HNB 20 mln shares unregistered

Twenty million shares of Hatton National Bank purchases during a 3-month period (October to December 2007) through the Central Depository Systems (CDS) have not been registered due to insufficient information on the four buyers.

"The Board Secretary (of HNB) was requested to obtain relevant information / documents from the purchasers and their representatives, in order to satisfy that the investments conformed to the Banking Act/regulations and other statutory provisions prior to registering and recognising the investors as shareholders," HNB’s 2007 annual report said. It said this move was to ensure that HNB does not become a party to any violation of statutory obligations and that it is awaiting information/documents to look into the aspects of complacence.

Deutsche Bank Trust Company Americas (15%), Brown and Co. Ltd (7.29%), CBD Exports Ltd (6.53%), Milford Exports (Cey) Ltd (6.53%) and Stassen Exports Ltd (5.66%) are the five top shareholders at HNB, in which Harry Jayawardena-led companies have a majority stake.

HNB officials told The Sunday Times FT that there were four foreign investors who bought the 20 million shares corresponding to nearly 10 percent shareholding of the bank. "We need to know the identity of the investors and have information on who the beneficiary is of the shareholding," an official said.

The official reiterated that this is in keeping in line with the stationary provisions of know your customer (KYC) in relation to money laundering to verity whether the buyers are acting in concert and to substantiate that they are not nominees of any party that already holds shares of HNB in excess of 10 percent, which is the stipulated limit by the Central Bank. In December two foreign funds through Lanka Orix Securities lapped up around seven million shares in Hatton National Bank (HNB). Ishara Nanayakkara, controlling LOLC, and his connected parties had sold shares of HNB to a foreign party last year and Browns Group which he took control of recently together with related parties has 15.1 percent of HNB.

Early December an Indian fund based in Singapore bought 2.4 percent and a Californian- based property development firm bought 1.35 percent of HNB. The latter bought this stake to bring their total holding to 10 percent. There are two more foreign funds which have 10 percent each in HNB, a Mauritius based company has seven percent and connected parties have two percent. Many believe that these are connected parties. Analysts point out that it is not possible or practical to control HNB given the current Central Bank regulation on single shareholder limits. “There are six different parties who are closely connected. Together these parties have more than 46 percent. But the single shareholder limit of 15 percent - if they act in concert - stops them from openly saying that they own HNB,” the stock market analyst said.

He said that Jayawardena who was in control of HNB (with 43.5 percent) before these regulations came into place had ‘his’ board of directors in place at the bank which gives him the power over others. “It is ultimately who controls the board that matters. The key decisions are agreed upon by the board of directors. As of now Jayawardena controls the board,” he said.