory and supervisory arrangements in keeping with modern trends. “Investigation capability will certainly be enhanced and we expect better performance in this area,” his said in the report.

The SEC, he says, believes that the settlement risk which currently exists between T (Trade Day) and T+3 (Settlement Day) will be fully eliminated by improving equity-market infrastructure such as establishing a Clearing Corporation. “We will also pay more attention to improving corporate governance, improving market liquidity, creating a well informed and educated investor base, re-evaluating market volatility controls and developing a long-term listed debt market in the immediate future. Introducing a minimum free float is one measure that the SEC is currently contemplating in order to increase the liquidity of the market,” he has said.

Dr. Hareendra Dissa Bandara, acting Director General in his statement, said that the SEC made considerable progress in ensuring appropriate safeguards for investors as well as provide regulation which allows enough impetus for capital market development.“Last year we finalised the amendments to the Takeovers and Mergers Code and Unit Trust Code and obtained the assistance of the World Bank to amend the SEC Act. Since the structural reforms as well as changes in the governance structure subsequent to Demutualisation of the CSE will undoubtedly bring our capital market on par with international jurisdictions, we finalised the provisions to be included in the Draft Demutualisation Act,” his report noted.

In the recent past a decrease was witnessed in foreign participation in the CSE and Dr. Dissa Bandara said that to attract external capital there's a need to take sufficient measures to reduce barriers to access the market, improve market technology and settlement systems, reduce information asymmetry as well as increase the supply of actively traded stocks in the market. “Towards this end the SEC successfully made representations to relax restrictions placed on foreign investments in unit trusts that invest in Government securities,” he said.

In 2011, various cases of market misconduct were detected. “There were 33 possible referrals raised which were forwarded to the Surveillance and Investigations Committee of the SEC to determine whether such cases warrant further investigation. 15% of the detections reported were possible insider dealing cases, 58% can be categorised as market manipulations, 12% possible cases of front running and the rest of the detections were relating to unfair trading practices by dealer/trader, churning, complaints, rumour verifications, error trades resulting in significant drop in the Milanka and issues relating to takeovers and mergers code,” the SEC report noted.

The SEC continued to carry out investigations into cases of suspected violations of the securities law and recommend appropriate enforcement action in relation to the same, thus fostering high standards of professional conduct and corporate behavior in the market and deterring future transgressions by investors, listed firms and market intermediaries.

Last year a total of 18 investigations were conducted by the SEC out of which two investigations remained suspended throughout the year because issues relating to these investigations formed the subject matter of pending litigation.
http://www.sundaytimes.lk/120610/BusinessTimes/bt10.html

http://sharemarket-srilanka.blogspot.co.uk/

Kumar

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

Well done, but what are the action took against them.
Could anyone list?

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