CSBA in a boil as two brokers quit

Apparently linked to recent developments, two brokers have quit the Colombo Stock Brokers Association (CSBA) with immediate effect, a move which is likely to further infest the market wounds.

Long-standing broking firm CT Smith Stockbrokers and relatively new entrant IIFL Securities Ceylon Ltd. are the two who had resigned from the CSBA.

IIFL Securities Ceylon Country Head Priyani Ratna Gopal had intimated that the current thinking of the CSBA did not conform to IIFL Group’s philosophy, hence the inability to be part of the association. The Indian giant’s local entity however didn’t specify what its philosophy was.

CT Smith Stockbrokers Chairman and Managing Director Cecilia Muttukumaru had notified the resignation with immediate effect though no reasons were given.

The membership fee in CSBA is only Rs. 10,000 per annum but quit notices weren’t linked to dwindling profitability of brokers in tandem with the miserable run in the market but on other issues. The move has sparked concerns among stakeholders as both CT Smith and IIFL are predominantly foreign-investor driven.

At present there are 28 brokers who deal with listed equities and debt. IIFL is a trading member whilst CT Smith is a fully-fledged member of the CSE.



Largely due to the misfortune of the Colombo bourse – be it over excessive regulation or manipulation – CSBA has been under unprecedented pressure. Via influential members CSBA’s direct line of communication with President Mahinda Rajapaksa leading to a first-of-its-kind audience between the two recently prompted some even to allege that CSBA was becoming too political.

A former regulator, Aritta Wickramanayake, went public describing brokers as “bunch of jokers”. This comment, which some view as unprofessional on the part of Wickramanayake, had angered the more responsible and dignified lot within the community.

However, others defended the CSBA saying that meeting with the President was following an invitation and discussions centred round developing capital markets given its importance in the overall economy and Government revenue.

CSBA is also getting flak for being responsible for the exit of SEC Director General Malik Cader and more recently Chairperson Indrani Sugathadasa, though sources close to the association deny it wanted heads to roll but only urged market supportive regulations.

However, influential high net worth individuals were also responsible for the exit of the top two at the SEC on the grounds that they didn’t understand how a market functions.

Year-to-date the Colombo stock market has declined by 10% in terms of the All Share Index and by 26% on the basis of the Milanka Index. From the all-time high of mid-February, the ASI is down by over 23%.

Independent analysts said that bizarre or extreme developments could have been ideally avoided as change of heads wasn’t the best medicine for the perennial and new ills of the market.

Others also said that whilst macroeconomic fundamentals, corporate earnings and market valuations are encouraging, Colombo bourse’s struggle continues as it is besieged with a crisis of confidence which needs collective effort for resolution by all stakeholders.