While tight rules governing private placements (PP) are being considered by the Securities and Exchange Commission (SEC), it also wants to firm up the regulations for 'introductions' through which many companies went public last year, the SEC chief said.
"We are considering regulating introductions in order to bring in more liquidity to the Colombo Stock Exchange (CSE). We also want to bring in minimum rules pertaining to liquidity levels of firms already in the share market," Thilak Karunaratne, SEC Chairman told the Business Times. He said that introductions don't offer new shares. "The public has to buy these shares from the existing shareholders. Listing through introductions doesn't give much liquidity to the CSE. So we are trying to bring some regulations with regard to listing through introductions."
Last year the CSE saw 18 listings through introductions while only 13 firms were listed through Initial Public Offerings (IPO). This year so far two firms went in for introductions while three were listed through IPO.
Meanwhile current rules governing PP say that the shares allotted on private placement shall be locked-in for a period of one year from the date of allotment of such shares. Mr. Karunaratna added that a company's PP should be imposed a lock in period from the date the firm goes public, which will prevent its share price from falling after trading in it. "This way the retailers are protected," he added.