Following the resignation of two stockbrokers from the Colombo Stockbrokers’ Association (CSBA) last week, many are raising questions on the apparent dissent amongst a section of an influential group and whether others will follow this trend.
CT Smith Stockbrokers and IIFL Securities Ceylon Ltd., with its Indian based parent - both headed by two women (Cecilia Muttukumaru and Priyani Ratnagopal respectively who have nearly 40 years of experience in the capital markets between them) resigned from the CSBA on December 5, citing differences with the main stock broking body and their thought processes. Ms. Muttukumaru is also the longest standing Chairperson and Managing Director of a stock broking firm.
Sources close to both firms told the Business Times that they didn’t subscribe to some decisions by the CSBA in the recent past. “The request by the CSBA to let stock brokers lend twice of their net capital is not a good proposal. One cannot have so many times credit leverage as it’s not healthy for the long term sustainability in the market," a source told the Business Times, adding that both CT Smith and IIFL don’t agree with this proposal. “They don’t want to be seen as they subscribe to what is happening and they don't want to be a part of this," the source further added. While these two firms agree to ‘some’ sort of credit lending concession, they don't agree to this particular proposal as they feel it's detrimental to the market in the long run, according to one source.
The Securities and Exchange Commission (SEC) has also pointed out that brokers already have Rs 2.2 billion worth of unutilised credit and that as at now they can lend credit up to the value of their liquid assets. The SEC says that what they haven’t used from their liquid asset values adds to this amount.
The source also noted that the two dissenting firms didn’t want to be a part of the ongoing controversies which some of the CSBA members have been accused of in the past such as powerful lobbying and pressurising the government to 'get what they want’. “They also didn’t want to be associated with the term ‘market manipulators’ and be in a body which represented people who resorted to such things,” the source added.
Both CT Smith and IIFL believe in conforming to the rules and regulations, while functioning within a level playing field, according to the source. Both these firms are also worried about the way the foreign investors view the Colombo share market and they say that changing the SEC Chairperson and kicking the SEC Director General upstairs – all within a space of less than a month - isn’t a good sign to the foreigners.
Some CSBA members aren't happy with the CT Smith and IIFL move to breakaway from them, saying that it's not the 'right' thing to do. "They are abandoning the camp and to agree with the majority is a democratic way of going about things," a CSBA member pointed out. But the source noted that it's also their right to leave an organisation if they want to. |
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