Sep 14, 2011 (LBO) - Sri Lanka should increase fines for securities fraud because trading volumes and potential for profit is much higher than when the fines were originally set, a lawmaker has said.
Harsha de Silva, a member of Sri Lanka's opposition United National Party, said a 10 million rupee fine charged on Environmental Resources Investments and key officials by the Securities and Exchange Commission was inadequate.
ERI, controlled by a foreign entity called Lionhart Investments and which had claimed to own platinum mining stock and was swapping assets among related units, was penalized by the SEC for delaying disclosure.
Larger Scale
De Silva said when Sri Lanka's securities law was amended in 2003, the annual turnover was 73 billion rupees and daily average turnover was 307 million rupees. By 2010 annual turnover was 570 billion rupees and daily turnover was 2,400 million rupees.
"It is not uncommon for ‘highly respected’ corrupt individuals to make tens of millions in profits in just one day of trading on insider-information or engaging in other activities contravening the SEC Act," de Silva said in a statement.
"The sad irony is that while it is well known such activity takes place, the kind of punishment meted out when one gets caught will not put off any one engaging in such crime."
De Silva says the maximum fine should be increased to 100 million rupees.
"The recent comment by former SEC director general Arittha Wikramanayake that the CSE is a "cess pool of indiscipline with no regulation" does not seem to be too far off mark," de Silva said.
"If this trend continues the entire credibility of the CSE will crumble causing further erosion of investor confidence in Sri Lanka. "
Lawlessness
Sri Lanka's lawlessness and arbitrary rules is not limited to securities markets and is part of a broader and sustained break down of rule law. Selective implementation of law is now routine throughout the criminal justice system, activists have charged.
Activists have pointed out that after the office of attorney general was taken directly under the president last year, rule of law and justice in the island suffered a fresh blow.
Some had argued that the move would make no difference since the office had anyway been under the ministry of justice, Kishali Pinto-Jayawardena, a lawyer and rights activist who has also spoken out against judicial autocracy said in a June speech.
"Within the following year, we then came to realize the actual difference; when the Attorney General started withdrawing charges of murder and rape filed against prominent politicians," she said.
"Unprecedentedly, both a sitting Chief Justice and a former Chief Justice made adverse comments in regard to this trend. Notwithstanding, the trends continued.
"Nothing was actually done substantially to address the issue."
Arbitary Rule
Critics say arbitrary rule was institutionalized in Sri Lanka in following a 1978 constitution , which destroyed several key institutions of liberty, which were already weakened by a 1972 constitution.
Agencies such as the Securities and Exchange Commission are operating in such an environment. Its investigators even face death threats when probing cases.
De Silva is critical of low fines and 'compounding' of cases where the offender is allowed to settle without being taken to court.
"It seems very much like a case of selective justice as in the past where high profile white-collar criminals were set free without being prosecuted or worse yet while being prosecuted," de Silva said.
"The case of compounding the case of a certain director of the Nawaloka Group conspiring to manipulate the share price of Nawaloka Hospitals comes to mind.
"The good work done by the SEC in catching wrongdoers obviously gets overshadowed when they are let go without being held accountable for their action."
In the Nawaloka case, nearly two years ago, the SEC withdrew charges against other parties in the case causing another controversy.
"This decision was taken by the Commission on the advice of the Honourable Attorney General," the SEC said.
source - www.lbo.lk
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