Business Times

We give what we can: SEC

With growing displeasure from many stockbrokers over the recent credit rule relaxations not meeting their expectations, the Securities and Exchange Commission (SEC) says that as a responsible regulator, it will only ease those regulations which are best for the market.

“We can only give what we can. As a responsible regulator, this (what was relaxed) is the best we can do. Other jurisdictions are much more stringent and strict with their regulations,” a regulatory source told the Business Times.

The SEC allowed stock broking firms to lend to their clients based on the computation of Liquid Assets minus their Obligations, retaining leverage at zero percent last week after representations Colombo Stock Brokers Association

Stockbrokers lamented that SEC didn’t relax the credit rules as they had expected. "We wanted something completely different. What we got is not what we wanted. Also the SEC has limited us in certain ways. Earlier the norm was that if a large client had not paid, the brokers can borrow that shortfall from related party firms or/and financial institutions in order to settle the Central Depositing System. But with the recent relaxations, the SEC has said that we need to reduce these borrowings from the stockbroking company's liquid capital computation.

Also the banks can leverage up to 10 times and we only requested for one time which they couldn't agree to," a broker told the Business Times. The regulatory source insisted that this is bad practice. “They own only Rs 35 million capital. It's a joke if they want to lend billions,” he added.

The day of the announcement of the relaxation by the SEC, the retailers went into overdrive with the Colombo Stock Exchange (CSE) indices posting gains while market’s turnover was at Rs. 3.76 billion. But some analysts said that the market has lost all the gains made on August 16 when this relaxation of the broker margin credit provision restrictions was made.

Calling the as repressive regulations an analyst said that it looks as if the easing of rules affecting margin provision is not at all sufficient to repair the long lasting damage caused to the psyche as well as the pockets of the market participants.

He said retailers with share portfolios of less than Rs.1 million who were unable to obtain margin trading facilities have been forced to sell their stocks. Another analyst said that these two weeks had seen only 'pure' traders. "It’s buy today, sell tomorrow people and no long term investors," he added.
Last week, the SEC directive said that licensed stock brokers should reconcile daily positions taken against their liquid assets and that they need to submit on a monthly basis a declaration to the SEC and CSE confirming the position of liquid assets minus their obligations as it stands at the end of each month. Many analysts noted that now many brokering houses prefer to give credit to high networth clients and not many retailers.

In May the SEC extended the timeline to clear credit given by brokers to customers till the end of the year, with 25% of remaining credit to be cleared by September 30. Dhanushka Samarasinghe, Director TKS Securities said that the SEC rules ensure that broking houses don't go into cash flow crisis. “It was a good move,” he said. According to analysts, with the new credit rules introduced last year, the estimated outstanding credit within broking industry had declined to Rs. 2 billion from Rs. 8 billion.

Top to the page  |  E-mail  |  views[1]
SocialTwist Tell-a-Friend
Other Business Times Articles
Govt. seeks new $140 mln loan for Hambantota port work
European travellers cruise into Colombo
Ceylon Chamber of Commerce welcomes the Lifting of the State of Emergency
Asia Capital gears to resurrect film industry
Dilith-dumping is a loser’s term
Sony Bravia high definition televisions enter Sri Lanka
COMMENT - Hasty move on vehicle imports
What you should know when you see a crowded bus!
Where to from here for NRFC account holders?
Bringing topline growth through sustainable strategy
RAM upholds AAI's 'BBB-' after its acquisition by Softlogic
SL first needs clearing house to up commodities, derivatives game
FCCISL local partner for World Tea Expo 2011 in China
Corruption: Even accepting a pen at a conference can be considered a bribe
Standard & Poor's president steps down after historic US debt downgrade
CDB raises Rs. 718 mln to support expansion
Sri Lankan private sector to import entire basmati rice quota from Pakistan
Sri Lankan companies urged to follow sustainable business practices
47th ICASL Annual Report Awards gets off the ground
Picture shows potential clients visiting Zhara HS's stall at ITB Asia 2010
3M enters first aid dressing market in Sri Lanka
HSBC awards gives impetus to young entrepreneurs
Sierra goes into pipes
Tokyo Cement to set up a 6MW Dendro power plant in Mahiyangana
3,000 vocational students to get access to Virtusa training
Symantec Endpoint Protection 12 launched in SL
Wataniya links up with Ericsson to implement converged billing solution
SL bakery scores 20,000 Facebook fans
EDB ties up with Rainbow Pages to introduce Sri Lankan Exporters e-Directory
Diethelm Travel introduces new fleet of vehicles to Taj Samudra, Colombo
Melfort Green Teas to tie up with Coca-Cola USA to produce Lanka special green tea
Browns buys more property, eyes some more
MTD Walkers to change name by March next year
Infrastructure bonds to set economic growth
Ceylon Tea sees bigger share in teas sold
HVA Farms to go organic and eco
We give what we can: SEC
Sri Lanka Customs probes empty fertilizer bag scam
Sony brings Internet TV for Sri Lankans
RAM assigns 'AA+' / Stable rating to Commercial Bank
Brokers in different plateau!
Dimo Batta mobile trade service attracts consumers in a big way
Aitken Spence’s sixth Indian hotel opens in December
Piramal profits double


Reproduction of articles permitted when used without any alterations to contents and a link to the source page.
© Copyright 1996 - 2011 | Wijeya Newspapers Ltd.Colombo. Sri Lanka. All Rights Reserved | Site best viewed in IE ver 8.0 @ 1024 x 768 resolution