The country’s capital market watchdog the Securities and Exchange Commission of Sri Lanka (SEC) has finally announced that it would instigate legal action against market players found guilty of manipulating trades last year.
In a statement issued yesterday the SEC said it was filing action against one investment advisor for market manipulation which is an offence and sending letters of caution to five other investment advisors, including a trainee, representing three stockbroker firms and two investors on suspicion for the same offence of market manipulation.
"The Securities and Exchange Commission of Sri Lanka (SEC) by virtue of the powers vested in it under the provisions of the Securities and Exchange Commission of Sri Lanka Act No. 36 of 1987 as amended, conducted an investigation pertaining to heightened trading activity and the unusual price escalation witnessed by the shares of Dankotuwa Porcelain PLC, Blue Diamonds Jewellery Worldwide PLC, Touchwood Investments PLC and in the warrants of Environmental Resources Investments PLC during the period 1st July – 3rd August 2010," the SEC statement said.
"The evidence elicited during the course of the aforesaid investigation suggested that the trades in some of the aforesaid securities which had been executed by five investment advisors amongst several (including a trainee investment advisor) representing three stock broking firms and two out of a large number of investors could possibly be construed as trades of a manipulative nature.
"In the above circumstances, the Members of the Commission, at its 285th Meeting, held on 19th August 2011, having considered the matters highlighted in the investigation report decided to caution the five investment advisors and the two investors in writing. Accordingly, the said investment advisors as well as the investors were cautioned against execution of trades in future which can be perceived as manipulative.
"Further, the Members of the Commission, at the above Meeting which was held on 19th August 2011, having considered the findings of an investigation pertaining to suspected market/price manipulation in the shares of MTD Walkers PLC during 11th – 19th January 2010 decided to issue Notice of Action to another investment advisor intimating that proceedings will be instituted against him in terms of the provisions of the Securities and Exchange Commission of Sri Lanka Act No. 36 of 1987 as amended. Consequently, Notice of Action was issued on the aforesaid investment advisor in respect of the contravention of Rule 12 of the SEC Rules published in the Gazette Extraordinary No. 1215/2 dated 18th December 2001," the SEC said.
These manipulative trades saw ‘junk’ stocks surge in prices although not being backed up by corresponding financial data of each company’s performance, and then fall sharply. This compelled the SEC to introduce a price band, issue limits on broker credit in a bid to bring sanity in the market which remains overvalued according to many analysts.
source - www.island.lk
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