The Colombo Stock Exchange (CSE) is seeking a revision of complicated foreign exchange laws pertaining to CSE transaction, sources close to the exchange said. "Some regulations are not practically applicable in the current trading scenario. The CSE has identified these and will bring these to the Exchange Controller (EC)'s notice,” the source said.
These issues were highlighted at a CSE-organized seminar conducted by ECD recently for stockbrokers and banks with regard to exchange control regulations. Exchange Controller E.A. Hettiarachchi told the Sunday Times FT that the seminar was organized to give an insight on the regulations. “Exchange controls are usually maintained in the belief that they help to protect a country’s currency and its foreign exchange reserves,” he said. “It is the first time such a dialogue is being held for the industry. It was here that these issues were highlighted," the source said of the meeting in which brokers and bankers attended.
One participant-broker said the interpretation of the law specifically related to Share Investment External Rupee Account (SIERA) was discussed. Under this non-resident investments up to 100% in issued capital of companies are permitted subject to several exclusions and limitations but such investments should be made through a SIERA .
The broker said they were informed that authorized dealers are required to comply with the reporting requirements stipulated under the operating instructions issued in respect to SIERA investments, but at times there are slight deviations.
"For instance when a block amount of US$1 million is received, then a brokerage will not convert the dollars into rupees immediately (as required by law) due to currency exchange fluctuations. We will await a better date (better rate for the benefit of clients) to do it. The law is unclear. When this money should be converted is not specified. All brokers do this," he explained.
The seminar came on the heels of Malaysian-based Vijay Eswaran's questionable transaction in Asia Capital (ACap) which is probed as to where the money came via SIERA. The source said that many brokers seem to violate exchange control rules as they seem to be unaware of the nitty-gritty's. "Having said that, the laws are also too old," he said.
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