Even as Sri Lanka’s Securities and Exchange Commission (SEC) prepares next week to lift the controversial price curbs on share trades, some local investors are praising the restrictions and urging the SEC to continue them.
“This is a very, very good move and long overdue,” said K. Viknarajah, a veteran investor and long-time campaigner for good governance and ethics in the market. “I have been advocating for a long time some measures to control casino-type trading in a market where there is large-scale insider trading..”
He told the Business Times that the price bands or curbs on share prices moving (up or down) by 10% should continue until such time regulation controls these sharp shifts in prices. He said the market shouldn’t get too alarmed about these regulatory processes because price curbs are in force at least in 10 to 15 countries including Pakistan in this region.
Insider trading is a huge problem, he argued, saying directors, auditors and some other influential stakeholders have access to inside information and some of them – not all - trade through related parties, a new way to circumvent the rules.
“Small, innocent shareholders don’t have such access and there’s no level playing field. Insider trading has been going on for a long time,” he said..
Referring to concerns that investors have burnt their fingers over the sudden price bands, Mr Viknarajah said even with a 10% restriction, investors can make good money.
“Bank interest brings you less than 10 % per annum. Here an investor could make three to four times that and if, for example, a stock rises by 10% per day for 10 days, that’s a 100% increase or more in price,” he said, noting “Greed should not take over the markets.”
He said in urban towns like Matara or Kandy with exchanges, small investors don’t have access to all the information like the Colombo investors and they could burn their fingers in a casino-type market because of a lack of awareness. Industry analysts said that agitation by investors over delays in the automated system operating at the Matara exchange a few days after the price curbs were imposed, may have been over frustration that they were losing money.
Mr Viknarajah said wrongdoers should be booked and punished but ‘unfortunately the SEC doesn’t have the mechanism and wherewithal to track deals and trades in a sophisticated way and quickly stop the culprits from covering their tracks.”