The Colombo Stock Exchange (CSE), in a recent circular, has ordered stock brokers to refrain from extending credit to foreign investors as per the exchange control rules.
Brokers and investors |
This came after the Securities and Exchange Commission directed the CSE to do so in a letter saying that SEC during its on-site visits has seen some broking firms extending credit to foreign investors when buying shares instead of getting them to fund such purchases through share investment external rupee accounts (SIERA).
A CSE source said this has been a practice by some firms, but after some foreign transactions such as the recent Asia Capital purchase by controversial GoldQuest founder Vijay Eswaran, the regulators wanted to remind the brokers about the rules.
The CSE has also told the firms that they need to ensure the foreign investor funds are deposited to the particular investor’s account (SIERA) before the broker firm places the share purchase order. |
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