Financial Times

SEC probes peculiar share price movements
By Duruthu Edirimuni and Iromi Perera
The Securities and Exchange Commission (SEC) is planning to summon investors regarding sudden price increases in some low valued stocks over the last few weeks, broking sources said. The move comes in the wake of concern by market regulators about unusual movements in the prices of certain shares.

The regulator is expected to write to some investors calling for explanations on their trading activities. A top SEC source said that the regulator is empowered by law to call for an explanation from investors if they see a sudden price surge in any stock.

The Colombo Stock Exchange recently warned brokers against manipulating share prices. However the SEC move has come under fire by the stock brokering community.

"It is up to the investors to make a decision when they buy shares," Asanga Seneviratne, Managing Director, Asia Securities said. He said if the SEC calls the investors for an inquiry, they will be curbing the general market enthusiasm. "What has happened so far in the market has kept it alive."

Dimuthu Abeyesekera, CEO, Asha Phillip Securities Ltd., said if the regulator calls for information from companies, it will destroy investor momentum and stop their buying sequence.

"It all depends on the perception of an investor and he takes the final decision," he said. He said if the SEC calls for information from the investors, it will create an unnecessary fear psychosis in the market. Some analysts said that share prices rise either because the firms have performed well, future expectations or plans to improve performance levels.

"It is wrong to say that investors have blindly bought these shares," an analyst said. However, a CSE official dismissed these explanations, saying, "the prices of low valued stocks cannot suddenly rise weeks after announcing results, which has been the case in some companies."

Analysts said some investors were furious last week, because the CSE had written to some companies, triggering a dip in their shares. A SEC source said that it is the regulator's job to investigate a sudden price increase of a low valued stock.

"We need to ensure that there is a level playing field without selected investors being privy to price sensitive information," he said. He said that investors have to be protected, and the SEC wants to justify the price increases in these stocks.

He agreed there may be a fear psychosis prompting some investors to leave the market, when the regulator calls for information, but that it will eradicate market abuse. "The SEC has long term interests of the stock market at heart," he added.

D. Wijesinghe, secretary of Citirights, an association of small investors, said that there appears to be manipulation in the stock market as only certain sectors and companies have gone up and the unusual price movements cannot be attributed to a general price increase.

He said that if all companies had an increase in prices then it would be normal, but only certain companies and sectors to rise, it appears to be manipulated.

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