Stock market operators are urging the regulators to tighten loose ends in disclosure provisions pertaining to directors of listed firms, as there is room for manipulation under the current regulations.
“With the recent boom in the share market, there were many disclosures by directors of listed firms pertaining to their share dealings, but these announcements have come in to the Colombo Stock Exchange (CSE) way after these transactions were done, which is a bit disconcerting,” a stock market analyst said.
The CSE’s listing rules says that a listed firm should immediately announce to the CSE the disclosures made by a director in terms of Section 200 of the Companies’ Act of any acquisition or disposal of a relevant interest in shares of that firm.
According to Section 200 of the Companies’ Act, a director of a company who acquires or disposes of a relevant interest in shares issued by the company shall after the acquisition or disposition disclose to the board the number and class of shares in which the relevant interest has been acquired or the number and class of shares in which the relevant interest was disposed of the disclosure of share dealing by directors.
“The word ‘immediate’ isn’t defined in the rules (time-frame) which is an issue, because in today’s context when there’re so many events taking place in the market, which are driving up shares, there can well be manipulation,” a second analyst noted, adding that when scrutinizing some transactions by directors, they ‘appear’ to be flirting on the lines of manipulation.
The first analyst agreed saying that this loop in the listing rules needs to be addressed as this is why some firms are not 'concerned' about 'when' they disclose such transactions to the CSE. "This is why the rules need to be tightened," he said.
However a CSE source noted that the CSE cannot take action against individual directors. “They are required by the Companies’ Act to inform the board, (which is at the firm’s board meeting). We’re not regulating the directors individually. We can only take action against the firm,” the source said.
However, he said that the CSE is checking on certain transactions to find out if there has been manipulation. “We’re currently scrutinizing some transactions as there have been some concerns raised by certain parties,” the source added.