SEC for Cross Border Listing

*Hopes for 60 more company listings

*All finance companies in the market

Charumini DE SILVA

The Securities and Exchange Commission of Sri Lanka (SEC) is exploring the possibility of introducing Cross Boarder Listing on the Colombo Stock Exchange (CSE).

Speaking on the Road Map for the Capital Market SEC Chairperson Indrani Sugathadasa said market capitalization is expected to increase at least by 20 percent per annum from this year onwards. She said the market capital will increase to Rs three trillion during this year.


Indrani Sugathadasa

The SEC hopes that 50 to 60 new companies will be listed on the CSE during the year and of these around 25 will be finance companies as directed by the Central Bank.

The Chairperson said the SEC has recognized five key strategic goals to be achieved in the next three years. They are to improve and facilitate capital market infrastructure, liquidity and introduction of new products in the capital market, encourage and broadening of issuer base and investor base, enhance the SEC’s performance through effective alignment and management of human, information and financial capital.

“To achieve these goals we intend to amend existing regulation to develop new products, obtain advance technology and infrastructure and improve practices.”

“Successful implementation of these initiatives can only be achieved through extensive support of stakeholders and therefore we look forward the continuous support,” she said.

At present Sri Lanka’s capital market contribution to the country’s Gross Domestic Production (GDP) is around 40 percent and by attracting more companies to list on the capital market will enable to increase this contribution. More importantly CSE needs large scale listed companies to generate large scale volumes, which will certainly serve as a positive indicator of the growth momentum of an economy.

It is vital for an exchange to raise the number of companies listed as it directly affects the liquidity of the market as well as the confidence of investors. The size of the capital market is generally measured by the market capitalization of the exchange. New listings will increase market capitalization.

With the new additions of listed companies, it is necessary to expand the number of active investors as well as to increase the awareness among the investors. It is important to broaden the investor base to improve market liquidity to minimize the market manipulations and other market abuses.

A total of 554,000 securities accounts have been opened with the Central Depositary System (CDS) as at December last year and of that only 72,000 account holders have traded at least once during the year. This is 13 percent from the total number of securities accounts registered and around 7,000 account holders have traded on a daily basis.

The SEC Act was introduced in 1987 and there have been three amendments thereafter. An overall review of the provisions to align it to the evolving global market trends has not been done so far.

Sugathadasa said there is a need for the stock market should venture more into the rural areas to achieve the objective of widening the investor base.

The CSE has ventured into four provinces already and society is keen on the latest developments in the stock market and to invest in it.

“Unlike in the past, the capital market has become a very popular subject among many people from all walks of life. The capital market in Sri Lanka has developed faster and during the last 18 months. In funding and mobilizing savings, the capital market’s role has become more comparable to that of the banks,” she said.

“The capital market has established its profile as an indicator and a facilitator of growth of Sri Lankan economy. Sri Lanka is poised to take off in 2011,” Sugathadasa said.

[Amendments to SEC Act]

The Securities and Exchange Commission (SEC) is to amend the SEC Act to create a conducive infrastructure in the capital market. “Rulemaking is often required to remedy abusive practices and facilitate changing economic conditions”, Securities and Exchange Commission Chairperson Indrani Sugathadasa said.

The SEC Act will be amended to incorporate the following: To regulate demutualized exchanges, provisions to effectively regulate a Central Counter Party and Depositories, to introduce civil sanctions and administrative sanctions to deal with capital market offenders and the introduction of provisions that will provide for restitution for investors, to license and regulate derivative exchanges including a Commodities Exchange, provisions incorporating legal duties on Auditors in respect of capital market offences and other relevant provisions that will enhance protection to investors.

Apart from that the introduction of the new Takeovers and Mergers Code, new market intermediary rules, guidelines to register auditors of listed companies will strengthen the functioning of the capital market in Sri Lanka, Sugathadasa said.

source - www.dailynews.lk