SEC chairman calls for positive mindset, better housekeeping and collaborative synergies

Capital Market regulator, the Securities and Exchange Commission of Sri Lanka (SEC) held meaningful discussions with the Chief Executive Officers (CEOs) of stock broker firms and other Market Intermediaries in separate stakeholder engagements in January 2024. The meetings were aimed at fostering collaborative efforts to fortify the regulatory framework and operational infrastructure of the securities market. The exchange of ideas and perspectives reflected a shared dedication to upholding the highest standards of integrity and investor protection.

SEC Chairman, Faizal Salieh, Director General, SEC Chinthaka Mendis, Deputy Director General, SEC Tushara Jayaratne, CEO, Colombo Stock Exchange (CSE), Rajeeva Bandaranaike, CSE’s Chief Regulatory Officer, Renuke Wijayawardhane, SEC Director Supervision, Dilum Mahawatte, and other officials of both the SEC and CSE participated at the meeting.

The SEC Chairman emphasized the importance of creating a more capital-friendly market and urged the Market Intermediaries to collaborate closely with the SEC in the new year and engage in doing “the right thing in the right way” in order to build and strengthen the capital market’s integrity among investors. The Chairman called upon the industry players to have a positive mindset in order to help the country come out of the economic crisis and requested the stock brokers to actively pursue and attract capital flows by engaging with investors. Currently, the market composition mix is about 11% foreign investors and 89% local investors and the country needs to attract more foreign investors. The Chairman stressed that a positive mindset and persistent hard work is essential to bring in new investments amidst challenging economic conditions. He cautioned against negativism, negative thinking and behaviour which are counter- productive to the growth of the capital market.

Salieh led discussions on the need for a sound Order Management and Broker Back Office System across the stock broking industry to ensure stability and continuity. The CSE CEO, indicated that this matter was thoroughly examined during the recent CSE Board meeting and will be addressed expeditiously. The industry stakeholders along with the CSE are set to engage in further active discussions to formulate a feasible solution, taking into account the various perspectives presented during the meeting.

The SEC officials stressed the importance of obtaining prior consent from clients for the execution of transactions and highlighted the need for stock brokers to capture and document such consent properly. He informed that the SEC will carefully assess the proposed amendments to the Trading Participant Rules and communicate its decision in due course.

Salieh, aiming for a more agile market, proposed the idea of moving from the present T+3 settlement cycle to T+1, with the ultimate goal of achieving a T+0 settlement cycle. Industry representatives responded positively to the Chairman’s suggestion, recognizing the potential benefits of a shortened settlement cycle. The Chairman reiterated the importance of aligning market practices with global standards, emphasizing the need to eventually move towards a T+0 settlement cycle. It was noted that a tighter settlement cycle will help improve liquidity, reduce risk and make the market more efficient (SEC)