Friday, November 16, 2012

SEC head tries to stamp out descent, but forced to recant

* Investigations ongoing, no pressure says Dr. Godahewa

* Capital market development plan unveiled

SEC Chairman Dr. Nalaka Godahewa having a quite word with Acting Director General of the SEC Prof. Hareendra Dissabandara.

The Securities and Exchange Commission (SEC) yesterday vowed to develop the country’s capital markets via a broad based consultative process and continue with ongoing investigations into market offences, but urged the media not to focus on negative aspects of the market as it could create wrong perceptions among potential investors both domestic and foreign.

SEC Chairman Dr. Nalaka Godahewa, whose appointment to the top post was shrouded in controversy after two chairpersons resigned under a year of each other on alleged pressure from a group of high net worth investors and their crony brokers for trying to clean up the market, was forced to apologise to journalists yesterday after he attempted to intimidate a journalist at a joint press conference hosted by the SEC, Colombo Stock Exchange, Colombo Stock Brokers’ Association, Unit Trust Association of Sri Lanka and the Margin Providers’ Association at the SEC headquarters at the World Trade Centre in Colombo yesterday (15).

A journalist who had raised some serious questions and concerns was told by Dr. Godahewa, "I know why you are here. You are here looking for negativity." Journalists voiced their displeasure over the remark, forcing Dr. Godahewa to quickly offer apologies. After the press conference, Dr. Godahewa personally apologised again to the said journalist and said he regretted having said what he said.

Dr. Godahewa earlier commenced the press conference by urging journalists to focus on the positives and highlight the bigger picture of capital market development so as to attract local retail investors and more foreign players, with current levels being well below the country’s potential.

In fact, the recurring message from the SEC and the other stakeholders at the press conference was for journalists to focus more on positives than the negatives.

But it was pointed out to them that journalists highlighted the market irregularities because they had occurred, varified with officials of the SEC and because former SEC Chairman Dr. Thilak Karunaratne has revealed much about the sorry state of affairs in the capital markets over the past few months.

"I cannot speak for the former chairpersons, I am not facing any pressures from any one and we are continuing with the investigations into market offences," he said in response to queries about 17 investigations left open when Dr. Karunaratne quit. "If there are offences we will take action against them."

Dr. Godahewa said journalists should not use the word ‘mafia’ to describe an alleged group of high net worth investors and their crony brokers.

"There is no mafia. There may have been manipulators but they were not colluding and there certainly is no mafia, it is the wrong word to use because a mafia is a gang that thrives on crimes such as extortion, and murder," he said, but after saying himself there was a mafia trying to destabilise the stock exchange by propagating negative perceptions!

Dr. Godahewa’s remarks inferred that descent would not be tolerated.

"We live in the age of the internet and when the media highlights negatives in what some people say, it is bad for the capital market, it is bad for the country."

This did not sit well with journalists who then raised their concerns, forcing Godahewa to say, "You can report on the negatives, it is an important function, but remember the bigger picture."

The SEC yesterday issued the following ten point development strategy for the capital market during the next two to three years: Establishing a regular consultative process; Re-examining the Net Capital computation; Lifting prohibition on executive directors, employees, spouses etc of stock brokers/stock dealer companies from selling listed shares; Developing the corporate Debt Market; Facilitating stock brokers to use CRIB to assess client credit worthiness; Granting financial concessions to improve stock broker IT infrastructure; Expediting the Demutualization process of the CSE; Extending the incentive scheme on the rent of new stock broker branches Initiating local and overseas promotions; Appointing a national level task force to map a capital market development plan; Grant concessions for the Unit Trusts Industry; Attracting new companies to list.

Dr. Godahewa said the SEC’s mandate was not just market surveillance and supervision but capital market development as well. His predecessor Dr. Karunaratne had said the SEC could not focus on market development because of the constant interference into investigations.

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