Regulators responsible for corporate collapse

by Lalin FERNANDOPULLE

Sri Lanka’s financial market regulators are responsible for the recent corporate collapses in the country due to the lapse in monitoring, experts said at a Round Table Discussion held recently at the BMICH.

The discussion on “Corporate Collapses in Sri Lanka-the Role of Stakeholders’ was organised by Transparency International Sri Lanka.

They said while the Central Bank, the Securities and Exchange Commission and the media are primarily responsible industry lobbies such as the Chambers and advisory committees are partially responsible for the financial market crisis in the country.

“The civil society, including the citizens and the media have to take a large part of the blame for their ineffectiveness, disinterest and lack of social consciousness shown by their inept behaviour while being key market participants”, an expert said.

The response by the Indian regulators and the civil society towards the Satyam scam was remarkable in bringing culprits to book and appointing a new Board to the company. The Securities and Exchange Board of India (SEBI) amended the SEBI (Substantial Acquisition of Shares and Takeover) Regulations.

The Auditors PricewaterhouseCoopers who faced lawsuits said the audits were conducted in accordance with applicable auditing standards and were supported by appropriate audit evidence.

“The daily full page coverage in international newspapers and extensive local media coverage helped to expose the fraud and bring to light the culprits”, they said.

The value of the fraud is estimated at US$ 1.0 billion of the fourth largest IT companies in India.

Experts said the Central Bank has a wider and stringent role to play in the stability of the financial institutions and added that publishing the list of registered finance companies is inadequate in the long term.

Media personnel present at the discussion said that media freedom has been heavily curtailed due to obligations to advertising companies which pump revenue to media establishments.

Around 4,000 investors were enticed by the offer of very high interest rates(Between 48 to 72 per cent) pledged by S.R. Property Sharing Investment (Pvt) Ltd. of Sakvithi Ranasinghe. The total value of the deposits is estimated at Rs. 4.0 billion.

Piyadasa Rathnayake Daduvam mudalali allegedly accepted deposits of over Rs. 6.5 billion from around 20,000 investors in a pyramid scheme that offered as high as 80 per cent interest in certain cases.

Golden Key Credit Card Co. collects deposits and issues credit cards but is not regarded a finance company. Approximately 10,000 investors were enticed by high interest rates and the value of deposits is estimated at Rs. 26 billion.

“The breakdown in values, social norms, good governance, transparency and professional standards are the primary reasons for the global corporate collapses”, experts said.