SEC Chief and Commissioners before COPE today

The Chairman and Commissioners of the Securities and Exchange Commission (SEC) will appear before the Committee on Public Enterprises (COPE) today when Opposition is likely to query on ill doings in the Colombo Bourse including the reversed NSB-TFC deal.

COPE Chairman MP. D.E.W. Gunasekara told the Daily FT it was a pre-scheduled and routine meeting with Auditor General’s comments on SEC’s 2010 Annual Report will be taken up. However UNP MP Ravi Karunanayake said various issues concerning the stock market will be raised by the Opposition including the contentious NSB-TFC deal.

Karunanayake’s eagerness is understandable as he, as exclusively reported in the Daily FT issue of 1 June, wrote to COPE Chief Gunasekara highlighting his concerns over some of the questionable transactions as well as manipulations on the Colombo stock market.

“The recent development of the National Savings Bank and The Finance Company Ltd. share purchase transaction reversal has led to exposing many problems, this only being the ‘tip of the iceberg’,” MP Karunanayake opined in his letter.

He also referred to the resignation of Indrani Sugathadasa as Chairperson of SEC in disgust trying to ameliorate the wrongs that were happening in capital market. “Considering her close political affiliation, it is nothing but right to commend her bold act of protecting her good name and also honouring the dignity of high office by resigning to prove a point,” he said.

In that context, Karunanayake suggested to COPE Chief that the opportunity to take cognisance of the fact of her resignation shouldn’t be missed and that the current Chairmen of the SEC and CSE as well as former Chairperson of SEC and former Director General Malik Cader should be summoned before COPE for immediate investigation.

Karunanayake reasoned his action as well as COPE going in to the matters raised to restoring confidence among the Sri Lankan foreign investors and the citizens of the country.

The fact that only SEC has been summoned as opposed to Karunanayake’s request for CSE as well confirms that COPE Chief’s action is largely on account of seeking accountability on the part of SEC Commissioners with regard to Auditor General’s Report on Audited Accounts of 2010. However at that time the Head of the SEC was top civil servant Sugathadasa whilst the incumbent Tilak Karunaratne took office only in December 2011.

Analysts said that usually in COPE meetings, members could take up any other matters hence recent issues will be raised.

Karunanayake’s request was also in the context that since COPE Chairman has been alive and responsive to Opposition requests to act on institutions such as Central Bank, SriLankan Airlines, Ports Authority, Ceylon Electricity Board, National Savings Bank, Lankaputhra Bank, EPF and Bank of Ceylon, etc., a similar course of action was required with regard to SEC and CSE as well.

Analysts said that though the SEC began an investigation in to the National Savings Bank-The Finance Company (NSB-TFC) transactions several months ago its outcome hasn’t been made public yet. However several regulatory measures were implemented to ensure avoidance of similar circumstances in the future.

In that unprecedented development, the SEC reversed the original purchase of 13% stake in TFC by NSB for Rs. 390 million. This was after NSB not effecting payment though its custodial bank had settled the sellers. The fiasco was after public and opposition outcry with regard to the modus operandi as well as the rationale for such an investment by the savings giant. Good governance and accountability was questioned apart from systemic risk of default highlighted. Several NSB Board members including the then Chairman Pradeep Kariyawasam resigned whilst the CEO of the broking firm to the transaction also quit pending completion of internal and SEC investigations.