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Saturday, January 15, 2011

Sri Lanka to boost share liquidity, tighten rules

* Mulling size of minimum public float-SEC

* Tougher penalties sought for capital market offenders

* REIT, ETF to be introduced-SEC

By Shihar Aneez

COLOMBO, Jan 14 (Reuters) - Sri Lanka will require newly-listed stocks to have a minimum free float, its securities regulator said on Friday, as its bourse gears up for an expected $9 billion in initial public offerings this year.

Larger investors have long complained that Sri Lanka has too few companies with enough easily tradeable shares and that its regulations against insider trading are too loose.

Despite being Asia's best-performing market for a third straight year, foreign investors have been net sellers.

Securities and Exchange Commission (SEC) Chairperson Indrani Sugathadasa told reporters that the regulator was working on "improvements in liquidity and the introduction of new products in the capital market."

"Liquidity is a function of many attributes such as the number of listed companies, maintenance of a minimum public float of listed companies, new products available in the capital market and the number of active investors," she said.

She declined to detail what the minimum public float might be.

Companies currently have to float 25 percent of their shares to get listed on the Colombo Stock Exchange's main board, and 10 percent to make the secondary board.

But there is no bar on directors or related parties buying those shares, resulting in some companies having a free float of less than 5 percent.

Sugathadasa said the regulator would propose tougher penalties to stop insider trading.

"The SEC...is expected 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," Sugathadasa said.

The SEC is also drawing up guidelines for real estate investment trusts and exchange traded funds, she said.

The SEC aims to boost market capitalisation by 45 percent in 2011 with $9 billion in initial public offerings. [ID:nL3E6N70AF]

source - in.reuters.com