‘We are watching you!’

• SEC says will not hesitate to curb market distortions, misbehaviour
• More than half of listed companies flout Governance Code

The Chairperson of the Securities and Exchange Commission said the capital market regulator would not hesitate to use the tools at its disposal to create a market that was fair and protected investor interests, despite recent criticisms that it was curbing market forces through price bands.

SEC Chairperson Ms. Indrani Sugathadasa said the Colombo Stock Exchange (CSE) was doing well with the price bands introduced to curb highly volatile stocks, ensuring the market was fair and safe for investors.

She said the CSE had tremendous potential to grow and contribute to the national economy. "Market capitalisation is about 42 percent of GDP which was 22 percent at the beginning of this year. The huge potential for growth also warrants vigilance and the regulator is more aware of the need of creating a fair market that would protect investors."

Earlier this year, the SEC imposed a ban on four stocks analysts termed ‘junk stocks’ after their prices increased without any improvements to the fundamental financials of these companies. The ban was lifted and a market-wide trading band of 10 percent was imposed. This brought stability into the market and the SEC later withdrew the price band and introduced a formula to capture specific stocks instead.

"There were mixed sentiments about the price bands but this was necessary to contain undue volatility in the market and the new formula was working well," Ms. Sugathadasa told a forum last morning.

"We are closely watching the market and would assist in its growth, however, we would not hesitate to use the tools at our disposal to dispel market distortions and misbehaviour," she said.

Ms. Sugathadasa made these comments at a meeting organised by the SEC and The Institute of Chartered Accountants of Sri Lanka in honour of visiting Chairperson of the International Organisation of Securities Commissions Executive Committee, Ms. Jane Diplock.

No longer a window dressing...

Ms. Diplock said the global financial crisis was a result of market misbehaviour and unethical practices where good governance was at best treated by companies like a window dressing. The crisis proved that good governance and profitability went hand and in hand and could no longer be separated. Investors would be interested in investing in markets where good governance was strong, she said.

More than half of listed companies...

The Institute of Chartered Accountants of Sri Lanka (ICASL) President Sujeewa Mudalige, quoting a SECreport, said that more than half of Sri Lanka’s listed companies failed to comply with a governance code the institute had formulated together with the SEC.

"The bottom line is this, less than half of Sri Lanka’s 240 listed companies are complying with a 15 year old governance code that was formulated by the institute and SEC. More than half are not. This code is not as stringent compared to global standards. The problem in Sri Lanka is that you have people sitting in company boards thinking that good governance did not add value to business," Mudalige said.


source - www.island.lk