Business Times

“Bring those responsible to justice” – BT poll respondents say

TFC-NSB fiasco

‘Charge them in court; jail them if guilty’ and ‘those responsible must be brought to justice’ were among the range of comments that flowed in as angry Sri Lankans vent their fury over the latest scam – the multimillion rupee stock market deal involving a state bank, the National Savings Bank (NSB).
This came when the Business Times on Thursday fired an email poll asking the public to respond to a questionnaire on the issue and also send in their comments.

In line with past practice and convention, the Business Times will not reveal the identity of the 400-plus respondents who come from a varied background like chairmen of companies, managing directors, other professionals, housewives, social activists, etc., and who provided these comments in strict confidentiality.

Results of the poll
Here’s a cross selection of the comments:

Q: Should the transaction be reversed?

  • If it is legally possible or in the interest of the public through some mechanism.
  • Only if it doesn’t undermine the time-honoured system at the Colombo Stock Exchange (CSE) which all investors rely on. One or two rotten eggs should not be allowed to bring down the system.
  • Yes, by compelling the sellers to purchase the shares at the same price.
  • The NSB should be charged for dishonouring its custodian responsibilities.
  • If this happens (reverse transaction), then I too should have the same privilege of doing the same: buy a stock at a fancy price and then asking for a reversal.

Q:Is the SEC and CSE slow in their response?

  • Yes compare the speed in which the US authorities loved in the mega J.P Morgan scandal in the US and last week’s IPL cricket scandal.
  • Disappointingly slow which raises concerns about their competence.
  • Yes but only if it has legitimate grounds under SEC regulations. If it is simply a case of bad judgement/corruption within the NSB, does the SEC have the right to cancel?
  • Unless there is insider dealing, there is no role for the SEC or the CSE. It is a normal market deal.
  • At least an interim statement should have been issued by now, giving inter alia, a definite time frame by which the final decision of the SEC/CSE will be announced.
  • Yes, this is because they are not in control as the strings are being pulled by some other authority. This is why right thinking persons have to demand that such public institutions should be politically neutral to function effectively.
  • You must be kidding, when have these institutions (SEC/CSE) ever clarified their wrongdoings?
  • CSE should go back to the drawing board and check what went wrong when a custodian bank failed to confirm a deal within 24 hours. If they had cancelled the deal and transferred (the stocks) to the broker this disaster would have been avoided.

Q:Should the SEC cancel the deal?

  • Deals shouldn’t get cancelled as it sets a bad precedent like the Expropriation Act.
  • Yes - I fail to understand why it should be cancelled by the President when the SEC is the watchdog and should act decisively on such fraudulent deals.
  • Only a court can void a deal for fraud or other problems. The SEC as far as I know has no powers to enforce contract law. It can only punish under its own laws. Parties can also break contracts over conditions.

But if one party fails to pay on a contract (after offer and acceptance) for whatever reason including after it gets to know that the other party has resorted to an underhand deal or used inducements or whatever, it runs the risk that the other party will go to court to enforce the contract (specific performance) or get damages provided he is acting honestly. Otherwise if it’s a crooked deal he will not go to court to enforce the contract.

  • They should be hauled before the Bribery and Corruption Commission.
    Not just this, any questionable deal needs to be cancelled. The SEC will otherwise be perceived as a cardboard ‘Sando’.

Q:Failure by the authorities to issue a statement on the crisis

  • The Central Bank and the Government must take the brunt because any instability in the NSB will entail problems for the stability of the banking system and the Government has to find money to bail out the NSB. So early action by both is needed. Yet, with the complaints in the market that the CB itself has done the same wrong with respect to EPF money and the media has not raised this issue sufficiently, the CB would be unable to point the finger directly at NSB for when one finger is directed to the NSB, it has to direct four fingers at itself. My feeling is that, not only has the Government and the CB failed, but the media too has failed.
  • The NSB did issue a short statement but that caused more damage that damage-control. In fact it confirmed issues of mismanagement.
  • The Central Bank should issue a statement without delay.
  • The Government is responsible. They should not try to fulfill other agendas on state (tax payers) expense.
  • It’s a shame that a country seeking to be the ‘Jewel (or Miracle) in Asia’ fails poorly on its integrity on such matters. Foreign investors will be averse to these conditions.

Q:Failure to inform the public on the status of the bank:

  • This is a major failing stemming from the fact that this is the only chairman of the company whose spouse holds high office in the state.
  • The public has a right to know immediately what happened, what went wrong and whether they are at risk.

Q:Should the NSB chairman and board of directors be sacked?

  • Definitely the chairman, for this is a white collar crime
  • Any action has to be through a transparent inquiry, not on ad-hoc basis. They should have been suspended until the outcome the inquiry.
  • YES, absolutely. Not only sacked, but suitably punished for their acts of omission or commission, and, never again given any public sector appointments.
  • Yes. But care must be taken to protect career officer/s, who is this case protested the deal at the expense of their own job/jobs.
  • Even if this happens, the new appointees will be no different – they’ll be the same calibre under different names. Same old wine in a different bottle!
  • Yes, not only at the NSB, but also (their dealings) with respect to other similar deals in other state institutions. But my biggest grouse is that the independent media has failed (in strongly raising these issues) more than the government.
  • They should resign even before being fired. Its time Sri Lanka starts acting responsibly if it is to have a real place in today's business world.
  • Charge them in court and jail them if guilty of fraud. Those responsible must be brought to justice
  • Only after a proper investigation. The Government should, on an impartial basis, attempt to identify the person/s from among the Chairman and the Board of Directors and/or others that gave directives, if any, to the Chairman/Board of Directors and institute legal action against them. If the directors were aware of the transaction and rubber stamped same, then only should they be sacked and made a party to the same legal proceedings.
  • Under no circumstances should the Government try to sweep this matter under the carpet or attempt to protect those responsible
  • It is not only the NSB directors who should face the music. Action should be taken against the TFC directors because they are responsible for the stock market losing its credibility because of these transactions, and this may not be the first instance.
  • Sacking won’t help as the followers (new directors) will do the same or be instructed to do the same. The question is, is the appointing authority independent and follows ethics and governance?
  • The proper thing to do should have been for all concerned to tender their resignations. That is not happening. The problem is who can conduct an impartial inquiry?? This is the serious crisis of confidence pervading public affairs in this country. Nobody is going to believe in a Central Bank inquiry. But, I must say, the SEC came out of this looking quite good.
    General comments:
  • When a few people with massive political clout resort to these kinds of one-sided trades with a solitary purpose of making a fast buck overnight the integrity in the market system gets compromised. We saw how the market suffered when a few politically powerful individuals flexed their muscles. The market is still licking the wounds of that disastrous period.
  • The trading license of the errant broker should be suspended pending inquiry.
  • The deal should not be revoked as this is not permitted under the stock exchange rules. Proceedings should have begun on charging the NSB and TFC directorates on insider trading. The NSB directors should have resigned, failing which they should have been removed for acting against the NSB Act, rules and regulations. The rules and regulations of the SEC and Stock Exchange should have been applied.
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