New SEC Act seen as an efficient stock market regulator and developer

By Hiran H.Senewiratne

The new Securities and Exchange Commission Act to regulate the stock market in keeping with current international best practices, passed by Parliament on September 1, will efficiently regulate the market to create a strong, developed stock market in the country, Securities and Exchange Commission Chairman Viraj Dayaratna said.

“The new law, which will replace the Securities and Exchange Commission of Sri Lanka Act No. 36 of 1987, will enhance the powers of the Commission and auditors and deals comprehensively with market misconduct, with fines for those violating the law ranging from Rs. 1 million up to Rs. 25 million and jail sentences between five to 10 years. It also sets strict rules for market intermediaries, Dayaratne said at a forum on the new SEC Act via online recently.

Dayaratne said that Act consists of 188 sections and provides for deterrence and enforcement action against all types of market manipulation, including false trading, market rigging, securities fraud and insider trading, with a view to establishing a fair, orderly and transparent securities market.

In addition to establishing the SEC, the objectives of the Act are to create, maintain and regulate a fair, orderly, efficient, and transparent securities market, to protect the interests of local and foreign investors and ensure the maintenance of high professional standards in the provision of services in relation to securities markets, he said.

Dayaratne, a President’s Counsel, said that the Act also regulates the issue of securities by way of public offers to ensure the disclosure of financial information by listed public companies; mandates auditors to disclose financial irregularities of listed public companies; allows for the licensing of market intermediaries and registering of their representatives; and allows for the protection of assets of the clients.

The SEC Chairman said the Act also provides whistle-blower protection, prohibiting an employer from discharging, terminating, demoting or harassing an employee on account of them having provided information to the Commission concerning violations or potential violations of this Act. Such employees may include directors, partners, Chief Executive Officers, chief financial officers, company secretaries, internal auditors, or any other employee.

The Commission will have powers to grant a reward to a whistle-blower who is the first to provide such information which leads to the successful prosecution or any other sanction by the Commission against a person for a contravention of the provisions of this Act, Dayaratne said.