Private pension, provident funds can invest up to 20% in capital market

Wednesday, 7 November 2012 01:11 - - {{hitsCtrl.values.hits}}

Restrictions placed previously on the investment in capital market by private pension, provident, and other funds have been lifted subject to a maximum of 20% exposure.

The Securities and Exchange Commission said yesterday that with the objective of developing the Sri Lankan capital market through widening the domestic investor base and enhancing the returns of the contributing members of these funds which by nature have a long-term investment horizon, the SEC made representations to the Ministry of Finance and the Commissioner General of the Department of Inland Revenue to lift the prohibition of investing in the capital market and enable a maximum 20% exposure to listed securities.

The restrictions placed on Private Provident Funds, Savings Funds, Pension Funds, Trust Funds and Gratuity Funds investing in listed securities through Gazette notification No.1599/13 under Section 217 of the Inland Revenue Act No.10 have been relaxed. The new Gazette notification No.1704/18 from the Department of Inland Revenue stipulates any of the said funds need to be in conformity with the following limits:

(i) A minimum of 40% of the monies of the fund should be invested by way of deposits in the Bank of Ceylon, People’s Bank, National Savings Bank, or in investments in Government securities;

(ii) Not more than 20% of the monies of the fund may be invested in listed debentures or other stocks;

(iii) Any balance should be invested by way of deposits in other commercial banks.

As per the previous rule, investments made by any such fund should be in conformity with following limits, unless a special approval is granted for a specific investment

1. Minimum of 50% of the monies of the funds should be invested by way of deposits in the Bank of Ceylon, People’s Bank, NSB, or Govt. securities.

2. The balance 50% may be invested by way of deposits in other commercial banks.