Harsha declares SEC fiasco a Govt. failure

* State impeding justice shielding market manipulators, insider traders – Harsha

UNP Economic Spokesman Dr. Harsha De Silva MP yesterday said the government has failed the country’s financial system by allowing regulatory capture to engulf the Securities and Exchange Commission of Sri Lanka, which would bring down the stock exchange in the long run.

An economic theory put forward by Nobel laureate Joseph Stiglitz, regulatory capture occurs when an influential group is allowed to undermine the regulator and manipulate the market. Dr. De Silva said that this was what had befallen the country’s capital market regulator the Securities and Exchange Commission of Sri Lanka, with its Chairman Thilak Karunaratne planning to resign by the end of this week because market manipulators the SEC was investigating were too powerful and wielded influence, or found favour, with the state.

"According to the SEC Act, insider trading and market manipulations are offences for which those found guilty could be sentenced to serve not more than 5 years in jail. Who is trying to take away this power from the SEC?" Dr. De Silva asked.

"Today the stock exchange has become a casino. But we should not look down on the stock exchange. It has the potential for becoming a significant contributor to economic growth. This is because the primary market is where companies raise equity capital. The secondary market is where stocks are traded. We need a credible secondary market to enhance the primary market. Investor confidence is boosted by a stable primary market. This is why governments establish regulatory bodies to ensure equity, justice and fair play to all stakeholders.

"The failure of the SEC to crack down on market offences is not a result of a flawed market, but the result of a failed government. The government has failed the financial system. Government failure is what is driving down the stock exchange and keeping away investors. Now, the Chairman of the SEC is resigning because the government is not supporting the SEC to crack down on market malpractices. Colombo Stock Exchange, Rest in Peace," the outspoken lawmaker said.

Shady investors and their crony brokers have accused the SEC of leaking information on ongoing investigations, which they said drove away potential investors.

"As far as I know, the SEC has not divulged any information on who or what is being investigated. Since the Environment Resources Investments fiasco almost a year ago (where three directors compounded their offences for Rs. 3.3 million each), there has been nothing on the ongoing investigations. There are attempts to keep information from the public. Thilak Karunaratne did not fall from the skies. He is well respected. So when he told COPE that a mafia was running the stock exchange he knew what he was talking about, and this the government chooses to ignore," Dr. De Silva said.
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=59271

By Nisthar Cassim
UNP MP Dr. Harsha de Silva yesterday declared that the fiasco at the capital markets regulator leading to the impending resignation of its Chief was a clear “failure of the Government”.

“In the next few days the Government’s failure will be known,” Dr. de Silva remarked, linking it to the pre-announced yet impending resignation of Securities and Exchange Commission (SEC) Chairman Tilak Karunaratne.

Citing a theory espoused by Noble Prize winner for Economic Sciences in 1982 George Stigler, the UNP MP alleged that the country had experienced a “regulatory capture”.

“When regulatory capture happens, it is not market failure but Government failure, because it is the Government which institutes a regulator to look after the interest of all stakeholders,” Dr. de Silva told a press conference yesterday.

“It is not the Opposition or the media but the Chairman of the SEC who is saying there is a mafia. Tilak Karunaratne didn’t fall from the sky overnight; he is a well respected and senior person. He has said it with due knowledge. This mafia has captured the regulator,” the UNP MP claimed.

He alleged that this was after certain individuals and investors, who as per market talk constitute the mafia,
met the President Mahinda Rajapaksa recently. Dr. de Silva alleged that the “regulatory capture” by this group was to ensure that capital market regulations could be changed according to their whims and fancies.

“This is because there are several ongoing investigations on alleged insider dealing and market manipulations against these persons,” the UNP MP claimed.

Dr. de Silva said as per the SEC’s Act, “Effective regulation lays the foundation for investor confidence,
supports efficient functioning of the capital market and thereby builds the platform for economic growth,” hence the stock market was an important component of the country’s financial system and that it was also crucial for the country’s growth and development.

“Some people describe the stock market as a casino. Be that as it is. However, the stock market plays a crucial role in a country’s economy and private sector development. It shouldn’t be ridiculed or looked down upon. A vibrant secondary market is key for emergence of a primary market via which companies raise funds for investments. Of late we have seen lesser number of IPOs because of the problems in the secondary market. Due to inequity with only some big players benefitting via pump and dump strategies, the larger
base of small and retail investors have lost confidence in the market,” the UNP MP opined.

As per the Act, it is the SEC which is responsible for the creation and maintenance of a market in which securities can be issued and traded in an orderly and fair manner as well as protection of the interest of investors. Via malpractices and without equity, justice and fair play to all, a market can be destroyed. It is the regulator and regulations that ensure markets don’t fail.

“However if the regulatory process fails, then it is a reflection of the failure of the Government,” he explained, adding: “If there a ‘regulatory capture,’ then it is better to not to have any regulations at all.”
Dr. de Silva said that the SEC under the chairmanship of Karunaratne had commenced a series of investigations to detect malpractices and punish wrongdoers. As per the SEC Act, if a person is found guilty, he or she is liable to imprisonment of a minimum of two years or a maximum of five years. The UNP MP indicated that the mafia via the regulatory capture was trying to change the course of the investigations.
He said that the last concluded investigation was with regard to an alleged act of non-disclosure by Environmental Resources Investments (ERI), over which alleged violation several directors of the company were imposed with a fine of Rs. 3 million. “This is a very low fine in a market where Rs. 3 million could be made within three minutes,” he said.

The UNP MP also used the press conference to renew his often-repeated call for the implementation of Right to Information (RTI) Act. He pointed out that if there was RTI, then proper information could be obtained and various persons and institutions could be held accountable.
http://www.ft.lk/2012/08/16/harsha-declares-sec-fiasco-a-govt-failure/

Harsha wants the CSE to underperform so he can continue his regular bashing.....

The cat is out of the bag......Thilak Ayya and UNP and chamber of commerce sponsored by the opposition (TRIO) trying another conspiracy theory to bring the market down..........

The biggest mistake Thilak did was to speak to the Reuters...what was he expecting ........

Lets see tomorrow ASPI cruising 5000+

Happy TAH

Some going kade for thilak because now they have to buy at higher prices.Anyone believe thilak could chance CSE.Never.Changes should come from top level.Lowest level man was Thilak.Can he do heroics without top support?.No.

traderathome wrote:
The biggest mistake Thilak did was to speak to the Reuters...what was he expecting ........

What else should he do? Speak to the Daily News?
Teach your children stand by what is right, speak with a backbone and do their duty right. May be they'll bring this country out from the hell hole.

aj wrote:

traderathome wrote:
The biggest mistake Thilak did was to speak to the Reuters...what was he expecting ........

What else should he do? Speak to the Daily News?
Teach your children stand by what is right, speak with a backbone and do their duty right. May be they'll bring this country out from the hell hole.

so what happened after telling to the reuters.what did he achieve.Reuters would have picked up the news anyways whether given to local media or some other.that gave further impetus to so called mafia.

As i said on some other thread when the bull run commences no one will be whining on thilaks sorry a** except the UNP crying foul play yet again here....because they dont want cse to perform better.they thrive on negativity like Harsha.

Thats why i said this forum will have a major duty towards educating the innocent retailers what to buy, when to buy and when to lock into profit.so that we minimise the risk exposure for all of us.

This is the utmost we can do.

If Thilak has to go, then he must go....there is no choice.

He forgot who appointed him in the 1st place. If he was under pressure, he should have made known to the President and tender his resignation gracefully without conspiring with the opposition to achieve hidden agenda.

So lets say he played into the trap of the mafia...

My portfolio is positioned in rather better place than couple of days ago ?

Have great day today...and hope to see everyone smiling in coming days.


Happy TAH