Thursday, June 28, 2012

Sri Lanka SEC moots IPO grading, independent research

June 28, 2012 (LBO) - Sri Lanka's Securities and Exchange Commission has sought views on plans to grade initial public offers through a rating agency and fund independent research, following best practices in other markets.

 "The purpose of rating/grading equities is equities is to provide the potential retail or institutional investor with an independent view on the fundamentals and prospects of the company seeking a listing…," the SEC said in a consultation paper.

 "The IPO grade represents a relative assessment of the fundamentals of that issue in relation to other listed equities.

"It is generally assigned on a five-point scale with a higher score indicating fundamentals and vice versa."

IPO grade 01 would have poor fundamentals; IPO grade two would have below average fundaments, moving up to average fundamentals, above average fundamentals and at IPO grade 05, strong fundamentals.

Sri Lanka has a disclosure based regulatory framework and the regulators which approve issues for listing do not comment on the merits of companies.


The SEC said it was also mooting an independent equity research schemes aimed at providing "unbiased research reports, with in-depth analysis of the fundamentals and valuations of listed companies to encourage informed investment decision maiing."

 SEC said such schemes are usually paid for through the stock exchange or a market development funds and are found in India, Singapore, Malaysia, Indonesia, Australia and the United States.

source - www.lbo.lk

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