CSE’s Rules Committee to meet on SEC’s new directive

The Rules Committee of the Colombo Stock Exchange (CSE) is likely to meet shortly to study and recommend changes if any to the SEC’s directive issued on Friday incorporating some new regulations following the fiasco centring on the NSB-TFC transaction.

Sources said that after a SEC directive is issued, the CSE’s Rules Committee, comprising three from the Board and four broker nominees, can meet and discuss any contentious issues and make relevant recommendations to the SEC for consideration.

Pending the issuance of the SEC Directive, the Colombo Stock Brokers Association on Friday met up with the SEC Chairman and discussed the broader outline of the new rules by the SEC via a press released on Tuesday evening.

Some concerns and suggestions were shared by the CSBA. They included the six months prohibitive period (between purchase and sale) for trading of shares by executive directors, employees, their spouses and nominees of market intermediaries.



The lock-in period of six months has been viewed as irrational and over-regulation. Intermediaries include a whole gamut of financial service providers including unit trusts, underwriters and margin providers, which are part of commercial banks.

Incidentally Taprobane Securities CEO Dinal Wijemanne’s sale of TFC shares (27 April 2012 at Rs. 50 per share) had been after seven months of him buying (21 September 2011 at Rs. 48 per share) them originally. Wijemanne, along with two other sellers in the consortium Rayynor Silva and Anura Fernando, were also Directors of TFC at the time of the transaction. However, SEC had maintained that measures announced were imperative in the interim until the capital market has a robust clearing house to manage the Central Counterparty risk.

The Daily FT last week quoted an analyst saying that to treat a wound, the SEC via the new rules had cut off the hand, whilst a specific requirement on NSB investments into the stock market (over Rs. 20 million worth transactions) needing brokers to have Board sanctions was described as not within the mandate of the SEC.

See Page 7 for the full text of the SEC’s latest directive issued late Friday evening.