The President chairing the meeting. Pic sent by Presidential Secretariat
Arguments and crosstalk figured at a meeting between President Mahinda Rajapaksa and stakeholders of the Colombo stock market on Friday at Temple Trees, informed sources said. However no decisions were taken though the market waited with bated breath – particularly for positive news of unrestricted credit being permitted. On Thursday the market gained in the hope that Friday’s meeting will result in a favourable outcome for brokers but fell the next day as news filtered in that the outcome was not as expected.
High net-worth investor Dilith Jayaweera, who on Wednesday said he had not received (at that time) an invitation for the meeting, made a lengthy presentation on behalf of the broker/investors listing their problems.
The general tone and complaint of investors, brokers and some shareholders were that the market is over-regulated, credit should be unrestricted and the Securities and Exchange Commission (SEC) was making ad hoc decisions. Other high net-worth investors included Harry Jayawardena and Nimal Perera, who also said on Wednesday that he has not been invited for the meeting.
Deputy Finance Minister Geethanjana Gunawardene, Presidential Secretary Lalith Weeratunga, Treasury Secretary P.B. Jayasundera, Deputy Treasury Secretaries – S.R Attygalle and B.M.S. Batagoda, Presidential Advisor Sajin Vas Gunawardena, and Colombo Stockbrokers Association (CSBA) Sriyan Gurusinghe were among 40-50 others present. Securities and Exchange Commission (SEC) Chairman Thilak Karunaratne and Colombo Stock Exchange (CSE) Chairman Krishnan Balendra represented their respective institutions.
Mr Jayaweera blamed sections of the media including the Business Times and its journalists for ‘negative’ stories which wasn’t helping the market to recover.He was also quoted as saying that it was ‘anti-government’ elements that were ruining the market pointing fingers at the media which has been criticizing large scale market manipulation and insider trading.
The meeting was explained by Dr Jayasundera as a pre-budget discussion to ascertain the needs of the industry, though informed sources said it was made on the request (to the President) by some investors. Responding to the claims by brokers and investors in Mr Jayaweera’s presentation, SEC Chairman Mr Karunaratne said unlimited credit could lead to a dangerous situation and eventual collapse as investors were essentially buying on borrowed cash. He strongly objected to allegations being against his staff particularly those involved in surveillance and investigation.
On the issue of several letters being sent to brokers and investors, Mr Karunaratne said these were routine letters seeking clarification which is the role of the Commission and rejected accusations of ad hoc decision-making saying all regulations were made in consultation with the CSE and furthermore the SEC has had two meetings with brokers.
When Mr Jayaweera raised the issue of anti-government elements, Mr Karunaratne responded: “Don’t bring politics into the market place.”Independent investors, K. C. Vignarajah and Charitha de Silva also spoke on the ills of the market raising the issue of market manipulation, etc and lack of fundamentals.
Mr Vignarajah said this meeting seems to an annual event, referring to the last December 2011 meeting with the President when Ms Indrani Sugathadasa was the SEC Chairperson. Ms Sugathadasa quit a few days after that meeting, following pressure from investors and brokers. Mr Vignarajah said he was raising issues on behalf of many poor investors who had lost money owing to market manipulation and pump and dump tactics in the market.
Meanwhile four brokers – JB Securities, IIFL Securities, CT Smith Stockbrokers and Somerville Stockbrokers who are not members of the CSBA – sent a letter to the SEC Chairman on Thursday welcoming the SEC’s efforts in regulating the capital markets in the country.
“A necessary condition for the development of the financial markets is to prevent the self-fulfilling cycle arising out of the economics of trust – Loss of trust – Withdrawal from risky assets – Rise in cost of capital- lmpaired returns.
lf this self-fulfilling cycle is not contained we will deprive businesses from access to equity capital necessary to make long term investments than in turn create economic growth. The equity market is a conduit to attract foreign portfolio investments especially from large but more discerning foreign institutional investors thus every effort must be made to adhere to international best practices,” it said.
The four brokers also said “contrary to popular perception our understanding is that the SEC never barred brokers from giving credit thus the ongoing debate is incorrectly framed, the only issue that is at debate is the funding of credit extended by brokering firms”.