Investor education, financial literacy vital for capital market: SEC Chief

Following is the address by Securities and Exchange Commission of Sri Lanka (SEC) Chairman Thilak Karunaratne at theCertificate and Diploma Awards Ceremony 2015 of SEC

SEC Chairman Thilak Karunaratne

I welcome Dr. Harsha de Silva – Deputy Minister of Policy Planning, Economic Affairs and other invitees for the Certificate and Diploma Awards Ceremony 2015. I specially thank Dr. de Silva for kindly accepting our invitation to be the Chief Guest this morning in spite of his busy schedule discharging his duties as a Minister and also being fully involved in the election campaign.  

I also extend my heartiest congratulations to the certificate recipients and commend the Capital Market Education Division for organising this event.

The Minister in his dual role as an economist and politician, which indeed is a rare combination in politics today, would agree with me on the functional role of a fair, efficient, orderly and transparent capital market in an economy.  

It is universally accepted that protecting the interest of investors is a fundamental component in a fair, robust and mature economy. Over the past decade, there’s been growing recognition that investor education is a critical element in achieving effective investor protection. It indeed complements the traditional tools of regulation, supervision and enforcement.

Financial literacy generally relates to all aspects of a person’s financial situation and includes the concept of financial capability which entails a person’s awareness, knowledge, skills, attitudes and behaviour.

Accordingly, increasing financial literacy among industry professionals is vital as they are the live wires causing a capital market to function smoothly. Market professionals are the nexus between the regulator, investor and securities industry. Increasing their financial skills and knowledge can complement regulations, promote better investment decision making, increase investor participation, protect the interest of the investors, etc. Above all it would strengthen investor confidence. 

Having understood the pivotal role of industry professionals the SEC undertook the important task of uplifting the standards in the securities and financial services industry by imparting knowledge and training on practical, contemporary and innovative education. I am indeed happy to note that there are over 100 certificate recipients today. 

One could never undermine the importance of education, knowledge and experience which entails wisdom. However as you receive your certificates today I urge you to reflect on the importance of maintaining true professionalism. Aristotle said: “Educating the mind without educating the heart is no education at all.”

As I stated earlier, financial literacy entails correct attitudes and behavior. Remember that investor confidence suffers and the financial system may collapse if we deter professionalism in terms of knowledge and integrity. We should not forget what happened during 2010-2012 in the capital market and the bitter lessons learnt.  Market stakeholders especially retail investors paid a heavy price due to irresponsible and unethical conduct of some of the so called market professionals. 

The industry (stock brokering firms, credit rating agencies and unit trust firms) should collectively strive to inculcate a culture in their work places that would encourage and promote industry professionals to be more responsible and accountable for their decisions. 

The SEC is entrusted with a profound duty of safeguarding the interest of the investors especially minority investors. This gives us the mandate to ensure that industry participants maintain utmost integrity in the market. Thus the SEC is currently exploring the opportunities of explicitly integrating ethics into effective compliance and regulations. It is also vigorously continuing its surveillance and investigation functions to minimise systematic risk in the industry.

Before I conclude, I remind our certificate recipients that education is a pragmatic and continuous process. Consider the qualification you receive today as a stepping stone towards enhancing knowledge.  Greater commitment towards this cause is even more compelling as capital markets continue to evolve and innovate. 

Investment products are becoming increasingly complex and financial services are increasingly diverse. There is a dire need for the industry to grasp the essence of these rapid changes if we are to compete with global markets and above all continue to foster efficient markets. On that note I take your leave and wish you all the very best for a successful career as market professionals. – Pix by Lasantha Kumara

Ethics must come from within: Harsha

​“Ethics is something I’m sure you learned in your course of studies, but it is something that is very difficult to teach. It is something that must come from within,” said Economic Affairs Deputy Minister Dr. Harsha De Silva, who was the Chief Guest at the Certificate and Diploma Awards Ceremony 2015.

The ceremony was organisedby the Capital Market Education and Training (CMET) and the Securities and Exchange Commission of Sri Lanka on Friday.

“When you’re a stock broker or investment adviser, you have an ethical responsibility more than or equal to your professional responsibility on what stocks to buy and sell. And that, I must stress here, has seen some bad days. Numerous allegations have been made of stock brokers complicit with investors, manipulating the market. Pumping shares, dumping them on various state institutions and so on,” he added.