SEC reinforces its authority, heads roll
The Securities and Exchange Commission (SEC) has set fit and proper criteria for all major stakeholders of the capital market industry, after suspending three stockbrokers over alleged violations of securities law, while bringing in a high-powered NASDAQ surveillance system, which will go live within a month, top market officials said.
SC Securities CEO – Roshantha Fernando, First Capital CEO – Jaliya Wijeratne and Capital Alliance PLC – Milanka Induruwage, Executive Vice President at Capital Alliance PLC, were suspended for three years by the market regulator for breaching the law, including front running the Employees Provident Fund (EPF). It is expected that they will appeal, and already some have filed writ petitions.
Top capital market sources said that the SEC is actively going into cases where investor protection was fundamentally violated. “They will be going all guns blazing after past and present market offenders,” one source said.
Meanwhile the AI-based, NASDAQ Surveillance system will go live within a month, assisting the SEC to detect market offences, another source said. Mr. Fernando was suspended for three years after findings relating to trading in Browns Investments, Royal Ceramics and Richard Pieris through the account of his wife in 2022, with the SEC statement saying, “whilst being privy to the impending transactions of the Sri Lanka Insurance Corporation Ltd (SLIC)”.
The decision of the SEC in the other two cases came after 11 years of the offence. Accordingly, Mr. Wijeratne was suspended for three years over allegations of conspiring to and front-running the EPF while trading in the shares of Piramal Glass Ceylon PLC in 2014 during the then SEC Chairman, Nalaka Godahewa’s tenure. On the other end of this same transaction, Mr. Induruwage was suspended for three years over allegations of conspiring to front-run the EPF and for aiding and abetting another to front-run the EPF over trading in Piramal Glass PLC.
Some stockbrokers were disappointed, saying that the architects who worked in collusion on these rogue trades are still at large, while the ‘soldiers’ have taken the fall. “There should be questions asked from the state agencies as well,” an analyst said. The Sunday Times Business learns that certain high-net-worth individuals also fear SEC sanctions.
Investors were elated, saying that the SEC is bringing back confidence in the capital markets. “There should be ethics in business. The EPF has our hard-earned money. For the SEC to take this initiative even after this long, and help bring justice and restore investor confidence, is a very good move,” one investor said.
However, some market analysts pointed out that justice delayed is justice denied. They also noted that it is important to ensure that the court system in the country is timely in solving these cases. “More often than not, these offenders can get stay orders. Thereafter, they can go back to being themselves,” a capital market analyst said.
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