Regulatory reforms welcome - Former SEC

“Regulatory reforms are welcome,” said former Director General of the Securities and Exchange Commission of Sri Lanka (SEC) and current Chairman of Venture Capital Lanka, Channa de Silva commenting on the relaxation of credit rules for stock brokering firms. He said that relaxing certain policy measures will help expand the market and create positive sentiments in the stock market.

However, the market should be monitored closely to ensure that the rules which have been relaxed are not abused.

SEC should monitor the market carefully to protect investors and ensure that affluent investors do not abuse rules which have been relaxed.

The SEC amended the Net Capital computation to relax restrictions on credit granted by stock broking companies to clients.

Stock broking companies are allowed to extend credit to their clients three times the adjusted Net Capital without having to deduct outstanding debtors from net capital.

The Commission also lifted the upper limit of 20 percent imposed on the price transactions carried out on the crossing Board of the Colombo Stock Exchange and to re-establish the status quo that existed previously in the Automated Trading Rules.

De Silva said that the Commission needs to look at the restrictive policy in regard to listings through an introduction. The spirit of introducing such a policy is to enable companies to list on the stock exchange with a minimum free float on a less stringent basis.

Large companies which are interested in listing but do not want to go through an exercise of raising fresh capital through an IPO could take this route. This would support the growth of the market and increase the listing of new companies enabling greater participation of companies operating on a transparent platform.

“Therefore the current listing rules which curb listing through an introduction must be examined as the market has not seen the listing of meaningful corporates for a long period. Even the IPO market has dried up. These restrictive policies affect investment sentiments and thus need to be examined,” De Silva said.Independent regulatory reforms with the consultation of all stakeholders is the need of the hour. These reforms should be done in a manner that will increase the confidence of investors and make the market vibrant, the former regulator said.

- LF