Convicted Magpek directors to appeal this week
The four directors of Magpek Exports Ltd, a toy manufacturing and exporting firm liquidated in the late ‘90s, who were slapped jail terms and fines, for the first time in a stockmarket case, are filing appeals against their sentence tomorrow.
The appeals will be made to the Fort Magistrates Court which in turn will refer it to the High Court, according to one of the ‘guilty’ directors.
They were charged with ‘non-disclosure’ of material information of a price sensitive nature under Securities and Exchange Commission (SEC) Act and sentenced to three years rigorous imprisonment and Rs. 5 million fine. This is the first ever conviction for a securities related offence in the country, a verdict that has welcomed by many investors saying it would minimize malpractices in the stockmarket.
“We were charged under section 625 pertaining to the ‘continuing listing requirements’ of the Colombo Stock Exchange (CSE). We will appeal against the sentence by Monday,” Ajantha Mylvaganam , Director, Magpek Exports Ltd told The Sunday Time FT.
He said that in these particular listing requirements, a company must ‘immediately’ give information to the CSE, but ‘immediately’ is not defined. “We believe the information given to the CSE has to be ‘immediate’ and also very importantly ‘accurate’,” he said adding that it was requested on 16th September 2006, but given 10 days later on the 26th . “That is because we had to be accurate with the information,” he said.
An SEC source said all continuing listing requirements have been gazetted under the SEC Act. “As such any contravention on the CSE Act is liable to be charged under the SEC Act. The CSE does not have power to charge any offenders. They also do not have investigative powers. That is why we had charged them,” he added.
Along with Mylvaganam, Kumar Boralessa, CEO of the company, with two other directors, Ananda Mandoza and Mohan Alles are charged.
The charges against three non executive directors - Magpek Chairman Piyasiri Ratnayake, Dimanthi de Silva and Tennyson Rodrigo were compounded because they were unaware of what was going on and turned crown witness for the state.
Boralessa, Mandoza, Mylvaganam and Alles were convicted for offences relating to violating disclosure requirements under the SEC rules, violating listing rules and corporate policies of the Colombo Stock Exchange (CSE).
Magpek went public in 1995 and within a span of approximately 18 months (in 1996 September), the company was liquidated and the SEC commercial investigations investigated their un-audited accounts for 1995-96. SEC charged the directors for writing stocks off and showing them as absolute, but not sharing the information with the shareholders and the stock market.