SEC issues fresh directive to brokers

The Securities and Exchange Commission of Sri Lanka (SEC) at its 393rd Meeting held on 28th July 2017 approved the procedure to be enforced on Stock Broking companies that have failed to ensure compliance with the Risk Based Capital Adequacy Requirements.

The Commission also approved the format specified for the issuance of a notice to all clients who maintain CDS accounts with the defaulting Stock Broking company.

Previously the Commission at its Meeting held on 8th November 2016 approved the implementation of Rules for the maintenance of Minimum Capital Adequacy Requirements by all licensed Stock Brokers excluding those licensed only to trade in debt securities with effect from 01st March 2017.  

The Rules required all Stock Brokers (excluding those licensed only to trade in debt securities) to maintain a Minimum Capital Adequacy Ratio (CAR) of 1.2 subject to a Minimum Liquid Capital of Rs. 35 million.  

Therefore the Colombo Stock Exchange (CSE) has been directed as follows:

(i) to incorporate the enforcement procedure appearing in Annexure I and the format appearing in Annexure II attached here to under Section 5 of the Stockbroker Rules of the CSE to be applicable to all the relevant stock broking companies who violate the Capital Adequacy Requirements in the manner specified in Annexure I; 

(ii) once the contents in Annexure I and II (attached hereto) are incorporated into the Stockbroker Rules as afore said, to revert to the SEC for approval in terms of Section 24 of the Securities and Exchange Commission of Sri Lanka Act (SEC Act) No. 36 of 1987 (as amended); and  

(iii) to inform all licensed Stock Brokers trading in both equity and debt securities of the enforcement procedures as set out in Annexure I to be enforced in the event of non-compliance with the Capital Adequacy Requirements, pending incorporation to the Stockbroker Rules of the CSE.